Emeka Onuzuruike Master Thesis (1)

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School of Management Blekinge Institute of Technology

Telecom Infrastructure Sharing as a Strategy for Cost

Optimization and Revenue Generation : A Case Studyof MT igeria!"ain igeria Collocation

Su#mitted #y : $me%a Onuzurui%e &M'A Thesis (roposal)

Autumn semester *++,

Supervised #y : -laus Sol#erg S.ilen

Thesis for the Master’s degree in Business AdministrationAutumn 2009



Abstract

There is a growing need for operators and providers in the Nigerian telecoms industry todrive down cost of capital assets or infrastructure deployed for telecom services. Thishas been expressed in recent times by many operators who now come, together , on

basis of mutual, agreements , to consider sharing infrastructure. The telecom market inNigeria is driven by growing demand for telecommunications services like voice, SMS,data services like internet, fax, etc as well as high broadband services like video calling,video messaging and video conferencing.This high demand from telecom users combined with the heated competition of agradually maturing telecoms market in Nigeria has driven many telecoms operators toexplore ways of reaching their potential customers in very cost efficient and cost effectiveways, hence the need to reduce the cost of rolling out telecom infrastructure while at thesame time achieving the numbers through effective network coverage. Also, theregulatory body in Nigeria,N! Nigeria ommunications ommission" has also givenits backing to this initiative by providing the legal and technical guidelines that wouldensure fairplay and enhance fair competition.

This study or research aims at exploring the value of infrastructure sharing as a meansof achieving cost efficiency and revenue assurance. The research is based on a casestudy analysis of the current collocation arrangement between MTN Nigeria #td and $ainNigeria #td. The study seeks to explore the benefits of the infrastructure sharing dealbetween these two companies as well as recommend an improved or enhancedframework or model to sustain this strategy model in the context of the Nigeriantelecommunications industry.%ased on a survey&interview of '( respondents drawn from key departments involved inthis sharing deal, the following conclusions were drawn. !)" That both operators haveexperienced significant reduction in their cost of A*+!capital expenditure" employedin network rollouts&deployments- !'" that passive infrastructure!network infrastructuresharing" has led to an improved cost efficiency in network deployments- !" thatinfrastructure sharing has led to improved network based operational expenditure- !/"that passive infrastructure sharing has enabled operators achieve improved coverageand capacity- !0" that infrastructure sharing has had no negative impact on customerexperience and 1uality of service- !2" that infrastructure sharing has led to improvedservice delivery by telecoms operators whereby captial gained or recouped has beeninvested in product innovations through better value added services to gain competitiveadvantage.The implications of these findings is that telecom infrastructure sharing serves as aneffective business model for cost optimi3ation and revenue generation for telecomoperators in Nigeria and the rest of Africa.



Acknowledgements

My gratitude goes to 4od and the 5ather of my #ord 6esus hrist for all his mercies andfavour towards me.

7 will also like to appreciate my beloved wife, Anthonia for showing me support and

understanding throughout the period of my undertaking this research work.

7 like to thank Mr. *atrick 8nuorah, my fellow distance learning M%A student at the%lekinge 7nstitute of Technology who helped me proof read and ob9ectively criti1ue thiswork.

5inally, my appreciation goes to *rof. :laus Solberg S;ilen for giving me this opportunityto prove myself and also for all his vital feedbacks and supports.

+meka 8nu3uruike#agos, Nigeria

<ecember, '((=.





EXECUTIVE SUMMARY

The Nigerian telecommunications industry has undergone very rapid growth in the pasteight years and the mobile telecommunications sector has been identified as the ma9ordriver for this impressive growth. urrently, the Nigerian teledensity stands at 0)./> from)2.?> in '(((. The mobile sector contributes @?.=> of the share of the active lines inNigeria. The Nigerian population stands at )/( million. As a result of the high demand for mobile services operators are under pressure toinvest heavily in infrastructure in order to expand their coverage and capacity in order toserve their customers. owever, the high operational and capital expenditures havenegatively impacted on their bottom line. ence, the need for telecom operators toseeks new business models to enable them save A*+ and 8*+ costs.Telecom infrastructure sharing is a viable business model for A*+ and 8*+ savingand has been proven to save operators costs by approximately ( B/( > of costsincurred where operators rollout network infrastructure on their own. ence, telecomoperators are encouraged to share infrastructure as a means of avoiding unnecessaryduplication of infrastructures. Savings achieved via infrastructure sharing could be used to employ better staff,improve network service and introduce value added service and product offerings thatwould lead to new streams of revenue generation.



Table of ContentsCHAPTER OE! ITRO"UCTIO...............................................................................10

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CHAPTER OE ! ITRO"UCTIO

%&% THE I'ERIA TE$ECOMS I"USTRY OUT$OO(

%&%&% O)er)*ew

The Nigerian telecommunications sector has undergone very rapid change andexplosive growth over the past eight years mainly due to the liberalisation of thesector and the resulting competition by private operators bringing about verysubstantial benefits to subscribers in terms of reduced tariffs!prices" andenhanced choice!N,'((0".

Ta#le /0 Gro1th of Telecoms Industry in igeria

7n '((/, the Nigerian telecoms sector received global acclaim as one of thefastest growing mobile markets in the world. The mobile sector has beenparticularly pivotal!key" to the growth of telecoms in Nigeria, developing from a

(,(((Bline subscriber base at the beginning of the millennium to @.0 millionconnections at the end of '((/, mobile being an outstanding success!N,'((0". Today, Nigeria has an average of ?( million line subscriber base.



2igure /0 Su#scri#er lines in igeria&/333 4 5une *++3)

Source: CC6*++7

Nigeria is now officially the largest growth market for telecommunications in Africaand the Middle +ast , and possesse the most vibrant fixed and mobile telephonycompanies in Africa !N, '((0".

%&%&+ Per,ormance o, t-e Telecoms Sector *n *ger*a

O)erall Sector 'rowt-

5or the past six!2" years the total subsciber base for connected fixed and mobilelines have risen from ','?),(0( at yearBend '((/, an average growth rate of)'0> annually, and today we have an average of ?( million active subscribercontributed mainly by for mobile licencees, vi3J MTN Nigeria, $ain Nigeria!formerly eltel", 4lobacom Nigeria and +MTS Nigeria !aka +tisalat".



2igure *0 Mar%et Share of Mo#ile Operators in igeria

Source: CC6*++7

Eet the demand of more subscribers continues to rise in Nigeria, Africas mostpopulous country !over )0( million people". There is substantial evidenceshowing the deep 1uest by consumers not 9ust for lines but also for good 1ualityservices from the operators, a 1uest many operators are making attempts tosatisfy through continuous infrastructure investments !N,'((0".



2igure 80 Traffic in Minutes of 9se in igeria

Source: CC6*++7

7n spite of this growth trend in telecoms in Nigeria the following issues have been

observed as ma9or sources of impedence to continuous future growth of theindustryJ

O *oor public power supply-O *oor security, as infrastructure are often vandali3ed-O igh import duty, as duties on telecoms e1uipment are in the regimes of (B?(>-O AntiBcompetetive practices, with some operators alleged to be forming cartels tofrustrate the natural interplay of market forces-OThe type and 1uantum of funds needed by operators to expand operations isscarce locally- and-Oigh operational costs !N,'((0".

%&%&. Ca/*tal and etwork In)estment O0tlook

T-e In)estment Cl*mate

According to the Nigerian ommunications ommission, investment into the Nigeriantelecoms sector has grown from DSP0( million to over DSP)' billion over the lasteight!@" years.

The growth in telecoms investment in Nigeria is as displayes belowJ

2igure 0 Trends of (rivate Telecoms Investment in igeria



Source: CC6*++7

*rincipal corporate investors include 5irst %ank, Stanbic 7%T %ank, $enith %ank,<iamond %ank, Standard hartered %ank, among others, as well as several stategovernments, notably #agos State, <elta State,and AkwaB7bom State of Nigeria. Nigerianbanks also regularly form syndicates to provide working capital for many telecoms

companies in the absence of ade1uate offshore !foreign" facilities.

A snapshot of announced investments, contracts and deals between '(( and '((/ isas stated belowJ

O Q2?0million turnkey contract awarded in 5ebruary '(( by 4lobacom to the5rench vendor Alcatel, for the installation of ) million mobile lines, )((,((( fixedlines, international gateways and a national fibreBoptic backbone.

O DSP=0million facility to MTN Nigeria by a syndicate of )/ Nigerian banks ledby Stanbic7%T %ank, and Standard hartered %ank!#ondon" in November '((,

as part of MTNs DSP).million capital expenditure budget.

O DSP'0(million facility to MTN by another consortium led by 4T% %ank in8ctober '((/, for network infrastructure.

O DSP?( million network upgrade investment by Starcomms in March '((, inseaparate contracts to #M +ricsson and uawei Technologies.O DSP)'(million e1uipment finance deal between #M +ricsson and Gmobile!now$ain Nigeria" in '(( , for the installation of a north and south transmissionbackbone.

O DSP'(( million contract awarded by 4lobacom to Siemens, for network

installation in Northen Nigeria in 5ebruary '((.

O DSP)? million wireless network provisioning contract to arris Networks by8dua Tel, in 6anuary '((.

O DSP))( million radio network contract awarded by Gmobile!now known as $ainNigeria" in 5ebruary '((/ to #M +ricsson.

O DSP)/0 million network expansion contract awarded by CelTel!now known as$oomMobile" in April '(( to #M +ricsson.

O DSP0 million 4SM contract awarded by N7T+# to #M +ricsson in April '((.

O DSP? million investment by uawei in establishing a multiBproduct trainingcentre in Abu9a.

O umulative DSP20( million network investment by MT+# as at April '((/, inseparate contracts to Motorola, $T+, uawei and #M +ricsson.

O DSP)' million network upgrade contract awarded by 7ntercellular to Motorola in6uly '((.

O MTN 4roup declared that it spent DSP2'( million on capital expenses incurredby its Nigerian operations between March and September '((/. Amount spentwas mainly used to build // base stations and 2 switches.



Today, the telecoms infrastructure deployment growth trend by private investors havecontinued to grow due to the high demand by the teeming mobile subscriber users aswell as the 1uest by telecoms operators to gain market share through increased networkdeployment, and expansion in in a bid to achieve better coverage and capacity.

2igure 70 Trends in (rivate Infrastructure ;eployment in igeria Telecoms

Source: CC6*++7

5or instance, MTN 4roup currently has well over =(.? million subscribers spread acrossthree of its ma9or operational regions, vi3J South and +ast Africa!contributing '/ millionsubs", Middle +ast and North Africa!contributing '2 million subs", and Hest and entral Africa !contributing /( million subs". !MTN 4roup Cesults, '((@".

2igure <0 MT Group Su#scri#er Gro1th

Source: MT Group Results=*++,

8f the /( million subscribers in the MTN H+A region, MTN Nigeria contributed '.)



million at the end of <ecember '((@. According to MTN, Raggressive nework rolloutcontinued through '((@, gaining strong momentum during the second half of the yearand significantly improving network 1uality and enabling increased net connections in thelast 1uarter. apital expenditure grew from C/.@billion in '((? to C=.@ billion. MTNNigeria rolled out ),02( %TSs bringing the total to /,??2. To further improve the network),)?(km of new metro and national fibre was implemented on key routes.R Again showing an increase in the trend of telecoms infrastructure rolled out, expandedand deployed.The $ain 4roup expended a capital investment to the tune of P0?= million in telecomsinfrastructure at the year end <ecember '((@ !$ain 4roup Cesults, '((@".

%&+ Conte1t and Mot*)at*on 2P0r/ose o, Researc-3

The growth of the telecoms market in Nigeria has continued at geometric rates therebysustaining the market as one of the fastest growing telecoms market globally. Thisgrowth, however, has brought with it a huge cost burden on telecoms investors andoperators as they continue to expend huge capital expenditures on telecoms assets and

infrastructure in a bid to gain and sustain competitive advantage.

Today, as the telecoms market in Nigeria nears maturity, the average revenue per user!AC*D" and revenueBonBassets !C8A" indices begin to dip, telecoms operators inNigeria are begining to desperately explore new ways of reducing their capitalexpenditures !A*+" and operational overheads&cost on telecoms infrastructure.*resently, key players in the Nigerian telecoms industry are now resorting to sharingnetwork infrastructure as a strategy to achieve substantial reduction in their A*+ and8*+ burden and hence be able to survive and realise better returns on theirinvestments.

Also, the Nigerian independent National Cegulatory Authority, the N !Nigerianommunications ommission" has given its support to this new model and has alsodeveloped a regulatory framework for potential collocatees to share infrastructure inorder to promote fair competition and promote infrastructure sharing amongst telecomslicensees.

The purpose of this research is to explore and investigate the profitability and practicalityof this infrastructure sharing strategy and model in order to recommend ways ofimproving on it for key decisionBmakers as well as policy makers in the Nigeriantelecoms sector.

%&. Researc- 4oc0s

The main research focus is to examine the current telecom infrastructure modelprevalent in Nigeria in order to investigate its strengths and weaknesses from a costperspective. The research highlights the costBbased management of the telecominfrastructure sharing arrangments among key telecom operators in Nigeria as a meansof improving telecom profitability or returnBonBtelecom investment !C87".

7t includes empirical analysis which involves interviewing 0 key personnel!technical andmanagerial" of two ma9or telecoms services providers, namely, MTN Nigeria and $ainNigeria, on a case study basis on infrastructure sharing formula. 7t also involvesgenerating historic data through network management tools !5ATS" for networkperformance reports and finally a survey of )( key personnel of both companies directly

and indirectly involved in the ollocation deal. Secondary data was sourced throughreview of relevant literature and statistical research done by reliable and established



sources.

%&5 Sco/e o, T-es*s

7n this research , the following seven !?" hypothesis were postulated and tested for

validity and reliability.

ypothesis )J Network infrastructure sharing results in a significant reduction in cost ofnetwork infrastructure rollout and capacity expansions for telecoms operators in Nigeria.

ypothesis ' J Network infrastructure sharing results in a improved efficiency in theutili3ation of telecoms infrastructure for telecom operators in Nigeria.

ypothesis J Network infrastructure sharing leads to a significant reduction in theoperational expenditures !8*+" dissipated for telecoms operators in Nigeria.

ypothesis /J Network infrastructure sharing does not lead to degraded 1uality of service

and customer usage experience for telecoms operators in Nigeria.

ypothesis 0J Network infrastructure sharing will enable telecoms operators in Nigeriaachieve and sustain competitive advantage through wider coverage and capacity at lesscosts.

ypothesis 2J Network infrastructure sharing would lead to improved service delivery bytelecoms providers in Nigeria.

ypothesis ?J Network infrastructure sharing would positively impact !improve" newproduct development and service innovation for telecom providers in Nigeria.

%&6 T-es*s 4ramework

This research&thesis framework is structured in five !0" sections as outlined belowJ

hapter 8ne !)" introduced the trend of private investments growth in thetelecommunications landscape of Nigeria and highlights the drivers for telecomsoperators to seek infrastrcuture sharing initiatives as means of cutting down the cost ofcapital and operational expenditures. 7t also outlines the research purpose, motivations,focus,scope as well as the framework&structure of the reasearch thesis.

The contents of the subse1uent sections are as shown belowJ

hapter )J 7ntroduction

hapter 'J #iterature Ceview

hapter J Cesearch Methodology

hapter /J Cesearch 5indings and 7nterpretations

hapter 0J onclusions and Cecommendations

hapter two!'" highlights the main drivers for telecom infrastructure sharing as well as

the various models of telecoms infrastructure sharing prevalent in the telecoms industry.7t also highlights the benefits as well as risks, concerns,challenges and issues affecting



the relevant stakeholders in this sharing model or initiative, examining it both from theoperator!new entrant and incumbent" and regulatory perspectives.hapter three !" discusses the research methodology as well as research approachedemployed in the study. 7t also highlights the data collection methods used to obyainprimary data as well as the data analysis approach employed!1ualitative approach". 7talso details issues and limitations to research such as reliability, validity, cost and timelimitations, ethical considerations !confidentiality matters" as well as the samplingmethod&approach employed for field interviews and surveys as well as empiricalobservations through network monitoring tools and instruments.hapter four !/" consists of a set of findings and interpretations of data analysisperformed on the data collected from surveys, interviews and field observations. hapter 5ive !0" discusses the 9ustification and&or falsification, based on data analysis, of thehypothesis earlier postulated and the conclusions of findings and recommendations forstakeholders and policy makers on ways of improving the existing telecom infrastructuresharing model in Nigeria.



CHAPTER T#O ! $ITERATURE REVIE#

+&% ITRO"UCTIO

Telecom infrastructure sharing has been defined as an arrangement whereby two ormore telecom service providers can agree to share infrastructure located in a commonplace or area for the purpose of reducing capital and operational expenditure ! %alaB4bogbo,'((=". 7n this new model, competitors are becoming partners in order to lowertheir increasing investments and the degree and method of infrastrcuture sharing canvary in each country depending on regulatory and competitive climate!httpJ&&en.wikipedia.org&wiki&#ocalBloopunbundling , accessed '((=B(@B'(".7n other

literatures telecom infrastructure sharing is referred to as #ocal #oop Dnbundling !##D or ##D%" which implies the regulatory process of allowing multiple telecommunicationsoperators to use connections from the telephone exchanges central office to thecustomers premises !httpJ&&en.wikipedia.org&wiki&#ocalBloopunbundling , accessed'((=B(@B'(".

2igure >0 GSM et1or% Sho1ing Access and Core et1or%s

7n this latter model !i.e. ##D" telecom infrastructure sharing is viewed as a way throughwhich the national regulator !NCA" seeks to stimulate competition in thetelecommunications and information processing sectors !7TD,'(('". owever, for the

purpose of this reasearch thesis, infrastructure sharing will be viewed from the formermodel whereby two or more telecom operators or providers come together to shareinfrastructure located in a common place as a means of reducing costs of investment.



Telecoms infrastrcuture!such as towers and backhaul" for a telecom provider account for about 2( percent of the cost of doing business !Aggarwal, '((=". The rising trends ofinfrastructure sharing among telecom providers can be seen as being driven by thisrising cost of ownership !T8" which represents the total capital costs re1uired todeploy network infrastructure.

+&+ THE 'SM MO7I$E ET#OR( ARCHITECTURE

4SM simply means 4lobal System for Mobile ommunication. 7t was designed to beplatfolrmBindependent, hence specifications do not specify the actual hardwarere1uirements, rather they specify the network functions and interfaces in detail. Thisallows hardware designers to be creative in how they provide the actual functionality ,but at the same time makes it possible for operators to buy e1uipment from differentsupplliers !+ricsson,'((".

+&+&% 'SM ET#OR( COMPOETS

The 4SM network is subdivided into two systems. +ach system comprises a number offunctional units or individual components of the mobile network. These two subsystemsareJ

O Network Switching System !NSS"

O %ase Station Systme !%SS"

O 8perations and Maintenanace entre !8M"

O Mobile Station !MS"

7n addition to these, as with all telecommunications networks, 4SM networks areoperated,maintained and managed from computeri3ed centres.

The NSS is responsible for performaing call processing and subscriber related functionsand it includes the following functional unitsJ

O Mobile services Switching entre !MS"O ome #ocation Cegister !#C"O Gisitor #ocation Cegister !G#C"O Authentication entre !AD"O +1uipment 7dentity Cegister !+7C"

The %SS performs all the radioBrelated functions and is comprised of the followingfunctuional unitsJ

O %ase Station ontroller

O %ase Transceiver Station !%TS"

The %ase Station ontroller !%S" manages all the radioBrelated functions of a 4SMnetwork. 7t is a high capacity switch that provides functions such as MS!mobile station"handover, radio channel assignment and the collection of cell configuration data. Anumber of %Ss may be controlled by one MS.



2igure ,0 The 'SC Ca#inet System

2igure 30 The 'TS System of the GSM et1or%

The %ase Transceiver Station !%TS" subsystem of a 4SM network is responsible for

controlling the radio interfaces to the MS !Mobile Station" at the subscriber side of thewireless link. 7t comprises the radio e1uipment such as transceivers and antennas whichare needed to serve each cell in the network. A group of %TSs are controlled by a



BTS

BTS BSC

ABI

S

%S!+ricsson, '((".

2igure /+0 T1o 'TS System controlled #y a 'SC in the GSM et1or%

The Switching System components will be discussed briefly as follows.

Mob*le ser)c*es Sw*tc-*ng Centre 2MSC3

The MS performs the telephony switching functions for the mobile network. 7t controlscalls to and from other telephony and data systems such as *ublic Switched TelephoneNetwork !*STN", 7ntegrated Services <igital Network !7S<N", public data networks,private networks and other mobile networks !+ricsson,'((". 7ts gateway functionalityenables an MS to interrogate a networks #C in order to route a call to a MobileStation!MS". Such an MS is called 4ateway MS !4BMS". 5or example, if a personconnected to a *STN wants to make a call to a 4SM mobile subscriber, then the *STNexchange will access the 4SM network by first connecting the call to a 4BMS. Thesame is true of a call from an MS to another MS on another 4SM network!+ricsson.'((".

Home $ocat*on Reg*ster 2H$R3

The #C is the centrali3ed network database thst stores and manages all mobilesubscriptions belonging to a specific operator. 7t acts as a permanent store for a personssubscription information until that subscription is canceled. The information storedinclude the following J

Subscriber identity Subscriber supplementary services Subscriber location information Subscriber authentication information

The #C sometimes can be implemented in the same network node as the MS or as a



standBalone database !+ricsson,'((".

V*s*tor $ocat*on Reg*ster

The G#C is a database that contains information about all mobile subscribers currently

situated in an MS service area. ence, there is usually one MS per network area. TheG#C stores subscription infomation on a temporary basis, so that the MS can serviceall the subscribers currently visiting that MS service area. 7t can be seen as adistributed #C since it holds a copy of the ome #ocation register information storedabout the subscriber !+ricsson,'((".Hhenever a subscriber roams or moves into a new MS service area, the G#Cconnected to that MS usually re1uests information about the subscriber from thesubscribers #C. The #C sends a copy of the information to the G#C and updates itsown location information. Hhen the subscriber makes a call, the G#C will already havethe same information re1uired for successful call setBup !+ricsson,'((".

A0t-ent*cat*on Centre 2AUC3

The main role of the AD is to authenticate or validate the identity of the subscribersattempting to use the network resources. 7n this way, it is used to protect networkoperators against fraud or potential hackers. The AD is a database connected to the#C which provides it with the authentication parameters and ciphering keys used toensure network security !+ricsson,'((".

E80*/ment Ident*t9 Reg*ster 2EIR3

The +7C is also a database which contains the mobile e1uipment identity informationwhich helps the operator to block calls from stolen, unauthori3ed, or defective MSs or

handsets.

T-e etwork Mon*tor*ng Centres

The network monitoring centres !NM" is comprised of two main areas, namely, the8peration and Maintenance entre !8M" and the Network Management entre !NM".

O/erat*on and Ma*ntenance Centre 2OMC3

The 8M performs all the operation and maintenance tasks for the mobile network suchas nmonitoring network traffic and network alarms. The 8M has access to both theswitching system !SS" and the %ase Station System !%SS". An 8M is actually acomputeri3ed monitoring centre which is connected to other network components of the4SM network , such as MSs, #Cs, G#Cs, ADs, %Ss, %TSs, etc via .'0 datanetwork links. 7n the 8M, operations staff are presented with information regarding thestatus of the network and can monitor and control a number of system parameters andperformance indices. There amy be several 8Ms within an operators ort serviceproviders network depending on the network si3e !+ricsson,'((".

etwork Management Centre 2MC3

The NM helps the telecom operator to perform centrali3ed control of the network. 8nlyone NM is usually re1uired for a network and this controls the subordinate 8Ms.

Mob*le Stat*on 2MS3



+

SIM Card Mobile Equipment

The mobile station !MS" is the handheld mobile phone at the subscriber or customer sideof the network and it communicates with the %ase Transceiver Station !%TS" via wirelessfre1uencies or over the air. 7t is comprised of two parts, namely Mobile +1uipement !M+"and Subscriber 7dentity Module !S7M".

2igure //0 The Mo#ile Station Su#System of the GSM Mo#ile et1or%

An MS is used by the mobile subscriber to communicate with the mobile network.Several types of handsets or MSs exists from various vendors such as Nokia,Sony+ricsson,Samsung, etc each allowing a mobile subscriber to make and receivephone calls.

The overall or summarised version of a 4SM mobile network for an operator is as

depicted belowJ



2igure /*0 The GSM Mo#ile et1or% sho1ing main components

+&+&+ 'SM 'EO'RAPHICA$ ET#OR( STRUCTURE

+very operators telephone network usually employs a specific structure to routeincoming calls to the correct exchange and then on to the destination subscriber. 7n amobile network it is very important to have this structure since the subscibers who aremobile operators customers are mobile. ence, as these subscibers move though thenetwork, these structures are used to monitor their location !+ricsson,'((".

THE CE$$ SYSTEM

A cell is the basic unit of a cellular system and is defined as the area of coverage given

by one %ase station !%TS" antenna system. +ach cell is usually assigned a uni1ueidentification number known as the ell 4lobal 7dentity in a specific 4SM network.!+ricsson,'((". 7t is a number of cell system that constitutes a base transceiver station!%TS" in a 4SM network.

$OCATIO AREA

A location Area !#A" is what defines a group of cells. Hithin the network a subsciberslocation is normally linked to the #A in which he&she is currently located !+ricsson,'((".The identity of the current #A is stored in the G#C !Gisitor #ocation Cegister".Hhenever a MS !Mobile Station" or handset or handheld device or 4SM phone of asubscibers crosses the boundary between two cells belonging to different #as in a

particular 4SM operators network it reports its new #ocation Area to the network.Hhenever there is a call for a subscibers MS, a paging message is usually broadcasted



P$M ser)*ce area

......

S9stem areaP$M ser)*ce area

MSC ser)*ce area&&&$ocat*on area&&&

7ase stat*on area&&&

Radio cell

...... ......

MSC ser)*ce area&&&$ocat*on area&&&

7ase stat*on area&&&Radio cell

P$M ser)*ce area

within all cells belonging to the relevant #A of the 4SM network !+ricsson,'((".

MSC SERVICE AREA

7n a 4SM network , an MS service area is made up of a number of #As !location areas"

and represents the geographical part of the network controlled by a particular MS. Tobe able to route a call to an MS, the subscibers MS service area is also recorded andmonitored. This information is stored in the home location register !#C" of the 4SMnetwork !+ricsson,'((".

P$M SERVICE AREA

A *ublic #and Mobile Network !*#MN" service area is the entire set of cells served byone network operator and is defined as the area in which an operator offers radiocoverage and access to its network services !+ricsson,'((". 7n Nigeria there are five !0"public mobile network areas belonging to MTN Nigeria, $ain Nigeria, 4lo Mobile, MBTeland +MTS!aka +tisalat" network operators.

'SM SERVICE AREA

The 4SM service area is defined as the entire geographical area or coverage in whichany subscriber can gain access to a 4SM network irrespective of the operator he&she issubscribed to. This area increases as more and more operators sign contracts agreeingto work together !+ricsson,'((". 7nternational roaming is the term applied when an MSmoves from one *#MN to another when abroad without having to officially register itsS7M !subscriber identity module" at the operator abroad before accessing it networkresources.

2igure /80 The GSM Service Area sho1ing su#?areas

Source: o%ia GMS (resentation

'SM 4RE:UECY 7A"S

The national regulatory authorities of every country or international region usually

assigns to operators, from their available national fre1uency spectrum, operatingfre1uency bands on lease basis. 4SM has expanded worldwide to operate at four main



fre1uency band categories as followsJ

O 4SM =((O 4SM )@((O 4SM )=((O 4SM @((!+ricsson,'((".7n Nigeria telecommunications industry 4SM operators are allowed to operate only withinthe 4SM =(( and 4SM )@(( fre1uency bands.

+&. 'SM OPERATORS; 7USIESS MO"E$

A business model describes the rationale of how an organisation creates, delivers, andcaptures value B economic, social, or other forms of value. The term business model isthus used for a broad range of informal and formal descriptions to represent coreaspects of a business, including purpose, offerings, strategies, infrastructure,organi3ational structures, trading practices, and operational processes and

policies!httpJ&&en.wikipedia.org&wiki&%usinessmodel, accessed '((=B)'B)?".#ike every other business enterprise, the telecom operators in Nigeria operate withvarious types of business models which aims at giving their subscribers good telephonyand data services at preset or otherwise tariff rates. These tariffs rates as well as 1ualityof service delivered to subscribers are regulated by the national regulatory authority,namely the Nigerian ommunications ommission !N".

According to Alexander 8sterwalderIs '((/ thesis a common reference model based onthe similarities of a wide range of business model conceptuali3ations exists as depictedbelowJ

2igure /0 Ale@ander Oster1alders 'usiness Model design template

Source: Bi%ipedia0org

According to his business model template nine building blocks and their relationshipcomprise to define a particular business model for any enterprise. These are as givenbelow.

In,rastr0ct0re

This includes the business core capabilities, partner network and value configuation.

O ore capabilitiesJ The capabilities and competencies necessary to execute acompanyIs business model.O *artner networkJ The business alliances which complement other aspects of the



business model.O Galue configurationJ The Galue onfiguration describes the arrangement of activitiesand resources that are necessary to create value for the customer.

O,,er*ng

O Galue propositionJ This has to do with the products and services a businessoffers.According to 8sterwalder !'((/", a value proposition Uis an overall view of ...products and services that together represent value for a specific customer segment. 7tdescribes the way a firm differentiates itself from its competitors and is the reason whycustomers buy from a certain firm and not from another.U

C0stomers

This consists of the targets customers, distribution channels and customer relationshipO Target customerJ This is the target audience for a businessI products and services.O <istribution channelJ This is the means by which the company delivers products and

services to customers. 7t includes the companyIs marketing and distribution strategy.O ustomer relationshipJ These are the links that a company establishes between itselfand its different customer segments. The process of managing customer relationships isreferred to as customer relationship management.

4*nances

O ost structureJ This is the monetary conse1uences of the means employed in thebusiness model or strategy.O CevenueJ This is the way a company makes money through a variety of revenue flows.7n otherwords, this can be described as a companyIs income streams

8sterwalder !'((/".

+&.&% 'SM OPERATORS; I4RASTRUCTURE

7n line with the model proposed by 8sterwalder !'((/" above, the telecommunicationsoperators in Nigeria maintain or employ the following infrastructure model. Most of thetelecoms operator in Nigeria obtain licence from N for the main purpose of providingusers network coverage at certain tariffs designed for specific customer segments withrevenue assurance in mind as proft maximiation entities. They simply providesubscribers with such mobile services as voice,data, short message services !SMS",etcfor a fee or tariff.

Their core capabilities include high investment in 4SM infrastrucure as alreadydiscussed above including staff with such competencies as planning and designing allaspects of the 4SM network, namely NSS !ore", %SS and transmission. 8thercapabilities include C5 !radio fre1uency" planning and optimisation, value and designengineering, transmission planning, core network capacity planning, networkperformance monnitoring, 1uality assurance and 1uality processes, %TS implementationauditing and Safety ealth +nvironment !S+". All these competencies are necessaryfor maintaining the superstrucure or network that ensures that users or subscribers canaccess network services everytime and everywhere.

Telecom operators also maintan partner networks or business alliances such as vendors

and suppliers who supply and provide them with technical support for 4SM e1uipmentwhich make up their huge capital investments in their respective businesses. An example



is MTN Nigeria relationship with +ricsson A% for supply of critical telecoms carrier classe1uipment such as MSs or switches, %Ss, %TSs and multiplexers.

Their value offerings or propositions usually involve preBpaid and postBpaid voice andsms or text services as well as special product offerings tailored towards targetedcustomer segments like family and friends, teenagers and youth, and business orenterprise users. These differentiation of their product offerings at varying tariffs helpthem maximise revenue from consumer surpluses existing in the mobile services market.

They also employ the use of trade or distribution channels for the sales of theircustomi3ed S7Ms !subscriber identity modules" and recharge or refill vouchers for preBpaid segment customers.

5inally, integral to their businesses, telecom operators usually maintain a finance oraccounting division whose main roles is to model the cost structure of their products andservices offerings. This division is also tasked with the duty of ensuring their incomes orrevenues are assured through the developement of strategic tariff plans that would

ensure profit maximisation for shareholders.

+&5 7USIESS VA$UE "RIVERS O4 'SM OPERATORS

An organi3ations value has been defined as the present discounted worth of all net cashflows occuring to security holders !both e1uity and debt holders". 7n theory, it is simply afigure that represents the entire cost of a company if someone was to ac1uire it!MTN,'((@".+very telecoms business will usually be comprised of investors in the form ofshareholders and debenture holders who finance the business as a way of investing inthe smooth and efficient running of the business with optimal returns on theirinvestments in mind. They are often in a principalBagent relationship with the directors

who make up top managment and who are tasked with managing the affairs oroperations or running of the comoany or business on their behalf. ence , they are seenas agents of the business performing the managerial aspects of the business througheffective corporate governannce mechanisms. These directors are re1uired by law toprovide members of the business with yearly reports on the financial health and progressof the business on a going concern basis. ence, shareholders as well as other securityholders who own stakes in the business would analyse to see whether the enterprise isperforming well or not since positive return on investment is the main reason forinvestment of their hard earned money or capital.

Val0e "r*)ers

These are variables which significantly affects the value of an organi3ation. These arethe bases of a businessV worth or overall performance. Galue drivers could be 1ualitiativeor 1uantitative. Most value drivers of organi3ations are tied or linked up with theorgani3ations key perfromance indicators !:*7s".:ey performance indicators !:*7s" are indices through which an organi3ation orenterprise defines and measures progress towards its goals and ob9ectives.%y studying the financial reports of most telecoms companies the following key financialindicators are often regarded by telecoms investors as primary or fundamental to theirbusiness successes. Alfred Cappaport identified seven key drivers of valueJ salesgrowth rate operating profit margin tax rate fixed capital investment working capitalinvestment planning period cost of capital.

owever,since most 4SM mobile operators are low margin and high volume companiesin their sales strategy and hence are growthBdriven, we will be looking mainly at the



following key performanace indicators as set out belowJ

O Mobile subscriber growthO 8perating profit marginO Cevenue growth

O Average revenue per user !AC*D"O +%7T<A +arnings before interest, tax,depreciation and amorti3ationO <epreciationO Assets and Ceturn on AssetsO +xpenditure B A*+O +xpenditure B 8*+O 4oodwill and other intangible assets like brands and registered trademarksO ash flowO ost of apitalO uman resource

Mob*le S0bscr*ber 'rowt-

This index is usually compared with the previous year performance to assess or evaluatethe companys penetration in the mobile market. This indicator is key since the figurerepresents the total revenue expected from subscribers of the mobile or 4SM services. 7talso reflects the market share and sales effort of the marketing team of the telecomsoperator. This value can be affected by such factors as high tarrif regime, poor 1uality ofservice, better offers by competitor networks leading to churn or high subscriber turnover rate meaning that subscribers are switching to other rivals for better 4MS services. 7t isalso generally affected by increasing or decreasing demand for mobile services. Anincrease in this figure on the financial or operational review or report suggests that thebusiness is losing revenue from subscriber churn on its network. ence, most telecomsoperators would fight to gain more number in this variable. This is more so since thenature of the business is low margin high volume and that means operators would battlefor more subscribers by offering better 1uality or value added services to lure consumersto themselves.

O/erat*ng Pro,*t Marg*n

The operating profit margin also known as Ceturn on sales is a ratio that relates theoperating profit for the period to the sales revenue generated during the period underreview!AtrilLMc#aney,'((@".7t is mathematically expressed as

Operating profit margin=Operating profit Sales revenue

x100

The operating profit is derived as the net profit before interest and taxation and is used torepresent the profit from trading operations before the interest payable expenses aretaken into account on the income or profit and loss statement!AtrilLMc#aney,'((@". 7t isa ratio that compares one output of the business known as operating profit with anotheroutput known as sales revenue. This ratio varies from industry to industry and since thetelecoms industry has been identified as a low prices or low tariff business they wouldnormally offer subscribers low prices or fees in order to stimulate demand and sales,therefore low profit margins.7nvestors are likely to look seriously at this index as it gives an indication of howprofitable the business has been in the period of review.



5actors such as degree of competition, the type of customer, economic climate andindustry characteristics or features such as risk level are likely to affect this figure.

Re)en0e 'rowt-

Cevenue is simply a measure of the inflow of economic benefits resulting from theordinary activities of the business. These benefits which accrue to the investors of thebusiness, will result in either an increase in assets such as cash or infrastructure or adecrease in liabilities. Cevenue streams for a mobile operator would usually be economicbenefits due to more subscriptions, fees, etc as a result of more people using thetelecom network services.ence, owners of the business are likely to be evaluating the business in respect of pastperformance, business plans or pro9ections and close rivals in respect of seeing arevenue growth.

A)erage Re)en0e Per User 2ARPU3

The AC*D figure or index is a very key indicator used by telecoms businesses to 9udgethe profitabililty of their business or operational performances.This measure is most often used in the telecommunications sector to survey the amountof revenue generated per cellBphone user, for example. The values of the measuresobtained can be used as a comparison between companies. ompanies may also usethis information to determine which product lines are lagging!httpJ&&www.investopedia.com&terms&a&arpu.asp, accessed '((=B)'B )?".Mathematically, it can be expressed as J

Average revenue per user= Salesrevenue

Total number of subscribers x 100

Shareholders are other investors as well as telcos management are usually in favour ofincreasing figure in this index since it represents the fact the the business is generatingmore money or profit or returns for investors and also proves that sales strategiesemployed by marketing management is yielding positive impacts from the targetedconsumer or subscriber segments.

E7IT"A < Earn*ngs be,ore *nterest= ta1=de/rec*at*on and amort*>at*on

This is an indicator of a companys financial perfomance and it can be expressedmathematically as given belowJ

EBITDA= Revenue – Expenses(excluding tax , interest , depreciation∧amortization)

+%7T<A is essentially Net 7ncome with interest, taxes, depreciation, and amorti3ationadded back to it. +%7T<A can be used to analy3e and compare profitability betweencompanies and industries because it eliminates the effects of financing and accountingdecisions. owever, this is a nonB4AA* measure that allows a greater amount ofdiscretion as to what is !and is not" included in the calculation. This also means thatcompanies often change the items included in their +%7T<A calculation from onereporting period to the next !

httpJ&&www.investopedia.com&terms&e&ebitda.asp, accessed '((=B)'B)=". 8ften,managment of telecommunications companies often use this +%7T<A metric though it isa nonB4AA* measure to show how profitable their business had been in the period



under review. ence, they employ an +%7T<A Galuation model in their financial reports. A positive growth in this figure indicates that the business is getting more financiallybeneficial to its security holders and other stakeholders.

"e/rec*at*on

A lot of telecommunications assets !plants, property and e1uipment" are nonBcurrent innature and do not have a perpetual existence. They are used up in the process ofgenerating revenue for the business. ence, depreciation is an attempt to measure thatportion of the cost !or fair value" of a nonBcurrent asset that has been used up ingenerating the revenue recognised during the period under review. The depreciationcharge is normally considered as an expense and charged against the period to which itrelates in the income or profit&#oss statement !AtrilLMc#aney,'((@".<epreciation can be applied to both tangible nonBcurrent assets as well as intangiblenonBcurrent assets. 7n order to properly calculate the depreciation charge for a peiod ona tangible nonBcurrent asset the following factors are usually consideredJ

O The ost !or fair value" of the assetsO The useful life of the assetO The residual value of the assetO The depreciation method employed in the industry as re1uired by 4AA*!AtrilLMc#aney,'((@".

The cost of the asset will include all costs incurred by the telecoms business to bring theasset to its re1uired location and to make it ready for use. ence, in addition to the costsof ac1uiring the asset, any delivery costs, installation costs !for instance, setting up anew MS&G#C or switching system or %ase transceiver Station !%TS"" and legal costsincurred in the transfer of legal title!e.g. in purchasing or leasing a property" will beincluded as part of the totla cost of the asset !AtrilLMc#aney,'((@".

The historical cost method which uses the depreciation method by recording value ofassets using their historical costs less any depreciation. The fair value in constrast to thehistorical cost method uses the current market value of the asset !i.e. the exchangevalue in an armsBlength transaction" for valuing nonBcurrent tangible assets.

The useful life of a nonBcurrent tangible asset has both economic and physical life. Thephysical life is usually exhausted through the effects of tear and wear that arises with useand passage of time. Hhile the economic life is dependent on the technological progressand by changes in demand. 5or a telecommuunications business environment,technological innovations cahnges very rapidly and hence this seems to impact heavily

on telecoms nonBcurrent tangible assets as the rate of obsolescence of telecomse1uipment is high caused by technological evolutions of the mobile network.

Cesidual value also known as disposal value is the payment recieved by a telecomsbusiness when it disposes of a tangible nonBcurrent asset such as obsolete MSs,%Ss,multiplexers, etc that may still be of value to others. 7n order to calculate the total amountto be depreciated, the residual value must be deducted from the cost of the asset!AtrilLMc#aney,'((@".

Selecting the depreciation method to use for a particular asset depends on which onematches the depreciation expense to the pattern of economic benefits that the assetsprovides. There are two main types of depreciation methods employed by accountants,

namely the straightBline method and the reducing balance method !AtrilLMc#aney,'((@".The straightBline asset depreciation methods simply allocates the amount to be



depreciated evenly over the useful life of the asset. 7n otherwords, it uses an e1ualamount of depreciation charge per year that the asset is held. The annual depreciationcharge appears on the income statement in relation to the particular asset and will beaccumulated for as long as the asset continues to be owned by the telecoms business!AtrilLMc#aney,'((@". The balance left after the annual depreciation charge is deductedfrom the historical cost of the asset is referred to as the carrying amount or writtenBdownvalue or net book value of the tanngible nonBcurrent asset.The reducingBbalance method of asset depreciation applies a fixed percentage rate ofdepreciation to the carrying amount of an asset each year.

Assets and Ret0rn on Assets

An asset is simply a resource held by the business !AtrilLMc#aney,'((@". Assets arebought to increase the value of a firm or benefit the firmIs operations!httpJ&&www.investopedia.com&terms&a&asset.asp , accessed '((=B)'B)@".7t can beconsidered as anything that can generate cash flow for the business such as theswitching e1uipment !MS,%S,M4H,routers,etc", multiplexers, transmission

e1uipment, base transceiver stations, etc that consitutes the capital expenditure!A*+" of telecoms business. This includes all telecom infrastructure ranging from the%TS shelters, rooftops, fibre ducts, satellite systems etc that enables the operatorefficiently deliver service to its customers.7n the realm accounting, assets are either current or fixed !nonBcurrent". urrent meansthat the asset will be consumed within one year. 4enerally, this includes things like cash,accounts receivable and inventory. 5ixed assets are those that are expected to keepproviding benefit for more than one year, such as e1uipment, buildings and realestate,%TS,MSs,5ibre trunks and other fixed telecoms infrastructure.5or accounting purposes for an item to be considered or recorded as an asset in thebusiness balance sheet , it should have the following characteristicsJO *robable future benefit

O +xclusive right by the telecoms business to control the benefitO The benefit must arise from some past transaction or eventO The assset must be capable of measurement in monetary terms!AtrilLMc#aney,'((@".

Telecom infrastructure has the characteristic of yielding future monetary value though itsuse. 5or instance, a %TS !base transceiver system" on the 4SM network on a '''&///configuration would serve approximately '=2 subscribers connected at the same time inone hour ! see Appendix for calculations". #ets assume that these subscibers use theMTN 5amily and 5riends subscription and these calls are outbound to other 4SMnetworks like $ain. 5rom MTN tariff plan it will cost a subscriber ?(k!seventy kobo" persecond. ence per hour MTN would charge its subscribers ?( x 2(( W '0'(((kobo W',0'( naira per hour per subscriber. This would amount to one %TS on a '''&///transciever configuration yielding for MTN an approximate ',0'( x '=2 N4N W N4N?/0,='( W DS< /,=?'.@(. ence, one can see that a %TS will be regarded as a valaublenonBcurrent tangible asset that would appear under *roperty,*lant L +1uipment row ofMTN annual balance sheet.

owever, the telecoms business must have exclusive rights of ownership or control ofthe asset or infrastructure such as %TS or fibre trunk for it to be regarded by accountantsas an asset. ence, such things as tower, shelter,%TS,%S which are all housed orhomed within technical premises of the operator are all assets by exclusivity of controlor access to them. The operator would also obtain the right to the premises from orignal

landlord on freehold or leasehold basis and all these would be reocrded on a historicalcost less depreciation basis in the balance sheet of the company annual reports.



5inally, these assets would with a reasonable degree of reliability be measured inmonetary terms before they can be regarded as assets. 5or instance, to record thehistorical cost of a %TS would involve accumulating all costs such as cost of ac1uiringthe premises from original landlord, cost of purchasing and installing the tower or masts,cost of civil works , and cost of %TS e1uipment itself. 5rom research the average %TSsite build cost in Nigeria is )/,(((,((( N4N !naira" or approximatley DS<=(,(((Xowever, this value is depreciated every year due to wear and tear and obsolescence oftechnology.

Asset Per,ormance

Asset performance has been defined as a businessIs ability to take productive resourcesand manage them within its operations to produce subse1uent returns. Assetperformance is typically used to compare one companyIs performance over time oragainst its competition. *ossessing strong asset performance is one of the criteria fordetermining whether a company is considered a good

investment!httpJ&&www.investopedia.com&terms&a&assetperformance.asp, accessed '((=B)'B)@". Analysts use metrics like the cash conversion cycle, the return on assets ratioand the fixed asset turnover ratio to compare and assess a companyIs annual assetperformance. Typically, an improvement in asset performance means that a companycan either earn a higher return using the same amount of assets or is efficient enough tocreate the same amount of return using less assets!httpJ&&www.investopedia.com&terms&a&assetperformance.asp, accessed '((=B)'B)@".

Ret0rn on Assets

An indicator of how profitable a company is relative to its total assets. C8A gives an ideaas to how efficient management is at using its assets to generate earnings. alculatedby dividing a companyIs annual earnings by its total assets, C8A is displayed as apercentage. 7t is also sometimes referred to as Ureturn on investmentU!httpJ&&www.investopedia.com&terms&r&returnonassets.asp, accessed '((=B)'B)@"

Mathematically, it can be represented as the e1uaion or formula belowJ

ROA= et income

Totalassets x 100

C8A tells investors what earnings were generated from invested capital !assets". C8Afor public companies can vary substantially and will be highly dependent on the industry.This is why when using C8A as a comparative measure, it is best to compare it against acompanyIs previous C8A numbers or the C8A of a similar company!httpJ&&www.investopedia.com&terms&r&returnonassets.asp , accessed '((=B)'B)@".ence, the figure is expected to be high or higher compared to previous yearperformances.

Ca/*tal E1/end*t0re 2CAPEX3

apital expenditure is regarded as funds used by a company to ac1uire or upgrade

physical assets such as property, industrial buildings or e1uipment. This type of outlay ismade by companies to maintain or increase the scope of theiroperations!httpJ&&www.investopedia.com&terms&c&capitalexpenditure.asp, accessed '((=B



)'B)@". These expenditures for a telecoms business would include expenditure ontelecoms infrastructure and distribution. Most telecoms company expand their networksto improve capacity,1uality and coverage - modernise the network and make it moreefficient- stimulate and support the development and launch of new products. Dsually bigtelecoms operators would undertake to rollout more new '4 base transceiver station!%TSs" and new 4 %TSs to expand their coverages. They also undertake in capitalintensive pro9ect like providing additional capacity to both the circuit switch !voice" andpacket switch !data", and rolling out fibre optic metropolitan network in the highBtraffic3ones.core network.This is usually driven by heated competition in the market as well as bysubscibers demand pushing the operators to seek new locations where their networkneeds to reach. This index is of ma9or concern to operators of telecoms business as it must be 9ustified for shareholders through efficient return on asset performance on ayearly basis. ence, telecoms is seen as a capital intensive industry.7n accounting terms, an expense is considered to be a capital expenditure when theasset is a newly purchased capital asset or an investment that improves the useful life ofan existing capital asset. 7f an expense is a capital expenditure, it needs to be

capitali3ed- this re1uires the company to spread the cost of the expenditure over theuseful life of the asset. 7f, however, the expense is one that maintains the asset at itscurrent condition, the cost is deducted fully in the year of theexpense!httpJ&&www.investopedia.com&terms&c&capitalexpenditure.asp, accessed '((=B)'B)@".Dsually, the mangers and analysts of telecoms business would like to have this figureoptimised in such a way as to 9ustify expenditure through measuring the asset usageperfomance. Therefore metrics like return on assets are ma9or tools used to evaluate thiscost expenditure in relation to returns to shareholders and other stakeholders of thetelecoms business.Typical capital expenditure for a telecoms business would be the followingJ

O cost of purchasing new %TS e1uipment from their vendorsO cost of buying or leasing buildings, landed properties or shelters and towers for theirtelecoms e1uipmentO cost of buying or procuring new %ase Station controllers !%S"O cost of purchasing new switches or MS !MobileO cost of purchasing new transmission e1uipment like microwave radio and antennasO cost of procuring and installing fibre metropolitan networksO cost of procuring intelligent network e1uipment such as S<*s, S*s

O/erat*ng E1/enses 2OPEX3

8*+ !operating expenses" are a category of expenditure that a business incurs as aresult of performing its normal business operations. 8ne of the typical responsibilitiesthat management must contend with is determining how low operating expenses can bereduced without significantly affecting the firmIs ability to compete with its competitors!httpJ&&www.investopedia.com&terms&o&operatingexpense.asp,'((=B)'B)@".5or example, the payment of employeesI wages and funds allocated toward researchand development are operating expenses. 7n the absence of raising prices or finding newmarkets or product channels in order to raise profits, some businesses attempt toincrease the bottom line purely by cutting expenses!httpJ&&www.investopedia.com&terms&o&operatingexpense.asp,'((=B)'B)@"..Typical opex costs for a telecoms operator would be as such belowJ

O engineering staff salaries and allowancesO staff relocation fees



O staff recruitmentO general staff welfareO %TS rent and taxesO 8ther buildings and technical premises rent and taxesO engineering offices rentsO rent of switchesO rent due to accommodation ontractorsO utilities such as water, electricity and fuel

'oodw*ll and ot-er *ntang*ble Assets

4oodwill is seen as an intangible asset on the balance sheet because it is not a physicalasset such as buildings and e1uipment. 4oodwill typically reflects the value of intangibleassets such as a strong brand name, good customer relations, good employee relationsand any patents or proprietary technology. 4oodwill can often arise when one companyis purchased by another company. 7n an ac1uisition, the amount paid for the companyover book value usually accounts for the target firmIs intangible assets

!httpJ&&www.investopedia.com&terms&g&goodwill.asp,'((=B)'B)@".

These are regarded as intangible nonBcurrent assets and are similar to nonBcurrentassets in that they have a clear and separate identity and the cost of ac1uiring them canbe reliably measured !AtrilLMc#aney, '((@". +xamples of these are technology patents,trademarks, copyrights, software patents and licenses.

Cas- ,low

ash is the life blood of every telecoms business since its nature is primarily capitalintensive re1uiring heavy financing of its operations through capital investments orexpenditures.ash flow is regarded as a revenue or expense stream that changes a

cash account over a given period. ash inflows usually arise from one of three activities Bfinancing, operations or investing. ash outflows result from expenses or investments!httpJ&&www.investopedia.com&terms&c&cashflow.asp,'((=B)'B)@". The net cash flow of atelecoms business is used by investors and analyst to 9udge its financial performanceand competitive advantage in the industry.

Cost o, Ca/*tal

ost of capital is defined as the the re1uired return necessary to make a capitalbudgeting pro9ect decision. ost of capital is an aggregate of both the cost of debt andthe cost of e1uity. The cost of capital determines how a company can raise money!through a stock issue, borrowing, or a mix of the two". This is the rate of return that a

firm would receive if it invested in a different vehicle&venture&pro9ect with similar risk!httpJ&&www.investopedia.com&terms&c&costofcapital.asp,'((=B)'B)@". A typical telecomsbusiness decision might be whether to build a new switching centre in a new location ornot. ence, investment analysts and accountants would ensure that the returns expectedfrom such venture would exceed the investment cost of capital.

7n order to maintain or ad9ust the capital structure, most telcoms company may ad9ust theamount of dividends paid to shareholders, return capital to shareholders, or issue newshares or sell assets to reduce debt. onsistent with others in the industry, the companywould monitor capital on the basis of its gearing ratio. This ratio is calculated as net debtdivided by total capital. Net debt is calculated as total borrowings less cash and cashe1uivalents. Total capital is calculated as e1uity and will be reflected the balance sheet,

plus net debt.



The following are factors that drive the cost of capital for a telecoms businessJ

O #everage

O Cisks such as exchange ratios, political stability or instability, industrial sector, pro9ectand commercial terms

O 4uarantee

O Structure

O Cegulation

!Horld %ank, '((@"

%ased on studies carried out by the Nigerian ommunications ommission !N" theHA !weighted average cost of capital" for fixed services is '=> while the HA formobile services is '?> in relation with interconnection among operators.

H0man reso0rce

Though not reflected in the balance sheet of a telecoms business, most telecomsoperators regard their employees as their most important or most valauble assets inrespect of the telecoms business. Telecoms business is speciali3ed and hence alwaysre1uire human capital that is highly trained and developed to managetelecommunications services for the operators. Since they recognise them as source oftheir competitive resource and advantage , telecoms companies or businesses ofteninvest a lot in the training and developement of their engineers to enable them ac1uireproficiency in the core set of telecommunications management skills.

Some of the human resource skills and competencies are reflected in the 9ob roles andresponsibilities obtainable in a typical telecoms operator business as outlined belowJ

O Cadio fre1uency engineers and specialists

O Transmission engineers and specialist

O ore network engineers and specialist

O *ower system engineers and specialists

O 5ibre network engineers and specialists

O Switch engineers

O *ro9ect Managers

O Accountants and financial controls

O Safety health and environment !S+" officers

O Cevenue assurance staff

O Marketing and Sales staff

O %usiness 7ntelligence specialist



O %usiness Analysts

O Kuality control and assurance experts

O 47S !4eographic 7nformation System" specialists

O <atacommunication specialist

O *ro9ect Accountants

O Gendor relations and procurement staff

+&6 TE$ECOM I4RASTRUCTURE CATE'ORIES

Telecom infrastructure for the purpose of this research thesis will be limited to mobileinfrastructure. This is in order to manage scope properly and effectivley utili3e time sincethe scope of telecom infrastructure is very broad covering fixedBline, wireless and mobileinfrastructure.%asically, a cell site for a mobile operator will consist of the following componentsJO Active infrastructure which consists of the electronic infrastrcuture or elements such asbase station transceivers !%TS", microwave radio e1uipment, switches,antennas,tranceivers for signal processing and transmission and all other electronic systems andcomponents of the mobile networkO *assive infrastructure which comprises the nonBelectronic infrastrcuture including, butnot limited to , towers, shelters, air conditioning e1uipment, diesel generators, batterybanks, electrical supply, technical premises and easements and pylons that account foralmost 2( percent of network rollout costs!httpJ&&en.wikipedia.org&wiki&Telecominfrastructuresharing, accessed '((=B(@B'(".

+&? I4RASTRUCTURE SHARI' MO"E$S

The type or form of infrastructure sharing prevalent in a particular country can takemultiple options amongst teleom service providers and the model adopted depends onthe telcom regulation and legislation or policy in place in that country or economy!httpJ&&en.wikipedia.org&wiki&Telecominfrastructuresharing, accessed '((=B(@B'(".ountries like the Dnited :ingdom and Sweden have witnessed the structural separationbetween infrastructure and service provisioning whereby fixed line operators canleverage infrastructure sharing to optimi3e the use of their networks. owever, it was themobile sector that paved the way towards mature infrasrtucture sharing modelsworldwide !hanab et al, '((?".

Active Components (assive Components

1.Base Stattions 1.Toers2.Microa!e "adio #$ui%ment 2. Shelters

&.Sitches &. #lectric Su%%ly'. Antennas '. #asements

(. Transrecei!ers (. )ucts

Ta#le *0 $@amples of Mo#ile Infrastructure Components

Source : 'ooz Allen amilton

+&?&% Pass*)e In,rastr0ct0re S-ar*ng2aka S*te S-ar*ng3



This is the sharing of the nonBelectrocnic infrastructure at the cell site. 7t is also known asSite Sharing and in this form of sharing, operators agree to share available infrastructuresuch as site space, buildings and easements, towers and masts, power supply andtransmission e1uipment !hanab et al,'((?". This kind of sharing is suitable for densely

populated areas with limited availability- expensive sites such as underground subwaytunnels and rural areas with high transmission and power costs.The key challenges in this model are for incumbent operators to accept the opening ofthe infrastructure to other players and for new operators to trust that incumbents willprovide them with the appropriate access to sites without tactical delays to prevent themfrom rolling out thier networks effectivley !hanab et al,'((?". +nforcing suchcooperation is a ma9or challenge to regulatory authorities.

+&?&+ Act*)e In,rastrc0t0re S-ar*ng2aka etwork S-ar*ng3

This form of infrastrcuture sharing entails the operators sharing the electronicinfrastrcuture such as sharing base station controllers !%S", and sharing common

networks, both circuitBswitched and packetBoriented domains !hanab et al,'((?". 7n thismodel, operators typically share the C%S, CN, mobile services swithcing centre&Gisitinglocation register !MS&G#C", and serving 4*CS support node !S4SN". +ach operator ,however, has its own individual home network that contains the independent subscriberdatabases !such as #C,AD,etc" services, subscriber billing and connections toexternal networks.Network sharing !aka active sharing" re1uires additional planning and deployment effortsto accomodate each participating operators capacity needs !hanab et al,'((?".

+&?&. S/ectr0m S-ar*ng

This concept, also known as spectrum trading , is a model that has recently developed inmature, regulated environment and it entails an operator leasing part of its spectrum toanother operator on commercial terms!httpJ&&en.wikipedia.org&wiki&Telecominfrastructuresharing, accessed '((=B(@B'(".Since spectrum is a scarce is scarce that is often underutili3ed by one operator in agiven location, sharing proves a viable option for two or more operators !hanab etal,'((?".

+&?&5 MVO2Mob*le V*rt0al etwork O/erator3

MGN8 typically have no network and spectrum rights of their own though someadvanced MGN8s will build parts of their core network needs, they basically rely on

infrastructure sharing to get access to subscribers and offer services !hanab etal,'((?".

+&?&6 at*onal Roam*ng2 aka 'eogra/-*cal S/l*tt*ng3

Mandatory national roaming is a form of infrastructure sharing that allows new operators,while thier networks are still being deployed, to provide national service coverage bymeans of sharing incumbents networks in specific areas. Hhile national roaming isgenerally introduced with a sunset caluse, it could be made permanent in specificlocations. National roaming accelarates competition by allowing new players to launchtheir services within shorter time frames !hanab et al,'((?".

+&?&? Tower Com/an*es



The growth of existing tower management companies have also helped to ease outproblems of infrastructure. The business model consists of ac1uiring wirelessinfrastrcuture for operators and managing it. The economics are strongly driven bycolocation of operators on sites. Tower management comapnies usually en9oy scalableand longBterm recurring revenues with contracted annual escalations. They also benefitfrom low churn rates and low operating and capital costs. Tower managementcompanies thus can ensure fair treatment of new entrants while providing financialbenefits to the incumbents by buying the latters infrastrcuture and managing it, hencelowering operating expenses in the long run !hanab et al,'((?". An example of this is elio Towers Nigeria!www.heliostowers.com", a company thatprovides wireless operators in Nigeria with fullyBmanaged tower sites on a lease basis.

+&@ THE "RIVER 4OR I4RASTRUCTURE SHARI'

The growth in wireless mobile subscribers in Nigeria in the last nine!=" years have beenphenomenal and now reaching above 0(.) million subscribers today. <ue to this

intensive growth, combined with heated competition among rivals, there has been arising trend in the cost of capital expenditure dispensed by telecoms operators in theirbids to reach more subscribers. ence, more and more operators now resort to sharinginfrastructure or colocation as a strategy for reducing this heavy cost burden in networkrollouts or deployments as well as network expansions and upgrades.4iven that such investments in technology and network deployment are fixed,sunk andirreversible, they represent a high risk factor. This risk is further compounded by theneed , for both fixed and mobile operators, to continuously adopt new technologies andupgrade infrastructure. Therefore, infrastructure sharing has been seen as a means ofreducing this risk for operators by spreading it among several players !hanab etal,'((?".8ther motivations for sharing of infrastructure among telecom service providers include

the followingJ

* Sharp rising site rentalsJ Site ac1uisition is a key aspect of mobile telecom sitebuild and many operators are challenged by the rising cost of realBestate prices,as site rentals have also seen a sharp increase. Site owners are now aware ofmore players desiring to rollout in urban and rural areas and hence the demandfor tower sites and rentals are expected to rise sharply !Aggarwal, '((=".

* New Tower CestrictionsJ %oth the urban plannning ministries and localgovernment authorities, as well as state governments are begining to placerestrictions on new tower constructions on the grounds that they pose healthha3ards and congest the skyline !Aggarwal,'((=".

+&@&% T-e Reg0lator9 Pers/ect*)e

Many national regulatory agencies around the world are driven to favour infrastructuresharing as a way of stimulating competition and hence they are beginning to to formulatepolicies that would regulate and encourage sharing of infrastructure among telecomcompanies as a key lever to foster competition and optimi3e telecom investments!hanab et al,'((?". 5or these NCAs, infrastructure sharing limits duplication and gearsinvestments towards underserved areas, product innovation, and improved customerservice !hanab et al,'((?".The Nigerian regulatory authority, N !Nigerian ommunications ommission" favoursinfrastrcuture sharing and has developed what it calls R4uidelines on ollocation and

7nfrastructure SharingR as a framework for infrastructure sharing among telecomoperators in Nigeria. The following were given as the ob9ectives of these guidelinesJ



O To ensure that the incidence of unnecessary duplication of infrastructure isminimi3ed or completely avoided-OTo protect the environment by reducing the proliferation of infrastructure andfacilities installations-OTo ensure that the economic advantages derivable from the sharing of facilities areharnessed for the overall benefit of all telecommunications stakeholders-OTo minimi3e operators capital expenditure on supporting infrastructures and to freemore funds for investment in core network e1uipment-OTo encourage operators to pursue a costBoriented policy with the added effect of areduction in the tariffs chargeable to customers.

!4uidelines on ollocation and 7nfrastrcuture Sharing, N".

According to the N, infrastrcutures amenable to sharing are those that can be sharedwithout an attendant risk of lessening of competition. The ommission !N" alsoencourages and promotes the sharing of the following infrastructuresJ

▪ Cights of HayO MastsO *olesO Antenna masts and tower strcuturesO <uctsO TrenchesO Space in buildingsO +lectric power !public and private source"

+&@&+ T-e Com/et*t*on Pers/ect*)e

5rom the operators perspective, infrastructure sharing is seen as a means of reducingcapital and operational operational expenditures as well as 1uick rollouts of theirnetworks allowing inflow of revenues. 7nfrastructure sharing is also viewed as a means of achieving optimum utili3ation of resources or assets and hence improved economicefficiency.New entrants view telecom infrastrcuture sharing as a means of rolling out their networkscheaper and faster and hence optimi3e investment in the telecom sector. Someincumbents view it as a new source of revenue creation from new entrants while otherincumbents critici3e it as not favouring facilitiesBbased competition since, in theirarguments, the new players are given the undue advantage of saving capitalexpenditures while they parasite on incumbents sunk investments. Eet another schoolargues that infrastructure sharing creates forms of collusion among the bigger

incumbents and prevents real competition. owever, this collusive behaviour can beproperly manged through regulatory policyBmaking, enforcments , inducements orincentivisation !hanab et al,'((?".

+& THE 7EE4ITS O4 I4RASTRUCTURE SHARI'

The main argument in favour of coBlocation and infrastructure put forward by theNigerian telecoms regulator N is that of improving 1uality of service rendered bytelecoms operators as well as reducing expenditure !%alaB4bogbo, '((=". 8thersinclude revenues obtained through moneti3ation of nonBcore assets, faster time tomarket for new entrants and thus the ability to focus on customer service and corebusiness!%alaB4bogbo,'((=". 7t believes that with infrastructure sharing and coBlocation,

operators can achieve competitive tariffs for customers, rollout in less attractive areas,and control excessive proliferation of towers and masts ! that make the skyline untidy" in



urban areas while encouraging competition.owever, telecom operators generally appreciate and welcome infrastructure sharingdue to the cost savings that itbrings with it!hanab et al,'((?". According to AggarwalJRHith passive infrastructure sharing, operators are expected to save close to ( per centon A*+ and 8*+ when it comes to passive infrastructure management!mainlytowers"R. Another telecoms expert 4handhi believes that Rthe sharing of passive infrastructure willallow service providers to focus on their core sales&marketing areas. This will also free upmanagement time at the carriers. *assive infrastructure sharing will allow operators todefer their towerBrelated A*+ investments into 8*+ lease rental payments over anextended period of time.R e also postulates that existing towers can also be sold andleased back, thereby creating new sources of cash, which can be invested in radionetwork expansion and distribution. Another school of thought believes that the optimi3ed investment will contribute to bettersustainability of telecom operators and will 9ustify higher investments in the long term,given the lower risk. Telecom e1uipment vendors estimate that sharing may reduceinfrastructure costs for operators by as much as /( percent !hanab et al,'((?".

7n liberali3ing markets , as well as maturing ones, incumbent operators could generatesignificant revenues from infrastructure sharing which in certain cases can exceed )0percent of operators total revenues !hanab et al,'((?".

2igure /7 : CA($D Cost Savings



2igure /< : O($D Reduction

Source: Eentura

8the benefits put forward by other experts include the followingJ

O Celeasing of apital for Strategic 7nvestmentsJ Spinning of the network into anindependent company will allow incumbents to focus on customerBcentric activitieswhile releasing cash for new strategic investments.O <ecrease in the %arriers to Market +ntry for New +ntrantsJ Hhen infrastructuresharing policy is in place, entry barriers for potential market new entrants will besignificantly lowered , hence, making the telecoms market more attractive to newinvestors and players.O Shift in 5ocus to ServiceBbased innovation instead of Network <eploymentJ

Through the reduction in the cost burden imposed by massive network deploymentsas well as its attendant huge operational costs incurred, infrastructure sharing willalso allow operators to turn their attention to improved innovation, improved customer service and eventually get better commercial service offerings and a healthiercompetition !hanab et al,'((?".O +xpansion of investments to #ess dense areas and meeting of univeral service

targetsJThrough infrastructure sharing , operators can use the cost savings harvested fromcapex and opex to undertake network expansions and capaity building in theunreached rural areas.O 8ptimi3ation in the Dse of Scarce National CesourcesJ 7nfrastrcuture sharing in itsbasic forms will result in better use of scarce national resources, such as rights of

way and in its more complex forms will allow for better use of spectrum.O Ceduction in Negative +nviromental and health a3ardsJ 5rom theenvironmentalists and health interest groups perspectives, infrastructure sharing andcoBlocation will lead to less network build up meaing better or improved skylines andlesser potential emissions and radiations harmful for the public and the environment.

7n summary, though there seems to be lots of benefits associated with the infrastructuresharing model, its application or practice varies from region to region and from country tocountry. 7nfrastructure sharing is widely practised in Hestern!+uropean" and Americantelecoms markets, and now widely employed in the Asian markets.owever, here in Africa the initiative or model has seen resistance both from the regulatory and operatorsstaekholders perspectives. 8ne writer expresses his ama3ement why, though Africabeing the lowest in terms of infrastructure developement in the world, nearly alltelecommunications companies in Africa shy away from it and are always unwilling to



share infrastructure with other operators !7*+SA,'((2".The ob9ective of this research work to investigate the present MTNB$ain coBlocationmodel or arrangement so as to highlight these benefits from a cost saving perspectiveand help more and more managers of telecoms companies in Africa in general andNigeria in partticular see the advantages of infrastructure sharing so that more and morepolicy makers and key decisionBmakers can frame policies to favour infrastructuresharing in the African telecoms markets.

The key assumptions being investigated or explored are as followsJ

▪ Hhether infrastructure sharing actually leads to a significant reduction in cost ofnetwork infrastructure rollout and capacity expansions by telecoms operators in Nigeria.▪ Hhether infrastructure sharing among telecom providers actually results in a improvedefficiency in the utili3ation of telecoms infrastructure by telecom operators in Nigeria.▪ Hhether network infrastructure sharing leads to a significant reduction in theoperational expenditures !8*+" dissipated by telecoms operators in Nigeria.▪ Hhether network infrastructure sharing does lead to a degradation of service 1uality

delivered by operators and customer usage experience in Nigeria.▪ Hhether network infrastructure sharing will enable telecoms operators in Nigeriaachieve and sustain competitive advantage through wider coverage and capacity at lesscosts.▪ Hhether network infrastructure sharing would lead to improved service delivery bytelecoms providers in Nigeria.▪ Hhether Network infrastructure sharing would positively impact !improve" new productdevelopment and service innovation for telecom providers in Nigeria.

+&B HI"ERACES TO I4RASTRUCTURE SHARI' I A4RICA

Some experts and analysts have argued the following as ma9or deterrent or factors that

often discourage operators in Africa from sharing infrastructure with other operators

+&B&% Use o, "*,,erent S0//l*ers *n Val0e C-a*ns

Many operators often complain of incompatibility of e1uipment and systems employed byother operators as ma9or deterents to infrastructure sharing. This hinders interoperabilitywhich is the ability of systems or e1uipments from both sides to operate withoutproblems of mismatched configurations. This is due to the fact that many operators oftenemploy different suppliers or vendors in their value chains as a source of competitiveadvantage !7*+SA,'((2"

+&B&+ Use o, In,er*or E80*/ment

Some operators deploy systems of inferior 1uality and so others that deem to havesuperior systems might not be willing to share with these in order to maintain theircompetitve advantage !7*+SA,'((2".

+&B&. Mono/ol*st*c 7e-a)*o0r Among 7*g Pla9ers

8ften new entrants into some telecoms markets in Africa often complain of antiBcompetitive or unfair monopolistic behaviours adopted by dominant incumbent playerswho would have established wide network coverage before the entry of the new players.ence, these monopolistic players create barriers of entry by showing unwillingness to



share infrastructure.



CHAPTER THREE ! RESEARCH "ESI' METHO"O$O'Y

.&% ITRO"UCTIO

Though telecom infrastructure sharing both as a concept and practice is well establishedin +uropean, American and Asian markets, it is very novel here in Africa as manyoperators are more unwilling to share infrastructure. ence, there were not previousresearch about the profitability of this model here in Africa. Though, it has provedsuccessful in other international contexts, it is still necessary to test its practicability andprofitability in an African market since this market is uni1ue and presents perculiarchallenges which other markets like +urope does not have or present.ence, the reseach design being employed in this research will involve a mix ofdescriptive, exploratory and causal research approaches, in order to describe, explainand investigate the relationship among many variables having to do with telecominfrastructure sharing in a business setting.

.&+ RESEARCH "ESI'

Cesearch design provides the plan or framework for data collection and analysis. 7treveals the type of research, whether exploratory, descriptive or causal and the prioritiesof the researcher !4hauri and 4ronhaug, '((0". The reseach design will comprise of acombination of descriptive, exploratory and causal approaches. This is because theconcept of telecom infrastructure needs to be clarified, and existing models explored inorder to investigate the causal relationships that exist among the variables under study. Also, both 1ualitative and 1uantitative methods of data collection and analysis will beemployed. Again, this is due to the nature of variables and context beinginvestigated.The researcher has employed a case research approach as the method is

particularly well suited for this research thesis since the phenomenon under investigationis difficult to study outside its natural context and also the concepts and variables underscrutiny are difficult to a large extent to 1uantify !4hauri and 4ronhaug, '((0".%asing my model and assumptions on previously tested theories in Hestern and othertelecoms market, my research will involve a deductive approach to drawing or makingconclusions based on hypotheses drawn from studying existing literature !4hauri and4ronhaug, '((0". A case research refers to 1ualitative and fieldBbased construction and analysis ofbusiness cases !4hauri and 4ronhaug, '((0".My case study research will hence, involve data collection through multiples sourcessuch as verbal reports, personal interviews, focus groups, electronic observations asprimary data sources !4hauri and 4ronhaug, '((0".

.&+&% Researc- A//roac-

The research approach that i have adopted in this research thesis is basically adeductive one in which 7 have built hypotheses drawn from existing body of knowledge!literature review" and hence will have to be be sub9ected to empirical scrutiny&testingleading to acceptance or re9ection of prior hypothesis !4hauri and 4ronhaug, '((0".

.&. RESEACH METHO"O$O'Y

This section deals with means and techni1ues through which data was collected for thisresearch thesis. The primary data collected here were meant for testing and validatingthe prior hypotheses postulated through literature review, which is the secondary source



of data.

.&.&% Sam/l*ng Strateg9

The Nigerian telecommunications sector is made up )' telecom operators constituting of

mobile and fixed private operators. The mobile 4SM sector is made up of five !0"operators of which colocation relationship exists mainly between two !'" dominantoperators namely, MTN and $ain. ence, this colocation arrangment between these twohave been selected as a case study. A convenience sampling strategy has been employed since 7 presently work for MTN andthis sampling method is representative of the entire population of 4SM mobile operatorsin Nigeria seeing that MTN has /=.)=> of the mobile market share, while $ain!eltel"has '/.?/>. See 5igure ' above.

.&.&+ "ata Collect*on Strateg*es

This research thesis is case study based and the single case reviewed is thecolocation&infrastructure sharing pact that is being currently undertaken by MTN Nigeriaand $ain Nigeria. %oth companies constitute /(> of the total number of mobile operatorsin Nigeria. %oth telecoms companies have undertaken to share infrastructure under amutual agreement called olocation which has the Nigerian Cegulatory Authoritysbacking. <ata was collected by means of indepth interviews among ten !)(" keypersonnel of MTN and $ain who are directly and indirectly involved in this colocationarrangment. The interview format employed a semiBstructured interview format. This isas a reult of the nature of infomation&data being sought as certain sections re1uired fixedresponse&s and others were openBended 1uestions allowing the respondent libery todiscuss his opinion on the problem area and sub9ect matter.These interviews wereindepth, lasting from (B2( minutes, and explored areas of interest in prior hypotheses

postulated above ranging from medium to deep depending on how involved the personor division is in the business of infrastructure sharing. 5inancial performance data werealso collected from key departments and divisions within MTN and $ain Nigeria.Network performance data would be generated from network 1uality perfomancestatistics using performance monitoring tool known as 5ATS, that tell how MTNNigeria&$ain colocation system has been performing in history and real time. A samplesi3e of 0( colocation sites were used to compare for performance against 0( noncolocation sites. This is drawn out of a population si3e of over )0( sites since MTN and$ain shares sites infrastructure in over )0( sites across Nigeria. owever, the researcher was constrained by nonBdisclosure and confidentiality considerations&clauses not to giveout certain exact figures in this report.

.&5 $IMITATIOS O4 STU"Y

This research faced some limitations which might influence the validity and reliability ofthe results of the study. 5irst of all, infrastructure sharing is a relativley new phenomenonor business arrangment in the Nigerian telecoms industry. ence, finding telecomsservice providers who are involved in infrastructure sharing was 1uite difficult except forMTN and $ain who seem to be the ma9or pioneers in the mobile telecoms industry. Theuse of the MTN&$ain colocation arrangement could pose external validity problems as tothe generali3ability of the findings and results for other telecom service providers, asmany more operators are yet to explore or implement the infrastructure sharing model intheir business plans.

.&5&% Cost O, Researc-



onsidering the fact that both head1uarters of the two telecoms firms were situated 1uitefar away from each other !'( kilometres on the average" and hence what it takesfinancilally to reach many different departments of both companies knowing thatbusiness schedule constraints make several trips to and fro both head1uarters

inevitable. 7n order to circumvent this bottleneck, i had to devise an easier way byreducing the sample si3e of interview respondents and hence adopting a conveniencerepresentative sampling method.

.&5&+ T*me Constra*nt

The study was also constrained by the limited by time considering how many trips wasinvolved and meeting ade1uately the schedules of the respondents since their meetinghours was during the business days. Also, the researcher was constrained by timeseeing he had to combine his personal work schedule with the several trips to and froMTN and $ain head1uarters.

.&5&. Et-*cal Cons*derat*ons

Also the reliability as well as integrity or validity of the data collected was influenced bythe fact that due to confidentiality considerations most of the personnel interviewed wereconstrained in releasing as much information as might be deemed necessary for athorough research as their businesses did not permit letting out much of such informationconsidering the advantage this information might give to the competition.

.&6 "ATA AA$YSIS A" ITERPRETATIO

<ata analysis was perfomed on the semiBstructured 1uestionaires that was used forrespondents during interviews using a mix of 1ualitative and 1uantitative methods.ence, hypotheses were sub9ected to testing using the feedbacks obtained from therespondents during the interviews which lasted between ( and 2( minuted. Also resultsobtained from financial performance data was cross checked for important or vital trendsin cost reduction or revenue improvement and finally radio fre1uency performance dataobtained from live network via the 5ATS tool was examined for vital trends andconclusions drawn on colocation impact on network 1uality and performance.

.&? RESEARCH VA$I"ITY A" RE$IA7I$ITY

Galidity and reliability of findings and results will be key issues in this research.Galidity has to do with whether the results obtained within the study are true !i.e. internalvalidity"as well as whether findings can be generali3ed in other cases and&or contextsHhereasreliability has to do with the stability or consistency of the measure employed !4hauriand 4ronhaug, '((0".Since, this is a single case involving two ma9or players in the Nigerian telecoms industry,the researcher has ensured that the sample si3e drawn from respondents in theinterview are representative of the Nigerian mobile telecoms market and hence can claimthe generali3ability of the results obtained.The validity of the findings or results is highly dependent on the truthfulness of theanswers and opinions given by respondents from both sides in the colocation

arrangment. owever, this to some extent might not reflect the reality on groundaccurately as both parties are bound by nonBdisclosure and confidentiality clauses and



issues. ence, the reseacher was limited in this regard.



CHAPTER 4OUR ! RESEARCH 4I"I'S A" ITERPRETATIO

5&% ITRO"UCTIO

This section deals with the empirical 1uantitiative and 1ualitaitve analysis performed onthe feedbacks obtained from the semiBstructured interviews, as well as data generatedfrom the 5ATS network monitoring tool. Also financial analyses would be performed onfinancial data collected from the finance departments&divisions of MTN Nigeria and $ainNigeria. The data analysis techni1ues had to be a mixture or a variety of 1uantitative and1ualitative methods due to the nature of phenomenon or variable under study. Somevariables are absolute and very easy to measure empirically while others such as service1uality were more relative and hence i relied stattistics performed the on sub9ectivefeedbacks from respondents.

5&+ THE MTDAI CO$$OCATIO MO"E$

5rom the interviews undertaken among MTN and $ain technical staff it is very obviousthat the MTNB$ain colocation model is a symbiotic model , otherwise known as a 8neBforBone swap model. 7n this model, each operator simply chooses what part of the otheroperators coverage area where it has no coverage for a site sharing base.ence, thecolocation is on a siteBbyBsite basis. 7n this colocation agreement, the legal terms usedfor both parties or operators who are in the agreement as #ocator and oBlocator.V#ocator V means the party who holds the lease of the site re1uested by the coB locator for coBlocation. And VoBlocator means the *arty who has re1uested the other *arty holdingthe lease of the Site for coBlocation.Some of the terms of the oBlocation contract in respect of the MTNB$ain colocation areas set out belowJ

O oBlocationO <urationO Access, Safety and Security at SiteO MaintenanceO Standards&Kuality ontrolO 7ndemnity and #imitation of #iabilityO 5orce Ma9eureO MiscellaneousO TerminationO SeverabilityO essionO <ispute CesolutionO onfidentialityO Notices and <omicilia <etails of the MTNB$ain olocation contract is attached at the appendix ' of this thesis.

5&. SCOPE O4 SITE SHARI' A'REEMET

This section deals with the scope of the colocation agreement between MTN and $ain.

5&.&% Access= Sa,et9 And Sec0r*t9 At S*te

This framework in the agreement between MTN and $ain allows each party access to

the others technical premises. ence, The #ocator would grant to a nominatedrepresentative of the oBlocator access to the site, on preBagreed times accompanied by



an authorised representative of the #ocator. The parties also agree to be bound by, andshall conform to each others rules and guidelines on site access, security, safety, healthand environment. The parties also draw up a procedure for access and entry into the sitein the event of an emergency, ( days after the execution of the agreement.

5&.&+ Ma*ntenance

As set out in the contract, each party is responsible for installing its e1uipment on thesite, and carrying out scheduled periodic maintenance on its e1uipment, provided priornotice of such maintenance is given to the authorised representative of the locator beforesuch periodic maintenance is carried out. The locator or host is responsible formaintenance of common areas such as the %TS shelters, towers, ducts etc.7t is the responsibility of the coBlocator or the party re1uesting to be hosted, to makeavailable its maintenance shcedule in advance to the host or locator through itsauthorised representative.7n the event of a fault with the oBlocators e1uipment, the oBlocator shall follow thefault notification procedure to be agreed upon by both parties to enable the #ocator *arty

authorise re1uisite access to the site.

5&.&. Standards And :0al*t9 Control

Hithin the scope of this colocation agreement between MTN and $ain, it is theresponsibility of each party to ensure network 1uality of its network performance and notto act or do anything that could cause the network services performance of the otherparty to suffer impairment or degradation. Also, both parties irrevocably authorise theother party to dismantle any e1uipment which in its opinion is responsible for theimpairment, degradation or interruption of the other partys network.

5&5 FO7 PRO4I$ES 7AC('ROU"S O4 RESPO"ETS

7t was necessary to capture the 9ob profiles of respondents from both companies. This isin order to ensure that the responses obtained were of relevance to the research. A totalof '(!twenty" engineers who are actively involved in the coBlocation business betweenMTN and $ain were interviewed to find out what model or form of infrastructure sharingwas in operation between the two companies. Also, their opinions were sought on theadvantages or benefits of the existing arrangments. Their opinions were considered tobe relevant to the study since they have built both knowledge and experience fromparticipating in the colocation pact since '(('. <ue to confidentiality reasons as 7promised respondents to keep their identities anonymous, 7 will simply disclose the 9obprofiles of each respondent below. 6ob profiles are grouped according to the companies

where they apply.

Res/ondent % ! Rad*o 4re80enc9 Plann*ng Coord*nator < MT

This 9ob role has the responsibility of setting the planned targets of colocation sitesrollout targets for the radio fre1uency planning team at MTN Nigeria. e is alsoresponsible for encouraging the MTN network group division to invest or venture more of its operations in site colocation arrangments due to it being faster and cheaper to deploywhen compared to normal sites rollout. e also has the responsibility of obtainingapproval from the MTN colocation sites landlords in respect of any new coBlocator forwhich MTN has to provide infrastrucure sharing resources.

Res/ondent +! Rad*o 4re80enc9 Eng*neer< MT= *ger*a



This person is responsible for planning sites deployment for MTN Nigeria after receivingthe nominal site rollout plans or business plans from the marketing department. e isalso responsible for providing the C5 *lanning oordinator with the sites coordinates!longitudes, latitudes" with which he uses to make the collocation bargaining with the$ain team or management.

Res/ondent .! S*te S-ar*ng Coord*nator < MT= *ger*a

This individual is solely responsible for assessing each %TS site at wherever the MTNC5 planning coordinator and C5 engineer identifies as suitable for collocation with $ainfor such re1uirements as tower, space, power etc and evaluating any cost additions thatcould be demanded from the coBlocator ion terms of rent&lease payment surplus, etc.

Res/ondent 5! at*onal In,rastr0ct0ral "e)elo/ment Manager < MT= *ger*a

This role at MTN Nigeria is responsible for planning fibre metros and long haul for thepurpose of backhauling %TS traffic to all the switch centres at the heart of MTN network.

Hith respect to collocation, his ma9or responsibility is to liaise with $ain representativesin order to discover routes where collocation could be of benefit to both parties and thenrecommend such arrangement to senior management in respect to rights of way.

Res/ondent 6! at*onal R4 Plann*ng Manager < MT= *ger*a

This role is responsible for managing MTN Nigeria radio planning unit. ence, he setsthe sites deployment or rollout target for the C5 team nationwide as it has to do withMTN %TS rollout pro9ect. e usually interfaces with the marketing team and prepares his%TS sites rollout pro9ections based on the marketing units nominal and strategic plans.

Res/ondent ? ! 'eneral Manager= etwork O/erat*ons < MT= *ger*a

This person heads the network operations team which has such the duties as ofensuring that the MTN 4SM network is monitored and controlled for optimiumperformance- fault resolution and site maintenance.

Res/ondent @! S*te Ac80*s*t*on Team $ead < MT= *ger*a

This individual is responsible for all site lease or ac1uisition related deals between MTNNigeria and respective landowners across the Nigerian territorial space. e isresponsible for site visitations, surveys and also negotiations with site owners andproperty owners for possible lease contracts both new and renewals.

Res/ondent ! Reg*onal Rollo0t Manager < MT= *ger*a

This role is responsible for MTN Nigerias national %TS rollouts in terms of actualimplementations and installations of towers, civil works and %TS including all engineeringwork that would ensure the successful completion of %TS sites as set out in the MTNnational %TS rollout target prepared by the C5 planning manager. e also has theresponsibility of evaluating every collocation offer by MTN with other operator toascertain the additional 4SM components to be installed such as additional capacitieslike space, power etc to ensure a successful collocation implementation between MTNand its colocator.

Res/ondent B! S*te "e/lo9ment Eng*neer < MT= *ger*a



This individual works directly under the Cegional rollout manager and is responsible forthe actual installation and implementation works such as towers or mast installations,shelter construction and installation, generator installation as well as other engineeringand&or civil aspects of the installation done in order to bring up a fully operational %TS

site up on the MTN *#MN.

Res/ondent %G! etwork Meas0rementPer,ormance Eng*neerD MT= *ger*a

This role is more or less a network 1uality assurance expert who is charged with suchresponsibilities as network monitoring and measurement for performance gaps which heusually escalates appropriately to the C5 planning engineer and manager for propertuning to ensure better customer service experience or network 1uality.

Res/ondent %%!at*onal S*te Colocat*on Manager < a*n= *ger*a

This manager on the $ain side is responsible for coordinating all colocation contracts or

deals with other operators like MTN. e is responsible for doing the %TS site colocationinfrastructure feasibility studies and analysis for his company.

Res/ondent %+ ! Rad*o Access Eng*neer < a*n= *ger*a

This role in the $ain operations is more like the C5 planning engineer at MTN. is 9obresponsibilities include carrying out radio fre1uency planning having recieved marketingstrategy forecast for $ain. e is also responsible for identifying possible site sharingpossibilities in both $ain and MTN networks.

Res/ondent %.! Transm*ss*on Plann*ng Eng*neer < a*n= *ger*a

This role is responsible for all microwave links plans as well as connectivity designs forthe $ain network. e also handles and resolves inssues such as fre1uency interferenceon the microwave links. e is actively involved in colocation technical site surveys.

Res/ondent %5 ! etwork O/erat*ons Manager < a*n= *ger*a

The nework operations manager in $ain Nigeria is responsible for all %TS, transmissionand core or switch related fault resolutions nationwide. e is responsible for ensuringthat $ain network performance is optimum for good subscriber experience for the $ainnetwork.

Res/ondent %6!S/ec*la*st ! Plann*ng Tool Management < a*n= *ger*a

This individual in the $ain organi3ation is responsible for ensuring that all $ain C5planning software tools function as specified for effective dimensioning of the $ainnetwork. e ensures that licenses are updated as and when due and he is alsorepsonsible for ensuring that the 1uality of radio signals from $ains %TS is assured.

Res/ondent %?!Proect $eader ! 7SS Rollo0t Program < a*n=*ger*a

This individual in the $ain network operations is charged with such responsibilities asensuring that %TS infrastructure is rolled out on site as planned by the Cadio accessmanager much in the same way the regional rollout manager works with plans from C5planning manager of the MTN network. e is also charged with such additional duties aspro9ect managing the colocation costs for the MTN&$ain site sharing deal.



Res/ondent %@! at*onal Rad*o Access Manager < a*n= *ger*a

The radio access manager at $ain functions more like the C5 plannig manager at MTNNigeria. 7t is his repsonsibility to set %TS sites rollout targets for the $ain engineering

team. 7t is his pro9ected plan that drives the pro9ect targets of the %SS rollout pro9ectleader at $ain.

Res/ondent %! Power S/ec*al*st ! 7TS Rollo0t < a*n= *ger*a

This role in $ain is responsible for power planning in line with $ain %TS sites rolloutprogram. e manages all power budgetting for all $ain %TS sites nationwide. e is alsorespeonsible for evaluating all power upgrades or enhancements re1uired at any MTN%TS sites where $ain deems good or suitable for site colocation and sharing.

Res/ondent %B! S*te Ma*ntenance O,,*cer < a*n= *ger*a

The site maintenance office at $ain is responsible for all %TS site maintenance issuessuch as infrastructure repair, %TS fault resolution, broken cables repair, antennaad9ustments etc to ensure the smooth operations of the $ain %TS sites. e is alsoresponsible for %TS sites maintenance of colocation sites between MTN&$ain and isregarded as the $ain representative for colocation site access visits.

Res/ondent +G! S*te Ma*ntenance Manager D a*n= *ger*a

This role oversees all site maintenance pro9ects in all $ain %TS sites across the Nigeriangeographical space. The Site Maintenance 8fficer discussed above is accountable tohim. e is responsible for allocating $ain representatives for regular sites visits to

MTN&$ain colocation %TS sites.

5&6 CO$$OCATIO PROCE"URE OR #OR( 4$O#

The %TS site colocation is often regarded as a separate pro9ect from their routine %TSrollout pro9ects and it involves series of 9ob tasks as defined belowJ

O Task)J The C5 +ngineers of one party scans through their network for lists of possiblecollocation or site sharing.

O Task 'J The C5 +ngineers of the colocator sends a list of possible %TS sites forcollocation to the #ocator operator seeking 5irst #ine Approval.

O Task J The locator operator !whether MTN or $ain" performs collocation feasibilitystudy for resource availability such as tower space, floor space, generator capacity etcthat would ensure successful collocation.

O Task /J The locator grants collocation approval to colocator for site sharing on identified%TS sites.

O Task 0J %oth parties !#ocator and olocator" schedules Technical Site Survey !TSS"involving %TS site visitation for the actual scope of work to be done to ensure thatinfrastructure is properly shared with locator. The result of this exercise would be a %TS#ayout <esign that depicts the floor layout arrangement for %TS infrastructure of bothcollocating parties.



O Task 2J The #ocator party performs additional civil or engineering works at existing %TSsites to accommodate the %TS e1uipment !C5 and transmission" of the collocate or partyseeking to collocate with it. 7n other words, the locator operator upgrades its existingfacilities and infrastructure to accommodate the %TS e1uipment and such things aspower output of the generators, etc are upgraded.

O Task ?J The locating operator or the host operator gives Site Ceady for 7nstallationnotice to the olocator to commence %TS e1uipment installations.

O Task @J The collocating operator receives notification of Site readiness and marshalsresources to site for %TS installation and integration.

5&? ITERVIE# 'UI"E 4ORMAT

The interviews generally lasted between ( to 2( minutes and it format adoptedinvolved a mixture of structured and semiBstructured 1uestions. The structured 1uestionswere presented with options in a #ikert scale format that employed response options

such as YStrongly disagreeR, YagreeR, YNeutral !ant say"R, YStrongly agreeR and YagreeR.The unstructured aspects employed openBended 1uestions that enabled respondents todiscuss freely their opinions and experiences as it related to each sub9ect&interest matterarea of the research. The backgrounds and 9ob responsibilities of the respondents werestudied to ensure the reliability and validity of the feedback expected from them.

5&@ RESU$TS O4 ITERVIE# SURVEY

The results of the interviews were filtered for each sub9ect or hypothesis area andanalysed using a mix of statistical and&or other 1ualitative methods, hence triangulationwas employed as a mixture of methodologies in the study of same phenomenon!4hauriL4ronhaug, '((0". The results obtained are as follows. The interview guide usedduring the interviews can be seen in Appendix A at the end of this thesis.

5&@&% T9/es o, In,rastr0ct0re S-ared b9 MT AI

The purpose of this area is an explorative one to discover what infrastructures wereshared between MTN and $ain. The results of the field interview in respect of this areaare as displayed in charts.The response rate as well as the results is depicted in graphical representations asshown below.

Presently what kind of infrastructure does your orani!ation share

with MT"#$ain%

&nswer 'ptionsResponsePercent

ResponseCount

Tower 90.0% 18

Technical Premises(Space in buildins! 8".0% 1#

$ibre (ih& o' wa! )".0% "

*lec&ric power 8".0% 1#

BTS 10.0% )

Swi&ches 0.0% 0

Trenches 1".0% +

Shel&ers "".0% 11

,icrowa-e euipmen& 0.0% 0An&ennas )".0% "



/&her (please speci'! )

answered question ()

skipped question )

0.0%

10.0%

)0.0%

+0.0%

0.0%

"0.0%

0.0%

#0.0%

80.0%

90.0%

100.0%

Presently what kind of infrastructure does your orani!ation share with MT"#$ain%



5rom the results of the responses obtained during the interviews we can see that theinfrastructures shared between both companies, in order of importance, are as followsJTower with =(> response rate- technical premises and electric generators !@0>"- %TSshelters !00>", and antennas and fibre right of ways!both '0>".

5&@&+ 7ene,*ts o, In,rastr0ct0re S-ar*ng to MT andor AI

The responses were data processed using Microsoft +xcel. The outputs of the resultsare as depicted below.



Please can you share with me the bene*ts of this infrastructure or collocation arranement your hae

&nswer 'ptions

answered questionskipped question

"umbe

rResponse ,ate

-"o --. ())/ 01-0

PM1. 2ow se& up cos&3 ). 4uic5 &o pu& si&e on air. +. e-enue is earned 'as&er &han 'o. 2ow opera&ional cos&. ". e7cien& use o' 6ed and scarce resources(land!

("o -0. ())/

--102 &M cos& reduc&ion3 'as& deplomen&3 wider area co-erae

0"o -3. ())/

--133 &Mbe&&er re&urn on asse&s(/A! achie-ed3 e7cien& use o' ne&wor5 elemen&s3 'as&er 'as&er rollou& &ime

3"o -4. ())/ -1--

PM +0% CAP* sa-ins on cos&

2

"o -4. ())/ 41(0

PM

This is aimed a& reducin CAP* and /P* and rollin ou& BTS 'as&er.

4"o -5. ())/ 61-3

&M I& has helped us share &he cos& o' diesel cos& since we share enera&ors a& colloc

5"o -5. ())/ 01-/

PMI& has helped m compan reduce number o' si&e -isi&s since &here is a shared m/&her cos&s li5e 'uel cos&s and cos& o' purchasin new enera&ors are also elimin

6"o -6. ())/

-)13/ &M

I& &a5es ou& cos& o' an&enna componen&s and &owers or mas&s 'rom &he cos& o' BTI& also reduces &he man:hours epended on adio 'reuenc desin durin &he pI& also allows 'or shared main&enance be&ween bo&h par&ies in &erms o' 'aul& reso

/"o -6. ())/ (102

PM

I& has reduced cos& o' si&e ren&als reuired 'or housin BTS euipmen&.

I& has also reduced &he &ime'rame i& &a5es &o comple&e a &pical BTS si&e as compI& also reduces cos& o' securi& 'or a BTS si&e

-)"o -/. ())/

--13) &MI& remo-es such cos&s as procuremen& o' e&ra enera&ors 'rom &he coloca&or.I& also elimina&es cos&s such as cos& o' &ower build3 and cos& o' ci-il wor5s.

--"o -/. ())/ (136

PM

I& has helped m orani<a&ion deplo BTS si&es uic5er and hence reduced &he e= This in &urn has impro-ed m orani<a&ions compe&i&i-e ad-an&ae.I& has also impro-ed e7cienc in &he usae o' ne&wor5 asse&s 'or m compan

-("o (0. ())/ 01))

PMI& sa-es &ime o' BTS si&e build and elimina&es &he challenes and cos& a&&ribu&abllandlords or proper& aen&s

-0"o (3. ())/ 01)2

PM I& sa-es on /P* and CAP* ependi&ure 'or an opera&or.

-3"o (2. ())/ 01(2

PM I& reduces &he cos& due &o si&e lease or ren&als. I& has also made BTS si&e rollou& '

-2 "o (4. ())/ 31(2PM

I& has enabled our ne&wor5 e&end i&s co-erae 'as&er a& lower cos&s.

Also ne&wor5 per'ormance moni&orin cos&s is also reduced since $ enineers oPar&ies share ne&wor5 moni&orin responsibili&ies 'or same BTS si&e.

-4"o 0). ())/ 01(4

PMCos& sa-in since elec&ric power is shared. Also i& sini6can&l elimina&es si&e acI& also speeds up &ime &o mar5e&. I& elimina&es cos&s o' &echnical si&es sur-es

-5,ec -. ())/ 01(5

PM cos& sa-in3 impro-ed ne&wor5 capaci& and pro&ec&ion and 'as&er &ime &o mar5e&

-6,ec (. ())/ 01(5

PM I& sa-es cos& &hrouh shared main&enance. I& also sa-es cos& due &o communi& l

-/,ec -0. ())/ 01(6

PM Posi&i-e reduc&ion in CAP* ependi&ure.



0>08 Model Of MT?"AI Collocation

The res%onse count and descri%ti!e te+ts are as dis%layed ,elo.

Please what model of infrastructure sharin areement does your company hae with MT"#$ain%

&nswer 'ptions Response Count

)0


skipped question )

"umber Response ,ate Response Te7t

- "o --. ())/ 01-0 PM /ne:one si&e echane

( :

0 "o -0. ())/ --102 &MSwap ,odel3 meanin one:'or:one or one si&e 'rom co:loca&or 'or one si&e 'rom loca&or

3 "o -3. ())/ --133 &M one:'or:one

2 "o -4. ())/ -1-- PM

/ne &o one BTS sharin i.e. 'or e-er one BTS owned b>ain &ha& we share wi&h &hem3 we i-e &hem one BTS &share wi&h us

4 "o -4. ())/ 41(0 PM Trade:b:Bar&er 5ind o' model

5 "o -5. ())/ 61-3 &M /ne:'or:one model

6 "o -5. ())/ 01-/ PM Swap model

/ "o -6. ())/ -)13/ &MAn echane 5ind o' areemen& also 5nown as ?one:'oone? swap model



-) "o -6. ())/ (102 PM Swap model

-- "o -/. ())/ --13) &M

Swi&ch model meanin &ha& each opera&or selec&s euanumber and uali& o' BTS si&es on each side 'orcolloca&ion

-( "o -/. ())/ (136 PM Smbio&ic 5ind o' rela&ionship

-0 "o (0. ())/ 01)) PM

I& has a swi&ched model3 &ha& is3 si&es are shared on ebasis on bo&h sides o' &he barain. I' ,T@ &a5es one BT

si&e &o share on >ain ne&wor53 &hen >ain would also selano&her si&e o' eual uali& and cos& on ,T@ side 'orsharin

-3 "o (3. ())/ 01)2 PM Trade:b:bar&er 5ind o' arranemen&

-2 "o (2. ())/ 01(2 PM Swap model

-4 "o (4. ())/ 31(2 PM one:&o:one

-5 "o 0). ())/ 01(4 PM This colloca&ion arranemen& wi&h ,T@ has helped >aidri-e down CAP* b 0%

-6 ,ec -. ())/ 01(5 PM Swappin areemen&s or ?one:'or:one? areemen&s

-/ ,ec (. ())/ 01(5 PM can& sa

() ,ec -0. ())/ 01(6 PM Swap ,odel

5&@&5 etwork In,rastr0ct0re S-ar*ng And Cost o, Rollo0t

The response rate is as displayed below.

"etwork infrastructure sharin 8aka collocation9 has helped yourcompany achiee a sini*cant reduction in its cost of rollout 8orcapital e7pended or inested9:


ResponseCount

S&ronl disaree 10.0% )

isaree 0.0% 0

@eu&ral(Can& sa! ".0% 1

Aree +".0% #

S&ronl aree "0.0% 10


skipped question )

The results of the interview were data processed using Microsoft +xcel and the output isgiven in graphical display as given below both in pie and bar charts.



"etwork infrastructure sharin 8aka collocation9 has helped your company achie+e a sini*cant reduction in its cost of rollout8or capital e7pended or in+ested9:

S &ron l dis a ree Bis a re e @e u&ra l( Can & s a! Aree S &ron l are e

5rom the results of the responses obtained as shown above we more than 0(> of therespondents in agreement with the proposition that infrastructure sharing would lead tosignificant reduction in A*+ cost of rollout.5inancial information was collected on the pro9ect cost of site build per 4reenfield %TS



site and compared with that of olocation %TS sites for the periods ranging from '((? to'((=. The information is as displayed in the table shown below.

4*nanc*al Per*odProect Val0e /er 7TS

s*te2'reen,*eld3 Proect Val0e /er 7TS s*te2Collo

'((? P)(),/2/.@( P2?,=2.2(

'((@ P@?,??'.=0 P??,200./=

'((= P?/,@'?.(/ P)/,0@.(=

%ased on the financial information received from the Site Collout coordinators andmanagers of MTN Nigeria, which for confidentiality reason, details are not provided inthis report, the following column charts displayed below shows a strong correlationbetween colocation of %TS infrastructure with reduction in A*+ cost of rollout per %TSsite shared.

)00# )008 )009

0.00

)03000.00

03000.00

03000.00

803000.00

1003000.00

1)03000.00

A-erae o' ProDec&

Ealue per BTS

si&e(;reen6eld!

A-erae o' ProDec&

Ealue per BTS

si&e(Coloca&ion!

Again, this gives a strong evidence of reduction in the cost of site build pro9ectsundertaken within these periods. 5or '((? the percentage reduction is .(/>- '((@ is)).0'> and '((= is @(.0)>.The decreasing trend in the cost of %TS site pro9ect cost is due to the effect ofmacroeconomics due to exchange rate fluctuations and recessionary effects. ence, theaverage percentage reduction gives /).2=>. Therefore, this tends to validate thehypothesis that infrastructure sharing between telecom companies would generally leadto signifant A*+ cost of rollouts.

5&@&6 In,rastr0ct0re S-ar*ng And Asset Usage E,,*c*enc9

The response rate obtained from the interview results for this section is as displayedbelow.

This collocation or infrastructure sharin deal has enabled yourcompany to e;ciently utili!e its *7ed assets such as <TS. Towers.

&ntennas. =loor space. electric enerators. air conditioners.ducts. trenches. or other infrastructure:




ResponseCount

S&ronl disaree )1.1%

isaree 0.0% 0

@eu&ral(Can& sa! 1".8% +

Aree +1.% S&ronl aree +1.%

answered question -/

skipped question -

The results when data processed using Microsoft +xcel is displayed in graphical form foranalysis as displayed below.

This collocation or infrastructure sharin deal has enabled your company to e;ciently utili!e its *7ed assets such as <TS. Towers. &ntennas. =loor space. electric enerators. air conditioners. ducts. trenches. or other infrastructure:

S &ro n l d is a re e B is a re e @eu &r al (Ca n & s a! A re e S &ro n l a re e

Hhen analy3ed using the bar chart scheme we see the fre1uency distribution as shownbelow.



The results obtained in this section reveals that 2.'> respondents agree with theproposition that infrastructure sharing helps operators in using their network assets moreefficiently, while ').)> tend to disagree.Mathematically, asset usage efficiency can be expressed as below.

ROA= et income

Totalassets x 100

ence, as total assets begin to reduce and net income remain fixed, then return onassets will grow.

There is evidence that colocation sites is on a growing trend as can be seen from the

data obtained from MTN Nigeria shown below.



0

)0

0

0

80

100

1)0

10

MT" Colo Proress Chart

To&al

Again, due to confidentiality issues, the researcher has excluded more explicit details.5rom this trend we can see that there is a growing trend in the use of colocation sites byMTN leading to a reduction in A*+ spend employed by the company. Since, there isevidence of net income growth as obtained from MTN Annual results below

Source - MT 200/ Annual "esults

ence, from C8A formula above, there is proof that there is much more growth in Ceturnon Assets!C8A" as MTN employs more and more of colocation %TS sites in itsoperations.

Also, from $ain MT annual results we can see its trend below.



Source- ain MT 200/ Annual "esults.

Since, the trend of colocation of %TSs is also on the increase for $ain as with MTN, thereis also a proof of better asset usage performance expressed as Ceturn on Assets!C8A".

ence, these results show that there is strong correlation between infrastructure sharingand better assets usage.

5&@&? In,rastr0ct0re S-ar*ng And :0al*t9 o, Ser)*ce

The responses of the interview survey is as depicted below.

This infrastructure sharin deal has neatiely impacted on yourcustomer serice e7perience or quality of your serice on yourcustomer mobile phones. P,&s. etc end>user equipment:


ResponseCount

S&ronl disaree 1".0% +

isaree ".0% 9

@eu&ral(Can& sa! 1".0% +

Aree )0.0%

S&ronl Aree ".0% 1


skipped question )

And the data analysis using Microsoft #+cel generated the out%ut gi!en ,elo.



5rom this result we can see that 2(> percent of respondents tend to agreement while'0> disagree and )0> are neutral having no idea about the sub9ect matter.This hypothesis that infrastructure sharing would not lead to a degradation in 1uality ofservice is further upheld through the analysis of network performance of fifty!0(" sitesselected across MTN Nigeria where there is colocation and there is no colocation or sitesharing. The results generated through 5ATS are as depicted below.



0.00

)0.00

0.00

0.00

80.00

100.00

1)0.00

TC? &ailablity Performancefor Colocation Site

wee5

wee5 "

Percentae

0.00

)0.00

0.00

0.00

80.00

100.00

1)0.00

TC? &ailablity Performace

for "on>Colocation Site

wee5

wee5 "

Percentae

Network availability is expressed in percentage and is defined as the ratio of availableradio resources to total defined radio resources in the network.7t is mathematically expressed,



Availabilit!=Total available traffic c"annels(T#$ )onBTSTotaldefined trafficc"annels ( DT#$ )onBTS

x100

7t is measured by C5 engineers by looking at the traffic channel availability of the %TS

sites.The traffic channels are the voice traffic bearing channels on the 4SM fre1uencies thatact as carriers for subscribers speech calls. 5or subscribers to have very good service1uality at all times then these traffic channels need to be up and running == out of )((times in a day.The average network availability per week for a very good 1uality of service is within the=2B==.===> range.5rom the graph or trend analysis for colocation sites we can see that the 1uality oravailability is near ==> most of the time. The spikes that is seen that drop downwards to3ero show times when these sites went down due to electric power failures, generatorfailures or vandali3ations and they remained down for longer periods due to lack ofcommitment from the site owner, whether MTN or $ain.

Hhen compared to %TS sites where there is no sharing as we see in the chart or trendbelow the first one, we see that there is little difference in network performance and thevariations we see is as a result of difference in site management associated with thedifferences in key performance indices!:*7s" employed by both operators.ence, these results tend to prove that infrastructure sharing would not lead to adegradation in service 1uality rendered by operators when efficiently managed.

5&@&@ In,rastr0ct0re S-ar*ng And Ser)*ce "el*)er9 Prod0ct Inno)at*on

The purpose of this sections was to verify or validate the hypothesis postulated thatnetwork infrastructure sharing leads to better service delivery by the network operator.The responses collated are as displayed using SurveyMonkey.com data analysis engineis as seen below.

This collocation8or infrastructure sharin9 pact has helped yourorani!ation improe on its serice deliery throuh introduction of alueadded serices8or introduction of innoatie product9 by means of usincapital saed from otherwise new or @reen*eld rollouts:


Response Count

S&ronl disaree ".0% 1

isaree 0.0% 0@eu&ral(Can& sa! +".0% #

Aree "".0% 11

S&ronl aree ".0% 1


skipped question )

7n pie chart format,



7n bar chart format,



As can be seen above, over 2(> percent of respondents believe that infrastructuresharing will make capital available to enhance or improve service delivery of telecomsoperators through the harvesting of funds that could have been sunk in newinfrastructure. These funds can be ploughed back into new product or servicedevelopment. ence, these results or responses tends to 9ustify the hypothesis thattelecom infrastructure sharing would lead to better service delivery by telecom serviceproviders.

5& SUMMARY

The summary of results of the hypotheses are as shown below.

ypothesi

s

2inal

Resul

t

/

etork infrastructure sharing results in a significant reduction in cost ofnetork infrastructure rollout and ca%acity e+%ansions for telecoms o%erators in

igeria.

Acce%t

*

etork infrastructure sharing results in an im%ro!ed efficiency in the utili3ationof telecoms infrastructure for telecom o%erators in igeria.

Acce%t



8

etork infrastructure sharing leads to a significant reduction in the o%erationale+%enditures 456#78 dissi%ated for telecoms o%erators in igeria.

Acce%t

etork infrastructure sharing does not lead to degraded $uality of ser!ice and

customer usage e+%erience for telecoms o%erators in igeria.

Acce%

t

7

etork infrastructure sharing ill ena,le telecoms o%erators in igeria achie!eand sustain com%etiti!e ad!antage through ider co!erage and ca%acity at lesscosts.

Acce%t

<

etork infrastructure sharing ould lead to im%ro!ed ser!ice deli!ery ,ytelecoms %ro!iders in igeria.

Acce%t

>

etork infrastructure sharing ould %ositi!ely im%act 4im%ro!e8 ne %roductde!elo%ment and ser!ice inno!ation for telecom %ro!iders in igeria.

Acce%t



CHAPTER 4IVE ! RECOMME"ATIOS A" COC$USIOS

6&% RECOMME"ATIOS

This research explored the benefits of telecoms infrastructure sharing as a means bywhich telecoms operators in Nigeria can optimise their capital and operating expenses.The results obtained clearly supported propositions in literature reviews that operators

can obtain (B/(> savings on both their A*+ and 8*+ spendings by deciding toshare telecoms infrastructure with other operators. The results of the research alsoprovided evidence that fears of network performance degradation due to telecoms sitesharing will not be necessary since ma9or issues of network degradation can be handledby simply synchroni3ing site maintenance schedules and each party taking responsibilityfor the others e1uipment fault resolutions. 7t also proved that operators are able toachieve better competitive advantage through wider coverage in faster and cheaperways by adopting infrastructure sharing in their business strategies.7nfrastructure sharing in telecoms was also seen as a catalyst for better product&serviceinnovations and new product developement depending on the companys marketing orsales strategy.owever, many experts have wondered at the trend of unwillingness to share

infrastructure by some telecoms operators in Africa !7*+SA,'((2". ence, in Africa it isnot uncommon to find three similar masts belonging to three different operators allcrammed in the same '(( s1uare metre area. 7t is also uncommon to find differenttelecom operators digging up roads in cities and along highways, each laying similarinfrastructure, like fibre, to that of the other companies !7*+SA,'((2". This does notauger well with the environment for the African people as these several cutting of roadsand plenty of masts or towers make the government spend more on road budgets aswell as making the skyline very untidy.olocation or infrastructure sharing can also help regulators achieve improved customerservice as the financial gains achieved by operators can be used to maintain their goodemployees, and add value to their services.ence, the following recommnedations would be made using MTNB$ain olocation case

study for policy makers and other operators as a way of encouraging the infrastructuresharing trend in Nigeria.

6&%&% Increase *n Comm*tment ,rom t-e Reg0lators

Some respondents interviewed expressed concerns about the lack of commitmentshown by the regulatory body towards their infrastructure sharing arrangments. Thetelecom regulatory body in Nigeria, N can encourage infrastructure sharing trends byensuring that terms of agreement are adhered to by both parties and ensuring thatdefaulting parties are penali3ed in forms of fines or surchaches. This would ensure better commitments by the colocating parties. Also, seeing that different operators set varying infrastructure rollout targets, it has alsobecome necessary for the N to ensure that colocation plans are made by operatorsahead of time to avoid such issues as unavailability of sharing resources when the



desiring party appraoches the host party. This would ensure that operators makecapacity available to other network operators as they rollout their private networks.

6&%&+ Standard*>at*on o, t-e Telecoms S9stem Plat,orms

There is the arguement by respondents interviewed or surveyed of different operatorsemploying different suppliers and vendors in their value chains as a source ofcompetitive advantage. This leads to disparate systems specifications making it difficultto share infrastructure with other operators willing to share. Some perceive the others asusing e1uipment of inferior 1uality and grade and since they feel this might bring downtheir compettitive advantage their often refrain from sharing infrastructure. This also canbe reduced if the N begins to lay out policies that would ensure proper 1uality controland assurance on infrastructure deployed by all operators and also set 1uality standardsfor all vendors supplying telecoms e1uipment to Nigeria. This can be efficiently done viastandards bodies such as the 7S8!7nternational Standards 8rgani3ation" orS8N!Stabdards 8rgani3ation of Nigeria". This would ensure that there is near e1uality of system specifications and 1uality and this fear is eliminated or reduced to a bare

minimum.

6&%&. El*m*nat*on o, t-e Mono/ol*st*c 7e-a)*o0rs b9 t-e Reg0lator

Some respondents believe that infrastructure sharing has also been discouraged insituations where a dominant or monopolistic player establishes a wide network and thenis unwilling to share infrastructure with new entrants. Therefore, in order to break thisantiBcompetition spirit among such big players the regulatory body such as the N willhave to employ regulatory enforcements through penalties etc. Also, the 5ederalgovernment can help remove these barriers by insisting through national policies thatthere should be no duplication of infrastructure in order to encourage operators tominimi3e waste and deploy infrastructure in underserved areas instead.

6&%&5 'rant*ng o, More Collocat*on$*cences to T-*rd Part9 Com/an*es

The national regulatory authorities can also eliminate the issues of nonBharmoni3ation ofstandards in specifications among telecom operators through issuing colocation licensesto third party companies who would be allowed to maintain or build infrastructure asseparate companies for companies desiring to share infrastructure. ence, such issuesas lack of commitment from the other party towards taking care of e1uipment belongingto the other will be eliminated.

6&+ COC$USIO

The following conclusions have been drawn from the results of this research.

O Network infrastructure sharing leads to significant reduction in cost of networkinfrastructure rollout and capacity expansions for telecoms operators in Nigeria.

O Network infrastructure sharing leads to an improvement in the usage efficiency oftelecoms infrastructure for telecom operators in Nigeria.

O Network infrastructure sharing leads to significant savings in the operationalexpenditures !8*+" dissipated by telecoms operators in Nigeria.

O Network infrastructure sharing does not affect 1uality of service very adversely whenproperly managed by telecoms operators in Nigeria.



O Network infrastructure sharing will enable telecoms operators in Nigeria achieve andsustain competitive advantage through wider coverage and capacity at less costs.

O Network infrastructure sharing would lead to improved service delivery by telecomsproviders in Nigeria.

O Network infrastructure sharing can help telecoms operators in Nigeria achieve bettercompetitive advantage through new product development and service innovations.

6&. 4URTHER RESEARCH AREAS

This research explored the financial benefits that accrue from two ma9or mobileoperators in the Nigerian telecommunications industry and there is strong evidence thatthere are huge benefits resulting from the collocation arrangment by both companies.5urther research can be conducted to see whether there can also be a beneficial

relationship in a situation where one party in the collocation deal is a new entrant. 7n thissituation, there is the challenge that the new entrant has no existing infrastructure for asite sharing or exchange system with the incumbent and hence there will be need toexplore what models of sharing to adopt by both parties in such a business situation.



C+5+C+N+S

Atril, * L Mc#aney, + !'((@" Accounting and 5inance for NonBSpecialists!2th ed." .*earson +ducationJ #ondon.

%alaB4bogbo, + !'((=" VTelecom 7ndustry 8perators 8pt for 7nfrastructure Sharing. Available from

httpJ&&www.'/next.com&csp&cms&sites&Next&Money&%usiness&0/)@2/?&story.csp!accessed '((=B(@B'("

%hanu!'((?" Sharing of Telecom 7nfrastructureJ *assive, %ackhaul L Active, November '((?, pp. ) )(.

%oo3Allenamilton!'((?" 7nfrastructure SharingJ 8pportunities and Threats for M+NATelecom 8perators , %oo3 Allen amilton onsulting. Available fromhttpJ&&www.boo3allen.com&news&'=0?)?)

apgemini!'((=" Kuest for MarginsJ 8perational ost Strategies for Mobile 8peratorsin +urope, Telecom L Media 7nsights!7ssue /'", 8ctober '((=, pp. ) )0.

hanab # A et al !'((?" Telecom 7nfrastructure SharingJ Cegulatory +nablers and+conomic %enefits, %oo3 Allen amilton onsulting, <ecember '((?, pp. ) )'.

haudhry S !'((?" 7nfrastructure Sharing in Telecom Networks 7ndian *erspective ,Telecom Cegulatory Authority of 7ndia, New <elhi,6une '((2, pp. ) B'?.

7*+SA !'((2" VThe ase for 7nfrastructure Sharing in Africa, ollaboration on7nternational 7T *olicy for +ast and Southern Africa. Available fromhttpJ&&www.cipesa.org&)2 !accessed '((=B(/B)/"

<orward, #. A !'((@" V%usiness 7mpact of 7nfrastructure Sharing, $ain 4overnment andCegulatory Affairs, 8ctober '((@, pp. ) B ?.

+ricsson!''(/" The %eauty of Network Sharing, +ricsson. Available fromhttpJ&&www.ericsson.com&solutions&news&'((/&1)&'((/('('Bnetwork.shtml! accessed'((=B)(B'2"

+stache, A et al!'((/" An 7ntroduction to 5inancial and +conomic Modeling forCegulators of Transport 7nfrastructures, Horld %ank, April '((/, pp. ) '0.

54N!'((/" National *olicy on Telecommunications, 5ederal 4overnment of Nigeria,6anuary '((/, pp. ) 0.

5rost and Sullivan!'((@" A*+ in the African Telecommunications Market toSkyrocket. Available from httpJ&&telecom.tekrati.com&research&==2 !accessed '((=B)(B



'2"4huari , * L 4ronhaug :!'((@" Cesearch Methods in %usiness Studies, *earson+ducation, #ondon.

ussain 5 !'((=" +xamining the %enefits of 7nfrastructure Sharing and ow to Apply itSuccesfully, eliosTowers.com, 6une '((=, pp. ) B)@.:uropatwa, !'((=" Network Sharing in #T+ <eployment. 7ts a no brainer. 7snt itZ,Gentura *artners, 8ctober '((=, pp. ) )0.

Meru!'((@" A Total ost of 8wnership Analysis of the Meru Girtual ell Hireless #AN Architecture, Network Strategy *artners, ##,March '((@, pp. ) B )'.

MTN !'((@" VMTN 4roup '((@ 5inal Audited Cesults for the Eear ended ) <ecember'((@, MTN 4roup, South Africa, pp. )B''.

N !'((/" VTrends in Telecommunications Markets in NigeriaJ '(( B'((/, Nigerianommunications ommission. Available from httpJ&&www.ncc.gov.ng !accessed '((=B

)(B'(".

N!'((2" <etermination of 7nterconnect Cate 7ssued by Nigerian ommunicationsommission, Nigerian ommunications ommission, 6une '((2, pp. ) ).

N!'((2" 4uidelines on ollocation and 7nfrastructure Sharing , Nigerianommunications ommission, pp.)B).

8nwurah, !'((@" 7nfrastructure Sharing *romoting ompetition 7n Next 4eneration5ixed Access, 858M, pp. ) B.

*arker, 6!'((/" *lanning a ost +ffective 4 %ase Station Strategy, oleago

onsulting #td, March '((?, pp. ) '.

Horld %ank !'((@" A %rief 7ntroduction to Modeling for the Cegulation of Transport7nfrastructure, Horld %ank, pp. )( B)0.

$ain!'((@" V $ain MT 4roup '((@ Annual Ceport, $ain MT 4roup, pp.)B=/.



APPE"IX A D ITERVIE# 'UI"E

School of ManagementBlekinge Institute of

Technology

Introduction

I am an M<& student at the <lekine Institute of Technoloyand I am currently doin a research in the telecoms industry toealuate Collocation. otherwise known as Infrastructuresharin as a means or stratey for Cost optimi!ation and

reenue eneration for telecoms proiders in "ieria:

I crae your indulence to ie hae at least 4) minutes ofyour time:

I understand the con*dentiality issues attendant on this kindof research and hae made it an anonymous surey and I alsouarantee that information sourced from this surey would notbe used unethically for the bene*t of any speci*c operator:

Company "ame

Aob ,esination

Aob <ackround #Responsibilities



E7tent of Inolement in Collocation

Purpose of Interiew

$or &he purpose o' &his s&ud3 &elecoms in'ras&ruc&ure sharin is anarranemen& whereb &wo or more &elecom ser-ice pro-iders (oropera&ors! can aree &o share passi-e or ac&i-e in'ras&ruc&ure 'or &hepurpose o' enhancin &heir business obDec&i-es and opera&ions.Passi-e in'ras&ruc&ure re'ers &o all non:elec&ronic componen&s o' a cellor BTS si&e such as &owers3 shel&ers3 air condi&ionin euipmen&3 dieselelec&ric enera&or3 ba&&er3 elec&rical suppl3 &echnical premises3easemen&s and plons.Ac&i-e in'ras&ruc&ure sharin in-ol-es sharin o' elec&ronic componen&ssuch as elec&ronics euipmen&3 an&ennas3 swi&ches3 BTS3 microwa-e

radios3 and &ranscei-ers used 'or &elecom sinal processin.Presen&l our compan (,T@F>ain! shares &elecommunica&ionsin'ras&ruc&ure wi&h ano&her opera&or (,T@F>ain! in an arranemen&called Colloca&ion.

Fuestions

41. Presen&l wha& 5inds o' in'ras&ruc&ure does our orani<a&ion sharewi&h ,T@F>ainG

Towers Technical Premises (Space in buildins!$ibre (ih& o' Ha!

*lec&ric enera&orsBTS euipmen&Swi&ches TrenchesShel&ers,icrowa-e euipmen&An&ennas

/&hers (Please speci'!



4). Please can ou share wi&h me &he bene6&s o' &his in'ras&ruc&ure orcolloca&ion arranemen& &ha& ou curren&l ha-e wi&h ,T@ or >ainG

4+. Please wha& model o' in'ras&ruc&ure sharin areemen& does ourcompan ha-e wi&h ,T@F>ainG

4. @e&wor5 in'ras&ruc&ure sharin (also 5nown as Colloca&ion! hashelped our compan achie-e a sini6can& reduc&ion in i&s cos& o'rollou& (or capi&al epended or in-es&ed!.

S&ronl disareeisaree@eu&ral (Can& sa!AreeS&ronl aree

I' es3 in how or in wha& was



4". This colloca&ion or in'ras&ruc&ure deal has enabled our compan

&o e7cien&l u&ili<e i&s 6ed asse&s such as BTS3 Towers3 An&ennas3$loor space3 elec&ric enera&ors3 air condi&ioners3 duc&s3 &renches3 oro&her in'ras&ruc&ure.


In wha& wasG

4. The colloca&ion deal be&ween ,T@ and >ain has helped ourorani<a&ion deplo ne&wor5 co-erae 'as&er3 and helped achie-ecompe&i&i-e ad-an&ae.

S&ronl disareeisaree

@eu&ral (Can& sa!AreeS&ronl aree

In wha& wasG



4#. This colloca&ion (or in'ras&ruc&ure! pac& has helped our

orani<a&ion impro-e on i&s ser-ice deli-er &hrouh in&roduc&ion o'-alue added ser-ices (or in&roduc&ion o' inno-a&i-e produc&! b meanso' usin capi&al sa-ed 'rom o&herwise new or ;reen6eld rollou&s.


Please in wha& wasG



APPENDIX B – DRAFT COLLOCATION CONTRACT

DRAFT CO-LOCATION AGREEMENT

BETWEEN



ABC NIGERIA COMMUNICATIONS LIMITED

2Here*na,ter re,erred to as JA7CK3

AND

XYZ TELECOMMUNICATIONS LIMITED

2Here*na,ter re,erred to as JXYK3



TA7$E O4 COTETS

lauses *age No.

). 7nterpretation '. 7ntroduction /. oB#ocation //. <uration /0. Access, Safety and Security at Site 02. Maintenance 0?. Standards&Kuality ontrol 0@. 7ndemnity and #imitation of #iability 2=. 5orce Ma9eure 2)(. Miscellaneous 2)). Termination ?

)'. Severability ?). ession @)/. <ispute Cesolution @)0. onfidentiality @)2. Notices and domicillia =)?. Hhole agreement )()@. Gariation )()=. 4overning #aw )('(. SetBoff )(

Annexure ' )'

@0



MASTER CO-LOCATION AGREEMENT

THIS MASTER COD$OCATIO A'REEMET is made on the )st day of <ecember

'((/

7ET#EE

A7C I'ERIA COMMUICATIOS $T"= a ompany incorporated in Nigeria, and having itsprincipal business address at A% ouse, )(( A% Street, A% 7sland, #agos !hereinafter referred to as YA%R" of the first part

A"

XY $IMITE", a ompany incorporated in Nigeria, and having its principal business address at

'(( E$ Hay, E$ Area, #agos !hereinafter referred to as YE$R" of other part

% ITERPRETATIO

).) The headnotes to the paragraphs in this agreement are for reference purposes only andshall not affect the interpretation of any part thereof.

).' Hords importing the singular shall include the plural and vice versa and the wordsimporting one gender shall include the other gender.

). LCoD$ocate; means sharing of sites, towers and other facilities including ground spacewithin specified premises.

)./ V"M$ means <igital Mobile #icence.

).0 VCC means Nigerian ommunications ommission.

).2 LCoDlocator; means the *arty who has re1uested the other *arty holding the lease of the Site for coBlocation

).? V$ocator V means the party who holds the lease of the site re1uested by thecoB locator for coBlocation

).@ VPart*es means E$ and A%

).= All references to the parties shall include E$and or A%s employees, workmen andany subBcontractor employed by or the agent of E$ and or A%.

'.( The Annexures to this agreement form an integral part hereof and words andexpressions defined in this agreement shall bear, unless the context otherwise re1uires,the same meaning in such Annexures.

@2



+ ITRO"UCTIO

'.) XY Telecomm0n*cat*ons $td is licensed by the CC under the CC Act No. ?0 of )==' to provideFFFFFFFFFFFF. FFFFFFFFFFFFFservices.

'.' A7C is licensed by the CC under the CC Act. No. ?0 of )==' to build and operate aNational digital mobile communications network

'. The *arties have, for the purpose of providing their licenced services ac1uired severalsites on which they have installed infrastructure and e1uipment including but not limitedto- towers, Cadio Antennas, %ase Stations and *ower 4enerators.

'./ The *arties have re1uested siteBsharing arrangements with each other to coBlocate their e1uipment and have agreed to the use of their respective structures and sites under thefollowing terms and conditions.

. COD$OCATIO

.) This Agreement shall set out the terms and conditions of the oB#ocation provided thatnothing herein shall be construed as an undertaking by either *arty to coBlocate the coBlocating *arty at any or all of its sites.

.' The *arties have agreed that coBlocation shall be on a siteBbyBsite basis sub9ect to either partys approval and availability of coBlocation resources. The details and terms of anyagreed coBlocation shall be more particularly described in the form of Annexure ) of this

Agreement.

/ "URATIO

/.) Notwithstanding the date of signature hereof, this Agreement shall commence on the )st

day of <ecember '((/ and shall endure until the (th of November'((2, unlessterminated by either party upon ( !thirty" days written notice to the other party or unlessterminated earlier in terms of the provisions set out in clause ) provided that the termsand conditions shall continue to apply to any unexpired coBlocation agreement pursuantto Annexure '

/.' This Agreement may be renewed for a further term of !)" one year on terms to be agreedupon by the parties, provided either *arty gives a notice of three !" months before theexpiration of the current term as contained under this Agreement.

/. The *arties shall not enter into any sub co B location or similar agreement with a thirdparty in respect of the Sites covered by this Agreement and the breach of this provisionshall be a ground for summary termination of this Agreement.

/./ The rent payable as specified in Annexure ' of this Agreement has been agreed by the*arties to be benchmarked in D.S <ollars payable in Naira at the prevailing entral %ankof Nigeria exchange rate applicable on the date of payment.

@?



6 ACCESS= SA4ETY A" SECURITY AT SITE

0.) The $ocator shall grant to a nominated representative of the oBlocator access to thesite, on preBagreed times accompanied by an authorised representative of the #ocator.The parties also agree to be bound by, and shall conform to each others rules and

guidelines on site access, security, safety, health and environment. The *arties shallalso agree not later than ( days after the execution of this Agreement a procedure for access and entry onto the site in the event of an emergency.

0.' The CoDlocator shall not do or permit to be done anything on the Site which may be or become a nuisance or annoyance to the occupiers of the neighbouring premises or which may lead to the forfeiture of the #ocators lease of the Site.

? MAITEACE

2.) +ach *arty shall be responsible for installing its e1uipment on the site, and carrying outscheduled periodic maintenance on its e1uipment, provided prior notice of such

maintenance is given to the authorised representative of the #ocator before suchperiodic Maintenance is carried out.

2.' The $ocator shall be responsible for the maintenance of common areas.

2. The CoDlocator shall in the case of such scheduled maintenance in 2.) above, makeavailable to the $ocator through its authorised representative, a schedule of activities tobe carried out by it in advance.

2./ 7n the event of a fault with the CoDlocator;s e1uipment, the CoDlocator shall follow thefault notification procedure to be agreed upon by both parties to enable the #ocator *artyauthorise re1uisite access to the site&

@ STA"AR"S:UA$ITY COTRO$

?.) The *arties shall, at their own cost and expense, take whatever steps that are necessaryto ensure that the fulfilment of their respective obligations and exercise of their respective rights in terms of this Agreement will not endanger the health and safety of any party including, without limitation- employees, agents, directors, subBcontractors andcustomers, and in this respect each *arty shall be responsible for the safe operation of the e1uipment comprising such *artyIs e1uipment on the site.

?.' Neither *arty shall act or omit to act in any way likely to in9ure or damage any person,

property or Network of the other party, or cause the 1uality of either partys NetworkServices to be impaired or interrupted in any manner whatsoever and both partieshereby irrevocably authorise the other party to dismantle any e1uipment which in itsopinion is responsible for the impairment, degradation or interruption of the other *artysNetwork.

I"EMITY A" $IMITATIO O4 $IA7I$ITY

@@



@.) The CoDlocator specifically indemnifies and holds the $ocator and all officers, directors,and employees of such #ocator harmless from and against any and all claims, demands,actions, losses, damages, assessments, charges, liabilities, costs and expenses!including but without limitationJ attorneys fees and disbursements, penalties andinterest" which may at any time be suffered or incurred by or be assessed against theoBlocator on account of or in connection withJ

a. Any default or breach committed by the oBlocator under this Agreement.b. Any negligent acts or omissions of the oBlocator in connection howsoever with this

agreement.

@.' The $ocator shall not be liable for any loss, claim, action, expense, damage or in9urysuffered or sustained by the CoDlocator pursuant to entering into this Agreement or as aresult of the coBlocation whether direct or indirect, conse1uential or contingent andwhether foreseeable or not. 7n particular, the #ocator shall not be liable for any financialloss, loss of business, profit, savings, revenue, or goodwill suffered or sustained by theoBlocator &

B 4ORCE MAFEURE

=.) Neither party to this agreement shall be liable for any failure to fulfil its obligationshereunder where such failure is caused by circumstances outside the reasonable controlof such party, including, without limitation, any Act of 4od, insurrection or civil disorder,war or military operations, national or local emergency, acts or omissions of 4overnment, labour disputes of any kind !whether or not involving the *artyIsemployees", fire, lightning, explosion or any other such cause !each an Yevent of forcema9eureR".

=.' The *arty affected by the event of force ma9eure shall promptly notify the other *arty in

writing of the estimated extent and duration of such inability to perform its obligations.

=. Dpon cessation of circumstances leading to the event of force ma9eure, the *artyaffected by such event of force ma9eure shall promptly notify the other of such cessation.

%G MISCE$$AEOUS

)(.) The *arties hereby covenant with the intent that the obligations created shall continuethroughout the term of this agreementJ

a. To ensure that its duly authorised personnel do not in any manner conductthemselves and carry out their operation in any manner likely to 9eopardise the other partys operations

b. Not to use the e1uipment being coBlocated on the sites for the provision of any illegalor unlicensed telecommunications service

)(.' The $ocator shall upon receipt of payment by the CoDlocator of all charges set out in Annexure ' of this Agreement, delineate and put the oBlocator in occupation and

@=



provide the agreed coBlocation services more particularly described in annexure '

)(. The CoDlocator shall ensure that all the e1uipment to be coBlocated on the said sitesare comprehensively insured and such insurance shall cover in9ury to the #ocatorsemployees, subscribers and other persons lawfully on the re1uisite site, damage toproperty or death resulting from any of the aforesaid.

)(./ 7t is hereby expressly declared that the coBlocation services being provided by either party as contained in this agreement, are only for the purpose of coBlocating e1uipmenton the said premises and do not imply in any manner that both parties are 9ointlycarrying on telecommunications business.

%% TERMIATIO

)).) This agreement may be terminated at the instance of either party at anytime by giving

one months notice to the other party in the event of the breach of the terms andconditions herein stated, or if any of the parties to this agreementJ

)).' fails to pay any amount due by it in terms of this Agreement by the due date and fails toremedy such breach within ') days of a written notice to do so- or commits a breach of any other provision of this Agreement and fails to remedy suchbreach within )0 days of written notice to do so-

*rovided that upon the termination of this agreement for any reason whatsoever, allamounts owed by any of the parties to the other party, shall immediately become dueand payable.

)). This agreement may be terminated if the oBlocator loses his license to operate aNational digital mobile communications network or is li1uidated whether provisionally or finally or steps are taken for the winding up of the oBlocator.

))./ 7n the event that the agreement is terminated, the oB#ocator shall be re1uired toremove all and any of its e1uipment on the #ocators site within a period of =( days fromand including the date of the said termination failing which the #ocator shall be entitled toremove such e1uipment belonging to the oBlocator and any cost arising there from,shall be borne by the oBlocator.

%+ SEVERA7I$ITY

7f any term, condition, agreement, re1uirement or provision contained in this Agreementis held by any court having 9urisdiction to be unenforceable, illegal, void or contrary topublic policy, such term, condition, agreement, re1uirement or provision shall be of noeffect whatsoever upon the binding force or effectiveness of the remainder of this

Agreement.

%. CESSIO

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No *arty shall cede, assign, transfer, encumber or delegate any of its rights or obligations in terms of this Agreement without the prior written consent of the other *artyand such consent shall not be unreasonably withheld

%5 "ISPUTE RESO$UTIO

The laws of the 5ederal Cepublic of Nigeria shall govern this Agreement.

7n the event that any dispute arises out of or in relation to this Agreement, which cannotbe amicably resolved between the *arties within fifteen !)0" days after the occurrence of such dispute, then either *arty may refer such dispute to arbitration upon giving theother *arty fifteen !)0" days written notice. The arbitration proceedings shall beconducted by a single arbitrator appointed in accordance with the provisions of the

Arbitration and onciliation Act, #aws of the 5ederation of Nigeria, )==( or anyamendments or reBenactments thereof utilising the rules contained in the said Arbitrationand onciliation Act. The arbitration venue shall be #agos, Nigeria.

%6 CO4I"ETIA$ITY

)0.) The *arties undertake that they will use all reasonable endeavours to keep and procurethat their directors, employees, agents and subBcontractors shall keep secret allonfidential 7nformation and will not disclose such onfidential 7nformation to any thirdparty.

)0.).) The provisions of clause )0 shall not apply to information whichJ

)0.).' is in or comes into the public domain other than by default of one of the *arties-or

)0.). is or has already been independently generated by the *arty disclosing suchinformation- or

=)



)0.)./ is disclosed to satisfy a legal demand by a competent court of law or government body- or

)0.).0 is in the possession of or is known by the receiving *arty prior to its receipt fromthe disclosing *arty- or

)0.).2 is authorised to be disclosed by the disclosing *arty in writing but then only to theextent of the authority given- or

)0.).? is properly disclosed pursuant to and in accordance with the licence or anylicence granted to A% or E$, or in accordance with any relevant statutoryobligation.

)0.' The provisions of this clause will apply with effect from the +ffective <ate until 2( monthsafter the date of termination or expiry of this Agreement.

%? OTICES A" "OMICI$IA

)2.) The *arties choose as their domicilia citandi et executandi their respective addressesset out in this clause for all purposes arising out of or in connection with this Agreement,at which addresses all processes and notices arising out of or in connection with this

Agreement, its breach or termination may validly be served upon or delivered to either of the *arties.

)2.' 5or the purposes of this Agreement the *artiesI respective addresses shall beB

)2. As regards A%J

A% ommunications Nigeria #td

A% ouse !?th 5loor", )(( A%Street, A% 7sland, #agos

Authorised CepresentativeJ A7C Re/

)2./ As regards E$J

E$ Telecommunications #imited'(( E$ Hay, E$ *lace, #agos

Authorised CepresentativeJ

or at such other address, not being a post office box or poste restante, of which the*arty concerned may notify the other *arty in writing.

='



)2.0 Any notice given or other document sent in terms of this Agreement shall be in writingand shall

)2.2 if delivered by hand be deemed to have been duly received by the addressee on thedate of delivery-

)2.? if transmitted by facsimile be deemed to have been received by the addressee the dayafter dispatch.

)2.@ Notwithstanding anything to the contrary contained in this Agreement, a written notice or communication actually received by one of the *arties from another including by way of facsimile transmission shall be ade1uate written notice or communication to such *arty.

%@ #HO$E A'REEMET

This Agreement constitutes the whole Agreement between the *arties as to the sub9ectmatter of this Agreement and no agreements- representations or warranties between the

*arties other than those set out herein will be binding on the *arties.

% VARIATIO

No addition to, variation, consensual cancellation or novation of this Agreement and nowaiver of any right arising from this Agreement or its breach or termination shall be of any force or effect unless reduced to writing and signed by both *arties or their dulyauthorised representatives.

%B& 'OVERI' $A#

This agreement shall be governed by the laws of the 5ederal Cepublic of Nigeria

+G. SET O44

7f any of the parties to this agreement at any time owes any amounts to E$&A%, theparties hereby authorise E$&A% to setBoff such monies owed against any amountowed to E$&A% by the defaulting party and vice versa.

=



Thus done and signed at #agos on thisFF.. <ay of FFFFFF.'((/.

As #*tnesses!

)

'.

FFFFFFFFFFFFFA7C *ger*a Comm0n*cat*ons $td&5ull NameJapacityJ

Thus done and signed at #agos on thisFFFFFF. <ay of FFFFFF.'((/

As #*tness!

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FFFFFFFFFFFFFXYTE$ECOMMUICATIO $IMITE"&

5ull NameJapacityJ

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AEXURE %

PAYMET TERMS

The CoD$ocator shall pay the sums specified in the schedule below on a siteBbyBsite basis for the coBlocation service or services provided by the $ocator!

!a" Tower, *ower and ShelterFFFFFFFDSP,0((.(( per month!b" Tower L *owerFFFFFFFFFFFDSP,')2.)) per month[TowerFFFFFFFFFFFFFFF.DSP=2./? per month

The payment shall be made annually in advance and such payment shall be exclusive ofwithholding tax.

The payment term shall be ( days from the date of receipt of the invoice from the $ocator&

+ither party may from time to time review the payment terms agreed upon under thisagreement.

=0



AEXURE +

=2

ommencement <ateJ F&FFF..&FFF. +xpiry <ateJ F&FFFF..&FFF

#ocator

oBlocator

Site Address

oordinate!s"

Services To %e*rovided

Tower, *ower L Shelter

Tower L *ower

Tower

8thers

+1uipment to be oBlocated

onsideration !N"

<ate of Cenewal Notice



APPE"IX C < 7TS SU7SCRI7ER CAPACITY CA$CU$ATIO

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