Outsourcing is an effective management strategy that enhances high returns on investments through cost cutting. Operators in the Nigerian information and communications technology industry are beginning to tap into the benefits of outsourcing, writes Emma Okonji
Outsourcing of a company’s major operations to another company for proper management of resources is a global trend that is making economic sense to business owners. Companies in Nigeria are beginning to embrace outsourcing for economic gains and the telecoms sector is not left out.
In telecoms, outsourcing is the release of some managed operations of a company to another company with professional expertise, with a view to managing the operations on behalf of the original owner. It has become a global trend in the telecoms sector and the essence is to enable companies reduce operational costs and to enable them focus on their core business operations. The idea to embrace outsourcing started with Airtel, when it outsourced its call centre operations to Tech Mahindra, through the Business Process Outsourcing (BPO) agreement.
It is very clear that Airtel is currently benefitting from its decision to outsource its call centre operations. It is believed that apart from the monetary gains, the system has also helped Airtel to focus more on its core business of providing voice and data services to its over 25 million active subscribers. After Airtel, MTN also outsourced its core centre operations in Lagos and Jos to Communications Network Support Services Limited (CNSSL), through the BPO agreement.
Last month, Etisalat Nigeria announced the sale of 2,136 of its towers to IHS Holding Limited as part of a broader strategy that would enable it focus more on its core business operations to drive improvements in the quality of its network performance and to accelerate rollout of 2G and 3G coverage and new services to its over 18 million customers. Just last week, MTN Nigeria, with a subscriber base of over 57 million, reached an agreement with IHS Holding Limited, to outsource its 9,151 telecoms towers otherwise known as base stations.
MTN reached an agreement in principle with IHS for the transfer and management of its towers. The transaction is expected to reduce MTN’s operating costs, drive network efficiencies and further expand MTN’s voice and data capacities, according to the telecoms company. Also last week, the Nigerian Communications Satellite Limited (NigComSat), one of the agencies under the Ministry of Communications Technology, concluded its earlier deal with Platinum Plus Television (PPTV) to lease its Direct-To-Home (DTH) satellite operations to the television station.
Tower sales and lease back by Etisalat The Etisalat IHS Holding Limited transaction is expected to close later this year. Etisalat’s partnership with IHS is designed to promote network sharing, ensure higher quality, sustain reliable mobile services, lower overall costs and also promote a cleaner environment through reduced diesel usage and increased investments in alternative energy solutions. Under the terms of transaction, IHS will invest $100 million in the towers, acquired advanced generators, efficient batteries and alternative energy solutions to reduce diesel consumption and improve efficiency of grid use.
Announcing the deal in Lagos, CEO of Etisalat Nigeria, Mr. Matthew Willsher, said: “Continued demand for mobile connectivity along with increased consumption of data requires reliable and effective networks that are also cost efficient for network operators. The decision to sell our passive infrastructure to an experienced commercial partner, such as IHS, is part of our strategy to increase network coverage and capacity which is already rated number one for quality of service by the Nigerian Communications Commission (NCC).”
CEO of IHS, Mr. AIssam Darwish, said: “We are delighted to have been trusted by Etisalat Nigeria with their passive network infrastructure. Our market leading operations team, managed through a state-of-the-art network operations centre and our continual investment in better, more efficient systems and technologies will ensure that the trust is well placed. This partnership will provide significant long-term benefits to Etisalat Nigeria, allowing them to focus entirely on marketing new customer propositions to a wider market.”
Outsourcing telecoms towers by MTN:
On the other hand, the MTN, IHS Holding Limited is expected to reduce operating costs, and drive network efficiencies, is line with the company’s continued efforts to further raise service levels for its customers in Nigeria. Under the terms of the transaction and subject to requisite regulatory approvals, the 9,151 towers will be transferred to a new company, which will be owned jointly by MTN and IHS, but IHS will have full operational control of the underlying business. The new towers company will market independent infrastructure sharing services to other mobile operators and Internet Service Providers (ISPs) in the country. The transaction is expected to close at the end of this year.
According to CEO of MTN Group, Sifiso Dabengwa, said: “We are delighted to have entered into a further transfer transaction with IHS in our largest African market. IHS’ deep knowledge and considerable experience in the sector will help drive efficiencies and enhance our network uptime, allowing us to concentrate on further raising our own service levels, improving the customer experience and ensuring we remain the number one operator in Nigeria.”
It is expected that on completion of the transaction with MTN, IHS will be managing over 20,000 towers in Africa. It was gathered that as part of the deal, the new towers company has committed more than $500 million of additional investment over four years into tower upgrades and a maintenance programme to improve quality of service and enhance the customer experience on the MTN Nigeria network. In addition, further investments will be made into IHS’ centralised Network Operations Centre (NOC) in Nigeria to optimise operations and increase IHS’ market network uptimes of over 99 per cent. IHS anticipates creating a considerable number of technical and engineering direct and indirect employment opportunities to be sourced locally in Nigeria.
Airtel’s new move:
Although THISDAY gathered from a reliable source that Airtel, which first started the BPO arrangement with its customer care centres long ago, is already in talks with Helios Towers to outsource its base stations, the telecoms company has, however, not made any public pronouncement to this effect. The source said Airtel had been negotiating with Helios Towers for some time now, but may have decided to remain mute, pending when the intended transaction is sealed. However, 2009, Airtel outsourced the management of its base station operations to Ericsson and still maintains that arrangement till date.
Lease of NigComSat’s DTH Satellite operations:
The Nigerian Communications Satellite Limited (NigComSat) has also seen the need for outsourcing as it concluded its earlier deal with Platinum Plus Television (PPTV), to lease its Direct-To-Home (DTH) satellite operations to the television station.
The conclusion of the deal took place in Abuja last week after a series of update meetings between NigComSat Limited board and PPTV management. Head, Corporate Communication of NigComSat, Mr. Sonny Aragba-Akpore said the leasing of NigComSat’s DTH facility to an indigenous television station, was performed by the acting Managing Director of NigComSat, Abimbola Alale and PPTV Chairman, Mr. Dumebi Kachikwu.
Alale said the agreement with PPTV was signed in November, 2013, which enabled PPTV to carry out a technical audit to ascertain the workability of the system as well as the desired services to be delivered. “Having been satisfied with the process, we decided to hand over the platform to PPTV,” Alale said. Kachikwu said the new platform would definitely make a difference to Nigerians because PPTV would leverage on the NigComSat-1R capacity and the DTH Headend, to provide triple play services for subscribers.
Economic benefits Looking at the advantages of outsourcing and outright sales of telecoms facilities, Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Mr. Gbenga Adebayo said the move does not only have economic impact on the country, but will also ease telecoms operators of the burden of grappling with too many operations in the process of trying to serve customers better. According to him, “BPO arrangement is a global phenomenon that has helped economies to develop fast, and the idea of adopting outsourcing in Nigeria, is a welcome development that will impact positively on service quality.”
Speaking on the efficiency in managing telecoms facilities and telecoms operations that are either leased or sold out, Adebayo said those that handle outsourcing are professionals in their own rights that have the expertise and competence to manage the facilities. He said such agreement would help telecoms operators to operate light and effectively concentrate on their core business operations, which he said, would lead to improved service quality across networks. “It will make telecoms operators more efficient, smaller in operations, such that they will have all the time and strategies to improve on service quality,” he said.
Operators in the Nigerian telecoms sector, no doubt, are beginning to see the economic benefits of outsourcing, hence the continuous outsourcing of businesses in recent times in the sector.