It has been two years since you have been in this market, how has it been, how would you describe your experience?

So far, the greatest attraction for operators in Nigeria is the size of the market. Nigeria is the biggest market in Africa. The first is that the market is large, but secondly, this market was the most under-served market in the world, standing third to the bottom after Afghanistan and Mongolia and so looking at the whole continent, one could see that Nigeria is a market with a whole lot of opportunities and prospects.

But there are other things that have made the country attractive to investors. When you consider the introduction of democracy in Nigeria, it is easy to see that Nigeria would be a great country if the human and material resources are harnessed correctly. So for us as business men, it was easy for us to recognise that Nigeria is a big market, not only in Africa but in the whole world. That was why we had to pay as much as $285 million during the bid. Now, we look back today and say, under normal circumstances would one have paid such amount? Was it a fair price? But I believe that some price would have to be paid though if one really wants to be in such a market. However, there are quite a lot of things we planned for or the things we expected but did not really turn out the way we expected. For instance, we are under-provided for interconnection and that of absence of infrastructure required to make our business a success. I think that in a lot of ways too, we under-provided for things like security and more especially power. We knew that we had to do something about power but we did not quite know what the impact of power would be. We know now that it is really a major one. So, these things changed the basis upon which we started operating the business two years back. You would remember the arguments and counter arguments we had with NITEL on whether it has enough or not. We went to the President and reported about the challenges we are facing, and also fighting with the NCC on our side to get the matter resolved. In all, I think that our basic plan was altered by almost $300 million from our original business plan. For instance, on interconnection, all the interconnection revenue that we thought we would have made were lost because we could not interconnect properly with NITEL. Secondly, the rate of customer uptake that we thought we would have achieved was not possible. In this business, your revenue depends on the number of subscribers your network can carry and the number of minutes that are used by the subscriber. If the subscribers' numbers are low, your revenue becomes low but if your subscriber number is high, your revenue is high. So this situation became a kind of challenge for us because we lost some revenue. We were hoping that we would be able to get the government to reduce the duty to zero percent which is what is done by most ofthe countries like South Africa, Zimbabwe, Zambia, and Namibia. In these places you find that when you talk about infrastructure, whether for the manufacturers or telecommunications, they reduce their duty to zero. What they believe as developing countries is that they needed to do something to encourage investors to bring infrastructure to develop their countries. We were hoping that Nigerian government was going to reduce such duties to zero percent but they only reduced it from 25 percent to 5 percent. So in that 5 percent, when we add taxes, it actually amounts to about 13 per cent and that has been so for the period of two years. Now all the PTO's and the GSM companies in the country have started all over again to lobby the government, trying to see if they can reduce the duty to zero percent. Our basic argument is that apart from its being an incentive for more infrastructure to be deployed, the money that is being taken for duty right now is the kind of money that could have created sufficient capacity to connect another million subscribers to the networks and we are arguing that our investments create a lot of taxes for the government, a lot of employment, VAT, revenue and other things. So until this is resolved, it will continue to be a constraint on the business. The transmission is not yet sorted out as we speak today, because we still depend a lot on satellite transmission. We are having to build our own transmission backbone nationwide and that entails taking almost $100 million covering a two years period which money should have been used to pay for base stations, switches and value added platform like SMS platforms and the like. We are now forced to go into transmission and transmission is not our core business. In other parts of Africa or Europe, all we have to do is go to fixed operators and use the existing infrastructure, but here we have to build. Imagine, $100 million invested today, that could give us more subscription capacity that would take in more subscribers. But in a country where the market is under-served and the network capacity across the board is not growing as rapidly as one would want, nobody needs to tell you that something needs to be done in terms of providing reliable trans~ssicn capa_itythroughout the country. All these remain so:ne of the major challenges and we hope that this time around, the government is going to do something seriously aboutpower. The inefficiencyisnotjust affectingtelecom alonebuttheentireindustrial sector. Nigeria could never grow aggressively any industrial perspective until the problem of power is sorted out.

On the issue of transmission elsewhere, if you don't have transmission backbone, you ride on the back of somebody who has and pay for the service, but if you provide it like you said then somebody would hare to ride on you. Either ways, it is investment...

Let's understand the difference between a GSM company and a national operator. Let me draw a parallel between Globacom and NITEL which are allowed to operate mobile services and also given licence for mobile. We are allowed a concession for international gateway. They are allowed to control international gateway, on which they are supposed to offer transmission. Now in our business plan, we did not provide for transmission but we have to build one today even though all the money we have put in this is the money that we have not made provision for in our business plan. So what will happen tomorrow is that, after we have put up all these, when NITEL and Globacom build their own, it would be another challenge of excess capacity. What we prefer to do is to build, we do not want to owe and be to told to maintain it in this way and that way, and are not allowed to carry excess traffic. But these others (national operators) are allowed to carry excess traffic, so two years after we have built the transmission we will now be having excess capacity because if you remember the appreciation on $100 million on a monthly basis when not associated with any revenue generating capability is huge on our business. NITEL gets revenue on transmission, on fixed, on mobile and international gateway. We get only on international gateway and on mobile. That is why we complained that we are being forced to build this, when we don't need it. Our Port Harcourt and Lagos transmission are connected by satellite and all the other cities like Onitsha, Enugu etc. are also connected via satellite. And when you talk about maintenance, we pay over 27,000 dollars per E1 and this is equivalent of 36 lines. For GSM to carry traffic from Benin to here (Lagos), we need 8 E1 from Abuja we need 6 E1, Kano to Kaduna we talking of about 8 E1 and that is the kind of costs that are associated with our business. Even for any base station, we need more than 2,000 litres of fuel per week. In Lagos alone, we use more than 20,000 litres of fuel. For base station we use over 60 thousand litres of fuel per week.

How many base stations do you have?

Well, I can't give you the exact figure here now.

Why has Econet refused to be open up on this, MTN said they have about 520?

I will explain to you why. It creates a lot of distortions and I try to explain this to people as often as possible. The configurations of our base stations may not exactly be the same.

You were expanding rather too rapidly, may be in order to meet up with the cost, but what this resulted to is that most of your calls drop, how would you explain this?

I can tell you the many things we have done to guarantee quality network to the extent that NCC itself has commented that our network is significantly better in terms ofthe quality that we deliver even though as an operator, we are still not satisfied because we know how much we need to spend before we can be satisfied with the quality of our network. In the past twelve months we recognised the fact that we needed to deliver a certain minimum level of quality. What has become evident is that we were taking in more subscribers than the system could support and that created a lot of congestion and a lot of dropped calls. So Econet made a very principled decision and that decision we believed would pay off on the long term. We decided to stop sales until we have sufficient capacity and not to sell for selling sake. We have committed ourselves to having what is called two percent Grade of Service. And this means that in GSM, you cannot have 100 percent Grade of Service. Two percent Grade of Service says that 98 per cent of the calls you make must be successful. However, when we stopped selling, we did not stop building in all the cities. For instance, we put more than 75 high capacity base stations in Lagos alone when we had already stopped selling. Motorolla put out almost 120 base stations outside of Lagos. That is what improved the network quality of Econet when we resumed sales. Again what helped us is that we decided not to go to new places because if you realised that you have a large number of subscribers on your network that are not happy there is no point wooing new subscribers who will also be unhappy.

From the end of July till about the end of August, we have started switching on 10 new base stations everyday in Lagos. The reason why we are doing that is not even for coverage but for existing capacities to ensure that anyone making a call would be able to succeed. People may ask why we had to start selling and then stopped. But you can see that just the last time, we had to sell over the 70,000 lines we budgeted for a month sales, in just three days. Even at that, the money we collected from our dealers was for about 140,000 lines so we had to refund them because we have decided to maintain the quality of our network. We promise to continue with this strategy, recorgnising the fact that GSM is an emerging technology in Nigeria. There is no network now that has put up more than a thousand base stations and yet to carve a niche in Nigeria comprehensively, a network must have a minium of up to four thousand base stations. We are looking at about five thousand when the network reaches that point of maturity.

Considering all of these costs, and the challenges that you are facing, would you say this business is profitable looking at your bottom line now?

The telecommunication business is a unique business in that it is a cash business. Sometimes we confuse profitability with quick cash. Because we are dealing with collecting cash on a daily basis one could end up with the impression that we are doing very well. Especially if you compare it with other businesses that collect their money at the end of the month. This business requires a lot of capital and I don't believe that there is any network that would be able to grow and expand unless it is investing a minimum of $250 million every year for the next five to seven years. So because of this investment and re-investment and maintenance, you find that while it might be recorded on paper that you are making profit, the cash resources are never there to fully support the capital expenditure. I believe that it will take probably another four years before we can generate enough internal revenue to be able not to worry about borrowing and all that, to sustain the growth of the network.

When do you expect to break even?

Maybe in the next three and half to four years. I think the investment would be balanced by the subscriber base. So if we are able to sustain a certain level of subscriber growth, we should be able to balance our investment in that time.

Since you started your operations, you have not declared your financial result and again, have you been paying anything to NCC since you started?

The reason why we did not talk about our results is because we are a private company. Our major competitor have the obligation because they are listed on the Stock Exchange and this particular entity is not listed so there is no need for us to publish our account.

The subscribers may want to know and it may actually bolster their confidence.

When we held our AGM last year, I think we made an announcement. The chairman of the board expressed that he was happy with the report.

In the last two years, you allowed people to accumulate validity until infinity. Many people rushed to buy your line because they can afford to remain on the network even when they don't have the money. Suddenly you woke up one day and say no matter what validity accumulation anybody must have acquired, the lasting period is just l50 days. Don't you think this is a deciet and betrayal of trust from the subscribers? I can understand that you guys interact with subscribers a lot. Now, what was the perceived benefit from the validity which accumulated say, till 2040?

The benefit for the subscribers was that even if they don't have money they could afford to be on the network till that time and again we are worried that people are beginning to think that it was a trick played on them only to make Econet popular.

There are a number of reasons why we put validity windows. We pay license fee for every single customer that logs on the network and we pay license fees for switching. This is so, both for the prepaid and post-paid subscribers. We also pay on the SMS and voice mail platforms per subscriber and also the billing system per subscriber. All those tax licenses have been trashed out on every subscriber's basis. Now we face a lot of challenges including that every revenue we receive is in naira but the equipment we purchase is in dollars. Secondly, we face the challenges that when a subscriber does not use his phone, we still pay. That is why we decided that if any subscriber does not use his phone for 90 days, we switch them off. But when you are using your SIM card and you have spent quite a lot of money we say that the maximum number of days you can get is 150 days. When we started, we may have probably advertised aggressively, that the validity period would not go up beyond 150 days and now as we want to implement it, obviously there is some agitations. The reason why we had to stop the level of validity is also to encourage customers to top up their phones so that they can contribute towards the payment of license fees and also help the network receive revenue and be able to build, maintain and to expand. Again, don't lose sight of the fact that we are losing up to a million naira every single month from taxes taken away from the subscribers base. It is important that we specify what the maximum validity period is now for the benefit of our subscribers.



What would you say on the reported interest of Vodacom in EWN?

First and foremost, any transaction that takes place at the magnitude of the numbers that we are talking about normally comes under confidentiality agreement but I can confirm that Econet Wireless Nigeriaj ust like Vodafone in Europe and all the other networks, especially given the type of market, we will continue to look for money both equity and loans and in fact if you look at our finance department, we actually had to recruit a corporate finance executive in recognition of the fact that this business will constantly be looking for money. We need, like I said earlier, if we are going to grow, naturally, a minimum of $200 million every single year. What that means is that using the normal process of raising money for your business, the business must have certain basic equity ratio and the current shareholders could put in more equity where they can follow their rights in inviting investors to come into the business.

Our business has been going through different kind of fund-raising exercise. In March this year, we completed possibly the largest and most successful restructure. In fact, the company had to restructure a loan of almost $200 million which were 90 days to 180 days and restructure them to four year loan and then we called for additional equity to make sure that if we bring in more equity, we can access certain loans that we need to be able to secure, with different financial institutions; and that exercise has been in progress. Now in the course of that exercise, different institutions indicated their own Expressions of Interest because they heard we were looking for this here and that there. Although I am not at liberty to name the institutions but all I can say is that whatever institutions which has interest must come through both existing shareholders and new investors that are interested in the future of our business. Anything we are doing now is designed to take our business to a new level. I believe that in the next couple of weeks or may be a month or two, when the exercise would be completed if there is any announcement that needs to be made, our board would make it.



Before you came, there was the feeling in the international business community that the state of the country is very hostile for doing business, there is corruption, poverty, political instability etc, that the judicial process was not reliable enough to give succour to aggrieved partners. What has been your findings against that background?

Let me say this, in Africa generally, there is a lot of corruption. I don't think there is any kind of corruption inNigeria, that is not in any other part of the world. It's just that Nigeria is such a big nation that everything happens in large proportion and people end up having their own conclusions. For instance if 10 percent of Nigerian are corrupt, that is about 13 million people. Yet this same figure can be the whole of Ghana. Whereas in a small country like Namibia or Botswana with a total of 1.3 million people, if 10 percent of their people were thieves, it would mean nothing. Yet there is a greater sophistication on how things are done here in Nigeria than in other parts of the world but I don't believe that Nigeria will be the worst. Now, our own thinking is that what makes corruption worse in any country is the in ability of the powers that be to deal with corruption or distinctly make efforts towards dealing with corruption. If you look at little Botswana, the country has a beautiful law that has zero tolerance for corruption. It does not matter if you are a president or minister, if you are caught in a deal of corruption you go to jail. They jail ministers, dismiss senior government officials, people you think are indispensable. So investments began to improve. Again, in Zimbabwe, they used to have what is called the leadership code and for a long time it was being implemented and people were being sacked from their positions, the country was okay. But since they abandoned it, I don't think there is any less corruption here than in Zimbabwe. The reason why Zimbabwe and Nigeria may be the worst corrupt countries in Africa, is because the level of literacy in these countries is very high and people who are doing the corruption and other things are very intelligent people, very educated people who are not going into petty scam. These are guys who would sit down and think, how do I move $10 million from the Central Bank into his account. But I like to think that there is a lot of confidence in this country today than there was in 2001. The country's transition from one democratic regime to another has given a lot of confidence. And the fact that there has been no violent reaction to the election result has given a lot of confidence. Don't forget that Nigeria has the advantage of having controlled inflation and has been managing it a lot better than other African countries. The exchange rate stability for Nigeria has been greater than that of South African Rand over the past two-three years. So, all these work in favour of the country. I think that what the international community would want to see is a concerted effort towards dealing with corntption especially in government. The country does not have capacity building institutions. The industrial base of Nigeria is smaller than that of Zimbabwe and that is what is needed to work on, at least, to reverse the situation where government is bigger than the private sector. If the private sector becomes more active, we should expect more positive reaction about Nigeria. If you go to South Africa, you see big names in the industrial world but if you drive into Nigeria, you don't see them, why? You see, those are institutions that are coming up from the community where they know the advantages of various infrastructures of development like power, telecommunication, water, transportation etc. Nigeria is extremely inefficient in these areas. For instance the number of man hours lost in the Lagos trafffic alone is frustrating. In South Africa, it is not as if there is no traffic problem or even in Europe, but there is alternative solution for them unlike the situation you have in Nigeria. In all, what it means that there are certain level of productivity Nigeria has been unable to achieve and until power, transportation and all other infrastructures improve, the problems may still be there. For instance, there is the BMW manufacturing in South Africa. Nigeria has the population thrice than that of South Africa and potentially much more than South Africa but if all those things are not there, they are not going to come here.