April 15, 2013 / 5:41 PM / in 5 years

Etisalat Nigeria to invest $500 million this year

LAGOS (Reuters) - The Nigerian operation of United Arab Emirates phone operator Etisalat ETEL.AD plans to invest $500 million to expand its network this year, its commercial officer said on Thursday.

A man walks past a sign at the headquarters of telecommunications company Etisalat in Dubai October 25, 2011. REUTERS/Jumana El Heloueh

Wael Ammar also told the Reuters Africa Investment Summit that the company plans to use local banks to finance future network expansion and growth in the coming years.

The new investments will enable the mobile phone carrier grow the market share of Etisalat Nigeria, which is 40 percent owned by its parent company, to 17 percent this year, he said.

It aimed to add four million subscribers to its existing 15 million this year, he said. The company currently has a mobile market share of 15 percent, behind MTN (MTNJ.J)’s 43 percent and Globacom’s 22 percent. Airtel, a subsidiary of India’s Bharti Airtel (BRTI.NS), has a 20 percent share.

Ammar also said he expected average revenues for voice traffic across the industry to continue to decline to around $5 per user over the next 3-5 years, from around $6-7 per user currently. ARPU was $10 per user in 2008, he said.

“We are investing $500 million this year to expand our network and services to Nigerian consumers,” Ammar said, adding that Etisalat aims to increase its existing 3,000 cell sites by an undisclosed number.

“Our next growth is going to be through Nigerian banks ... by giving us the required debt for expanding our operations.”

Ammar said Etisalat entered Nigeria’s fast growing market as a start-up operation with a $2 billion investment 7 years ago, facing more established rivals like South Africa’s MTN (MTNJ.J) and Globacom, owned by billionaire tycoon Mike Adenuga.

Ammar said Etisalat would be able to grow its subscriber base without having to poach large numbers of customers from rivals because some 40 percent of Nigerians -- tens of millions of people -- still did not own a phone.

“We see the second wave of growth coming from the youth segment. It is a huge segment that will ... turn into future consumers and the growth will happen across multiple years,” he said.

The International Telecommunications Union forecasts Nigeria to have 120 million mobile subscribers by end 2013, out of a population of 170 million.

The number of mobile users in Africa’s most populous nation crossed the 100 million subscriber base in the first half of last year, adding six million new callers from 2011.

Analysts say average revenue per user (ARPU is falling behind, owing to increased competition and the fact that the new subscribers tend to be poorer.

“What we see for the future is that the growth will be on data and this will be the balancing act for ARPU stabilization,” Ammar said.

(Follow Reuters Summits on Twitter @Reuters_Summits)

(This version of the story was corrected to make clear that the $500 million investment and local bank financing are separate.)

Editing by Tim Cocks

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