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Internet Penetration Dims as Millions Lose Access

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Internet Usage
  • Internet Penetration Dims as Millions Lose Access

The Federal Government’s target of 80 per cent Internet and 30 per cent broadband penetration by 2018 may become elusive as about five million Nigerians have dropped off the Internet radar in the last one year.

Specifically, the number of Internet users in the country fell from 97 million in December 2015 to 91.8 million as at December 2016.

Except things get better and government gets more serious with the implementation of the National Broadband Plan (NBP), more subscribers may not eventually have access to the Internet. The situation has also led to a fall in the Average Revenue per User (ARPU) by 15.7 per cent.

ARPU is a measure used primarily by consumer communications and networking companies to calculate revenue made from a subscriber. It is defined as the total revenue divided by the number of subscribers.

The ARPU, which dropped in 2016, fell in response to the economic realities in the country. An operator said that subscribers were generally spending less than they used to.

Investigations have shown that about 40 million Nigerians, residing in some 207 communities in the country still don’t have access to basic telecommunications services.

While these gaps persist, the aggressiveness of the states in charging exorbitant fees as Right of Way (RoW), against the collective agreed levy of N145 per meter, is another challenge observers projected may hamper the progress being made.

But the Minister of Communications, Adebayo Shittu, while speaking with The Guardian, assured that the country would meet next year’s target, stressing that some efforts were already ongoing to ensure success.

The country has in the last few years attained a 14 per cent penetration, but relying on a UNESCO report, the Executive Vice Chairman of the Nigerian Communications Commission (NCC), Prof. Umar Danbatta, put the mobile broadband penetration at 20.9 per cent. Market observers have, however, posited that even at the acclaimed 20 per cent penetration, data services remain very poor. They observed that for both 2G and 3G connections, not to talk of the much-touted 4G/LTE service offerings, “it is still a snail speed across all the networks.”

Indeed, subscribers who have migrated to the 4G/LTE services in the country have expressed dissatisfaction with the offerings from the mobile network operators.

Since October 4, 2016 when indigenous service provider, Globacom Networks launched the service, shortly followed by South Africa-based MTN on the 6th, and the United Arab Emirates’ Etisalat on the 14th, subscribers have been trooping to the nearest shops of their service providers to migrate to the new wonder generation fast speed network, but their expectations have not been met.

The service may not even get perfected in Nigeria until 2020. The reasons adduced for this are that the 4G/LTE is still evolutionary, and that the infrastructure to run it is still very much inadequate in the country.
Nigeria is home to four submarine cables, including MainOne, Glo1; WACS and SAT3, with all having about 11 terabytes bandwidth capacity, but last mile infrastructure, multiple taxation, vandalism, among others, have continued to limit expansion of broadband services to other parts of the country.

Going by the NBP put up under the pioneer Minister of Communications Technology, Dr. Omobola Johnson, to which the current administration promised commitment, by 2014, the country was expected to have built fibre infrastructure across the country, introduced incentives for building of last mile wire line infrastructure to homes, estates, and commercial premises and extended international cable landing points to other coastal states. But The Guardian reliably learnt that only 15 per cent of this plan has been achieved with one year to the 2018 date.

Nigeria was also expected to have, between 2014 and 2015, ensured all new cell sites become LTE compatible; spread 3G services to at least 50 per cent of the population; completed digital dividend spectrum migration; and released more spectrum for LTE.

But because the country failed to migrate from analogue to digital in June 2015 due to lack of fund and the needed political will under the administration of President Goodluck Jonathan, the digital dividend spectrum in the 700/800MHz could not be transferred from the broadcast industry to telecoms operators.

Furthermore, in 2017, the NBP timetable showed that the country was expected to have wireless broadband infrastructure upgrade and expansion in phase two, and expected to spread 3G/LTE to at least 70 per cent of the population, but information showed that lack of access to foreign exchange by operators will limit their ability to order equipment needed to enhance roll-out of services.

According to the President of the Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, the steep devaluation of naira versus the United States dollar is serious and impacting negatively on the Capital Expenditure (CAPEX) programme of many operators in the telecoms industry.

Another target of the NBP for 2018, was the provision of wireless broadband infrastructure upgrade and spread of 3G/LTE to at least 80 per cent of the population, but there are skepticisms about the possibility of achieving this, especially because of the exorbitant levies by states and their agents on telecommunications operators, as it relates to RoW.

According to a document obtained titled “The Resolution of the National Economic Council (NEC) on Multiple Taxation, Levies and Charges on ICT Infrastructure in Nigeria”, dated March 21, 2013, the states had agreed to an administrative charge of N145 per meter for every build and N20 per meter yearly recurring fee for existing duct with five years of review on RoW.

While the Lagos State government allows an operator to pay N500 per meter for RoW, prices from other states totally differ. Ogun, Oyo, Osun and Delta charge N6, 500, N5, 200, N4, 748 and N4, 600. They remained the highest. Anambra, Kano, Bayelsa, Niger, Ekiti, Sokoto, Kaduna, Ondo, Cross River charge N1, 270, N1, 200, N3000, N1, 000, N3, 500, N3, 000, N1, 130, N3, 000 and N2, 250.

According to the Association of Licensed Telecommunications Operators of Nigeria (ALTON), these charges are high and they will definitely affect fast broadband penetration.

On the way forward for telecoms operators, ALTON’s Head of Operations, Gbolahan Awonuga, said service providers’ request that duty tax waivers should be given to them should be given consideration. “We are finding things tough due to the current naira status and Nigeria ecosystem situation, we are not isolated from the impact. Telecoms operators should be allowed access to forex at lesser rate,” he said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Technology

Telecoming and Evina Sign a Global Alliance to Enhance Security in DCB Payments

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European technology companies Evina and Telecoming have signed a global alliance to work hand in hand in promoting DCB as the safest and most appropriate payment method in the new mobile economy and, in particular, for the fight against fraud.

The agreement deals a body blow to the mobile fraud that cost the African continent over USD 4 billion last year. DCB is the most suitable payment technology for millions of unbanked Africans who appreciate its unparalleled reach and convenience. The agreement between Evina and Telecoming; both with operations in 15 African, Middle Eastern and European countries; now makes mobile-based transacting even safer.

Telecoming is the leading expert in DCB since 2008 and Evina is the reference in the fight against digital fraud. With this alliance, both organizations combine their expertise to develop the industry and boost mobile payment security.

Roberto Monge, COO of Telecoming, states “Direct carrier billing has been growing in the new digital economy. It is a technology with enormous potential that benefits all players in the mobile environment. With this alliance, we want to place DCB at the forefront of the payments industry and reinforce our commitment to the development of a transparent, secure and stable mobile economy“.

David Lotfi, Evina’s CEO: “The potential of DCB is widely underestimated by mobile operators and other market players. This is mainly due to the fact that DCB is currently adversely affected by fraud. By protecting the mobile payment ecosystem, we aim to sustain DCB’s growth and help all players flourish in this ecosystem.”

The alliance aims to educate on the vast potential of direct carrier billing through the DCBMaster service that allows users to measure their exposure to fraud, as well as their market and regulations knowledge.

The alliance will also enable the launch of the first global DCB indicator. This DCB Index will measure the maturity of the DCB market in different regions, based on the analysis of four indicators: Fraud protection, Innovation, Penetration in the Digital Industry and Growth Potential.

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Fund Raising

Nigerian Fintech Appzone Raises $10M for Expansion and Proprietary Technology

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Africa’s fintech space has gained proper attention over the past few years in investments but it is not news that startups still battle with offering high-quality products. However, they seem to be doing quite well compared with traditional banks that face challenges like legacy cost structures and a major lack of operational efficiency.

Appzone is a fintech software provider. It is one of the few companies that builds proprietary solutions for these financial institutions and their banking and payments services. Today, the company is announcing that it has closed $10 million in Series A investment.

Typically, African financial institutions rely on using foreign technology solutions to solve their problems. But issues around pricing, flexibility to innovate, and a lack of local tech support always come up. This is where Appzone has found its sweet spot. The company based in Lagos, Nigeria, was founded by Emeka EmetaromObi Emetarom, and Wale Onawunmi in 2008.

Appzone clearly plays a different game from other African fintechs. One clear differentiator is that the company functions as an enabler (at payment rails and the core infrastructure) within banking and payments.

It commenced as a services firm to provide commercial banks with custom software development services. In 2011, the company launched its first core banking product targeting microfinance institutions. The following year, Appzone launched its first product (branchless banking) for commercial banks. It went live with its mobile and internet banking service in 2016 and launched an instant card issuance product in 2017. In 2020, the company launched services catered to end-to-end automation of lending operations for banks and blockchain switching.

“We started Appzone with the intention to build out innovative local solutions for banking and payments on the continent,” CEO Obi Emetarom told TechCrunch. “The focus was to leverage our ability as an enabler to create proprietary technology for both segments.”

Appzone platforms are used by 18 commercial banks and over 450 microfinance banks in Africa. Together, they amass a yearly transaction value and yearly loan disbursement of $2 billion and $300million.

Since its inception, the Google for Startups Accelerator alumnus claims to have led Africa’s fintech sector in some global firsts from the continent. First, the company says it created the world’s first decentralised payment processing network. Second, the first core banking and omnichannel software on the cloud. Third, the first multi-bank direct debit service based on single global mandates.

Emetarom likes to describe Appzone as a fintech product ecosystem with an emphasis on proprietary technology. So far, we’ve touched on two layers of this ecosystem—the digital core banking service providing software that runs financial institutions’ entire operations and interbank processing, which integrates these institutions into a decentralized network powered by blockchain.

Coinciding with this investment is the introduction and scaling of a third layer that focuses on end-user applications. Appzone, having built both banking and fintech layers, wants to connect individuals and businesses to their services. This is where most new-age fintech startups operate, and although Appzone is coming late to the party, it has a bit of an edge, the CEO believes.

“Most of these companies operating in end-user applications have to depend on services from core banking and interbank processing to be able to get their own offerings out there. For us, I think we have an advantage in terms of costs and flexibility because we are already operating in both layers,” Emeratom said in relation to what he thinks of competition.

The company is coming out to blitz scale its products and services after working in stealth mode for more than a decade. One way it wants to carry this out will be to take its pan-African expansion sternly even though a large part of its 450 clients are based in Nigeria. Other countries with a presence include the Democratic Republic of Congo, Ghana, Gambia, Guinea, Tanzania, and Senegal. Before now, Appzone lacked the resources to push into these markets aggressively even though they showed promise. But having closed its Series A, the plan is to drive growth in these countries and expand across more African countries.

Another means Appzone plans to achieve scale is by growing its engineering team — a department it takes pride in. These engineers make up half of Appzone’s 150 employees and there are plans to double down on this number. Like most Nigerian startups these days, Appzone is big on senior engineers. Still, while it might present a problem to other companies, Emetarom says the company has no issue training promising junior talent to grow in expertise.

“Our proprietary tech allows us to innovate at a fraction of a cost, and they are built by essentially the best local talent available. Because those systems are really complex and the level of innovation required is on another level, we literally seek out the to 1% of talent in Nigeria,” he remarked. “We know that even though the expertise isn’t there, we can accelerate acquiring that expertise when we train the very best talents. The more we train our engineers, the faster they grow in terms of expertise, and they will be able to deliver at the same level of world-class quality we expect.“

Back to the round, a noteworthy event is that most investors who took part are based in Nigeria despite its size. CardinalStone Capital Advisers, a Lagos-based investment firm, led the Series A investment. Other investors based in the country include V8 Capital, Constant Capital, and Itanna Capital Ventures. New York-based but Africa-focused firm Lateral Investment Partners also participated.

Before now, Appzone closed a $2 million from South African Business Connexion (BCX) in 2014. Four years later, it raised $2.5 million in convertible debt and bought back shares from BCX in the process. But overall, the company says it has raised $15 million in equity funding.

Speaking on the investment, Yomi Jemibewon, the co-founder and managing director of Cardinal Stone Capital Advisers, said the firm’s investment in Appzone is further proof of Africa’s potential as the future hub of world-class technology.

“Appzone is building a disruptive fintech ecosystem that will be the backbone of Africa’s finance industry with products across payments, infrastructure and software as a service. The impact of Appzone’s work is multifold — the company’s products deepen financial inclusion across the continent whilst providing best-fit and low-cost solutions to financial institutions. Its emphasis on premium talent also helps stem brain drain, rewarding Africa’s best brains with best in class employment opportunities,” he added.

Appzone’s funding continues the fast-paced investment activities witnessed by Africa’s fintech space after a slow January. In the last two months, more than eight fintech startups have secured million-dollar rounds. This includes very large rounds by South African digital bank TymeBank ($109 million) in February and African payments company, Flutterwave ($170 million) in March.

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E-commerce

China Fines Alibaba Record $2.8 Billion After Monopoly Probe

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China slapped a record $2.8 billion fine on Alibaba Group Holding Ltd. after an anti-monopoly probe found it abused its market dominance, as Beijing clamps down on its internet giants.

The 18.2 billion yuan penalty is triple the previous high of almost $1 billion that U.S. chipmaker Qualcomm Inc. had to pay in 2015, and was based on 4% of Alibaba’s 2019 domestic revenue, according to China’s antitrust watchdog. The company will also have to initiate “comprehensive rectifications,” from protecting merchants and customers to strengthening internal controls, the agency said in a statement on Saturday.

The fine — about 12% of Alibaba’s fiscal 2020 net income — helps remove some of the uncertainty that’s hung over China’s second-largest corporation. But Beijing remains intent on reining in its internet and fintech giants and is said to be scrutinizing other parts of billionaire founder Jack Ma’s empire, including Ant Group Co.’s consumer-lending businesses and Alibaba’s extensive media holdings.

Alibaba used its platform rules and technical methods like data and algorithms “to maintain and strengthen its own market power and obtain improper competitive advantage,” the State Administration for Market Regulation concluded in its investigation. The company will likely have to change a raft of practices, like merchant exclusivity, which critics say helped it become China’s largest e-commerce operation.

“The high fine puts the regulator in the media spotlight and sends a strong signal to the tech sector that such types of exclusionary conduct will no longer be tolerated,” said Angela Zhang, author of “Chinese Antitrust Exceptionalism” and director of Centre for Chinese Law at the University of Hong Kong. “It’s a stone that kills two birds.”

Alibaba’s practice of imposing a “pick one from two” choice on merchants “shuts out and restricts competition“ in the domestic online retail market, according to the statement.

The government action sends a clear warning to the tech sector as the government scrutinizes the influence that companies like Alibaba and social media giant Tencent Holdings Ltd. wield over spheres from consumer data to mergers and acquisitions.

The investigation into Alibaba was one of the opening salvos in a campaign seemingly designed to curb the power of China’s internet leaders and their billionaire founders. The company has come under mounting pressure from authorities since Ma spoke out against China’s regulatory approach to the finance sector in October. Those comments set in motion an unprecedented regulatory offensive, including scuttling Ant Group Co.’s $35 billion initial public offering.

Alibaba said it will hold a conference call Monday morning Hong Kong time to address lingering questions around the antitrust watchdog’s decree.

“China’s record fine on Alibaba may lift the regulatory overhang that has weighed on the company since the start of an anti-monopoly probe in late December,” Bloomberg Intelligence analysts Vey-Sern Ling and Tiffany Tam said, describing the fine as a small price to pay to do away with that uncertainty.”

Further Action

Still, it remains unclear whether the watchdog or other agencies might demand further action. Regulators are said for instance to be concerned about Alibaba’s ability to sway public discourse and want the company to sell some of its media assets, including the South China Morning Post, Hong Kong’s leading English-language newspaper.

The Hangzhou-based firm will be required to implement “comprehensive rectifications,” including strengthening internal controls, upholding fair competition, and protecting businesses on its platform and consumers’ rights, the regulator said. It will need to submit reports on self-regulation to the authority for three consecutive years.

“Alibaba accepts the penalty with sincerity and will ensure its compliance with determination. To serve its responsibility to society, Alibaba will operate in accordance with the law with utmost diligence, continue to strengthen its compliance systems and build on growth through innovation,” the company said in a statement on Saturday.

Faced Challenges

Chief Executive Officer Daniel Zhang said in a memo to employees on Saturday that Alibaba always reflected and adapted when it faced challenges. He called for unity among staff, saying the company should “make self-adjustments and start over again.”

The Communist Party-run People’s Daily newspaper said in a commentary on Saturday that the punishment involves specific anti-monopoly measures regulatory authorities take to “prevent the disorderly expansion of capital.”

“It doesn’t mean denying the significant role of platform economy in overall economic and social development, and doesn’t signal a shift of attitude in terms of the country’s support to the platform economy,” the newspaper said. “Regulations are for better development, and ‘reining in’ is also a kind of love.”

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