Mafab Defeated Airtel to Acquire 5G License in Nigeria But can it Deliver?
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Insight & Analysis - January 27, 2022

Mafab Beats Airtel to Acquire 5G License in Nigeria but Can it Deliver?

Mafab is expected to pay $273m for the 5G license in Nigeria before February 24

The new kid on the block in the telecoms industry, Mafab Communications Limited, has stepped into the spotlight after edging out Airtel Nigeria and others in the race to acquire a 5G license in Nigeria.

The company got the attention of industry watchers when it gave a spirited challenge to the big players and favoured brands at the bidding round for the 5G license in Nigeria, which was auctioned off in December 2021.

At the auction, held at Transcorp Hilton Hotel, Abuja, three bidders – MTN, Airtel and Mafab – competed for the available two slots. Mafab went on to emerge as the second telecommunications company to win the 5G license in Nigeria, with MTN taking the first spot.

The relatively unknown company got a provisional license for the 3.5 gigahertz (Ghz) spectrum subject to the payment of the license fee of $273 million, being the cost for each lot of 100 MHz licenses. Mafab is expected to complete the payment on or before February 24, 2022.

Mafab’s big plan is to take a strategic position in providing 5G internet connectivity to Nigerians within the next five years from the date of its launch. It plans to establish 6,000 sites within this period. 

The breakdown

The company says it will establish 1,000 sites in its first year, 2,500 in the second year, 4,000 in the third year, 5,000 in the fourth year, and then 6,000 in its fifth year.

The young company projects that it would have a total subscriber base of 7.5 million within its first five years of being in operation. It projects that it would have 1.5 million subscribers in its first year and double it by the end of its second year, then hit 5 million by the third year. 

By the fourth year, it foresees a reduction of about 35 per cent and then by the fifth year, it projects to have hit 7 million subscribers.

Although laudable, things don’t always go as pencilled down on paper!

Hurdles before the Young Company

Acquiring the 5G license in Nigeria is by far a big feat for an obscured company like Mafab, but when the reality of what is available and possible sets in, the excitement simmers down. Several hurdles lie in Mafab’s path to achieving these laudable growth plans.

The first hurdle before Mafab, a subsidiary of Althani Group of Companies, is the payment of $273 million, which is the cost of each lot of 100 MHz licenses before February 24, less than six weeks away.

The company plans to raise a total of $350 million via equity by issuing 70 million units of its shares at N5 and raise $1.59 billion through debt to complete a funding round of $1.9 billion. It plans to use this to offset the cost of the license and other expenses that will arise in the course of implementation.

For now, what is not clear is how far it has gone in this process and how close it is towards getting the funding.

This is undoubtedly a precarious path. The inability to raise the sum before the due date would mean Mafab might lose the allocation. The Nigerian Communications Commission (NCC) may be forced to re-allocate the spectrum license.

Should that happen, it will be so much for the spirited pursuit for the 5G license in Nigeria.

Secondly, the fact that it does not have previous operational experience in the industry may spell doom for it. Without a 3G and 4G license already in place, the company will have to source for other options.

To mitigate this, the company plans to adopt either of the following three options to enter the market: it plans to either buy off an existing service provider and then use its infrastructure to deploy its service or apply to the NCC for support as a New Entrant National Carrier. Lastly, it would acquire operational assets such as full Network Functions Virtualisation (NFV) architecture and modular data centers.

With these options lined up, nothing is certain at the moment, and as such, the decision could go either way, which all adds to the uncertainty around its business model.

Furthermore, even when it successfully raises the license fee and adopts an entry model from the list outlined above, the forecasts and plans it has laid out on subscriber acquisition may not work out as easily as it sounds, considering the market trends.

Hopefully, this business adventure works out well, as Nigerians will be the better for it. It will translate to a plethora of options to choose from in terms of network connectivity, job creation and increased opportunities.

READ ALSO: Nokia Signs MoU with African Telecommunications Union to Speed up Digital Transformation in Africa

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