Nigeria Needs Telecom Infrastructure Funding Bank

Engr. Ikechukwu Nnamani, Managing Director of Medallion Communications, spoke to Chike Onwuegbuchi of Nigeria Communications Week on issues around data Center operations in the country. 

Building Private and Public sectors confidence in hosting their servers in the country

We are seeing great improvement in terms of adoption; we are seeing a lot of people appreciating the need for it as well as improvement of uptake of local data center services compared to what it was in the past. From our own data center in terms of the uptake year in year out I can say for certain over the last one year we have to increase our data center capacity significantly just to take in more customers, that for me is an indication that a lot of people are beginning to see the need.

Certifications in the ecosystem and service availability

The Tier certification is being managed by Uptime Institute and really it is a benchmark where they want to create minimum requirement for availability in terms of support from the data center most of it is towards power availability, so remember in other environments where data center have been existing for a long time, the understanding is that they have steady power supply from public sources to private sources power is very steady.

You have cases where for many years they have not experienced a blink in their power supply. They want a situation where you don’t have to depend on public power to run your data center, those were markets where you have natural disaster like earthquake, tsunami among others that may disrupt public power supply so without these natural disasters you hardly have a disruption all things being equal.

So, the Uptime Institute is assuming for instant if you have data center in California unfortunately you have the California fire issue that took place last year and your data center had to be cut off from the public power supply within the data center do you have availability of power? That will last for 72 hours which is Tier 111 certification, you should be self- sustaining in power for 72 hours if there no public power supply.

That means if you are operating a data center in California with Tier 111 certification, you have to show outside of the traditional power supply that you have built redundancy, if it goes off you can self-sustain yourself either on battery back- ups, generators or some other means that will ensure that your data center should be operational for 72 hours in case of Tier 111 certification.

It becomes interesting when you bring such requirement into our climate, where you usually operate your data center almost on private power supply, like our data center we operate seven days straight on self -generating power, because the public power supply is not available.

So, how much Tier will you put such a data center? From power perspective it becomes interesting when you look at markets like ours. There was a particular case we were on our self –generating power for more than five weeks running.

Although there are areas that Uptime Institute  looks at but the key point is power. They also look at redundancy; for instance, you should maintain dual power feed equipment to data center.

My take is that Tier certification is important because it gives a guide to minimum service level you should attain as a data center. It is worth doing or attaining.

Where I have a problem is when people start using it as a marketing tool as if it is a big deal then I have a problem with that because by default every data center should operate at that standard.

Why would organisations host their servers with you?

We have been able to offer our customers efficient service at right service levels we are able to create a market place they interface with others. We are able to provide a carrier neutral infrastructure where they are not afraid they are dealing with a competitor with them.

Any service our customers are offering from our data center we at Medallion don’t go and start competing with them to offer such service. That gives them the confident that truly they are at carrier neutral place.

We also enable every one of our customers to be treated equally in terms of size, whether you are big like MTN or small operator, we give every of them equal opportunity to do their business in efficient and cost-effective way. Availability and the minimum standard I enumerated earlier we make sure we don’t fall below them.

I think these are the reasons they are with us, of course pricing is important, I don’t think we are the most expensive in the market. You have to ensure that your client can afford the cost of the services you are offering them. Clearly, Medallion data center is the most connected presently.

Potential of Data center business in Nigeria

There have been new data centers in the market since last year I said the country requires 72 data centers

with the two new ones we have not even started. Interestingly, the two announcements are still in Lagos where the major existing operators are located. This means that people have not fully understood the situation at stake and what needs to be done to address the problems of geographical spread of the infrastructure.

We have to look at it from the strategic point to ensure that people making investment in data center make the right one with location in mind.

We need to be able to extend connectivity, service delivery and content across various part of the country so that it is less dependent on the transmission links. I always say, Imagine a call taking place in Sokoto between an MTN subscriber and Glo subscriber and that call comes all the way to Lagos in order to be exchanged before going back to Sokoto. It doesn’t make sense just from the basic principle of it.

Some of these things have to change, if we are to attain the right quality of service and better pricing for services.

Data centers are concentrated in Lagos. Is there no demand for the service outside of Lagos?

The need is there, it is a case of business model and understanding in terms of potential revenue generation. Some believe that the market is in Lagos. If they build a data center in Lagos they will be able to get return on investment faster in Lagos.

I defer from that line of thinking. I believe there is demand in every state capital in Nigeria that needs to be address, it is a matter of somebody taking the step to go there and set up and then you see the business, that is the way to go, it may take some time but ultimately over time people will find out it is the way to go.

Lagos is still an important market it is not yet saturated even for data center business but I can assure you that there are some cities today that need it more than Lagos, everybody knows what they are looking for in the business we won’t tell where to locate their business. Some of them are more successful than we are so, we won’t advise them.

In the next few years it will become obvious especially to those who do not see now that it is necessary to build that infrastructure outside of Lagos.

Is Medallion Thinking of Expanding outside of Lagos?

Yes. As we are speaking now we are working out a plan to building a new data center in Enugu, Kano, Ibadan, Port Harcourt, Asaba and possibly Kaduna in addition to Lagos and Abuja where already have data centers that is our plan for this year 2019.

This is capital intensive project how are going about funding this expansion projects?

It is a tricky one because there is high cost of fund in Nigeria. You have to look outside to see if you can cheaper fund which initially may appear cheaper but when you look at challenges such as exchange rate fluctuations then it becomes a problem even if initially you get it at a cheaper interest rate.

Image you took up a debt finance at dollar exchange rate of 363 suddenly it drops N1,000 that means you need more revenue just to be able to service your debt than you need today, who are you going to pass that across to? That was the reason a lot of companies went under when the exchange rate went from N120 to N350 especially those trading in the oil and gas sector even those in telecoms that is highly dependent on foreign currency in terms of investment building of infrastructure.

One of the things we are pushing through as an association, ATCON is that government needs to intervene in the area of funding the same way it intervenes in the manufacturing sector, with the stuff Bank of Industry is doing for the manufacturing sector. Even in the banking sector when there was crisis in that sector they came in with AMCON and others to give some bailout among others.

There is need for government to intervene, some of us have advocated for the setting up of telecom infrastructure fund bank to provider long term low interest rate financing for telecom infrastructure projects over a long time say between 5 to 10 years and you are given moratorium to build that infrastructure.

You go to a bank and they ask for a collateral which you may not have but the infrastructure you are building should be a collateral, for banks here they don’t see it that way, they say oh we can’t use your equipment as collateral, they rather want you go and get landed property which some time the cost of getting the collateral is more than the fund you are accessing. Those are the challenges we are facing it is not a Medallion issue it an industry issue which at ATCON we want to address this year among other industry issues.

Courtesy: Mr.  Chike Onwuegbuchi, Nigeria Communications Week (www.nigeriacommunicationsweek.com.ng)