Challenges of Telecommunication Privatization in Nigeria Literature Review Chapter

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Telecommunication Privatization in Nigeria

Definition of Privatization

Privatization is the process by which an entity is made privately owned thus the ownership is no more public. The debate of public and private goods and ownership is old. The privatization of goods and entities is considered quite more efficient the reason is that the private goods are owned by people that know that earnings will increase as more effort and struggle will be put. The aim of managing private goods is wealth and profit maximization thus these services are efficient but bear an expensive cost tag. On the other hand the state own or public goods that are created as through a process of nationalization, are less efficient yet still productive and are also cheap. The state offers public services to benefit its people thus these goods and services are cheap. But the people working in organization are working for salary and not profit thus they do not excel in performing their tasks.

Compare Privatized Telecommunication Companies in Nigeria to the Global Development

The global standard development in Nigeria was initiated during year 2006. From year 2000 when there was 0.1% population using internet, today around 26% population uses internet services (Internet Usage and Telecommunications Reports, 2012). The increase of tele-density and access to internet is lower in Nigeria than other major countries in Africa like Egypt yet the increase in acceptance and services is remarkable that is supported by privatization of companies. The national Telco Nitel was privatized in 2005. V-Mobile and privatization of other companies has simply catalyzed the growth. While the broadband subscribers have increased to a massive number of 1.6 billion, there are also nearly a hundred million subscribers in Nigeria alone. While the number is quite big for a country that started journey about a decade ago, the Nigerian regulatory bodies and telecom companies have a challenge to overcome traditional work environment, fight management issues and improve the financial conditions for operation of the industry.

3) Worldwide theories

The worldwide progress of telecommunication industry is driven by demand as well as the need to keep pace with time. The worldwide telecom growth theory suggests that the growth of the sector was need of era since people needed a fastest mode to get to know what's happening round the world especially in the war hit areas of Afghanistan and Iraq. The rise of Arabic media systems and the birth of iPod are the events that dragged the telecommunication industry globally to privatization since nations were not contended and did not rely upon only the state owned sources. In the global context, Nigeria faces quality, regulatory and price challenges that need full dedication from all the stakeholders.

a. The Theoretical Framework for Privatized Telecommunication Companies

The privatized telecommunication companies are increasing in number due to some advantages in the model of privatization. The private Telco's anywhere in the world and especially in the case of Nigeria benefit from change of ownership. More dynamic and productive teams take over the management of company thus make it more efficient. The more the number of private companies in the market, enhanced is the competition which demands the management to bring organizational reforms. The companies pursue to make best use of their time. Money, assets and people and that increase organizational and national productivity.

The Nigerian telecom companies, despite coming a long way to growth, need to take care of the management and ownership problems that have earlier delayed the growth rate and hindered penetration of telecom usage. The companies would need to manage the organizations as well as industry in a way to avoid any negative practices. If an effort of creating an oligopoly is made, the companies might face tough challenges both from the consumer base and the regulatory bodies. Thus, it is vital to be careful and to learn lessons from global telecom companies and avoid legal and social actions against the companies.

(i) Ownership change

The ownership of Nigerian telecom companies is shifted from the state to private parties during the privatization. The ownership change is a challenge due to many reasons. First of all being a less developed country, Nigerian managers need to manage international relations. Also the change of ownership is followed by resistance of employees that the management has to deal with. Private owners are far more output oriented so the employees often find it hard to accommodate (Dikki, 2013).

(ii) Market competition

The market competition theory believes that increased competition cultivates rivalry thus the firms in industry improve quality and reduce prices so that they can increase their client base. The market competition has increased in Nigeria because the privatization leads to increase in number of service providers from one to multiple.

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Thus the market competition is increasing in telecom of Nigeria.

(iii) Management reform

The management reforms in Nigeria after privatization of telecom include the change of administration methodologies. Today, the telecom industry in the country is directed towards achievement of high quality and penetration of services rather than simply employing workforce under a department.

(iv) Rondinelli's Performance Management Model

The Rondinelli's Model for performance management revolves around four steps including Act, Plan, Do and Check. The market analysis, plan formation, implementation and evaluation of Nigerian Telecom help it improve the quality. The simpler it seems does not mean that it is very easy too. It is a challenge for the managers in industry to improve quality through a regular evaluation so that the problems in industry are detected in time and solved. For example the resource, technology or human resource issues in Telecom need to be kept tract of so that there is no problem that hinders productivity of sector.

(v) The resource-based view of the firm

The internal view or resource-based view of Nigerian telecom industry can help find its human resource, assets competitive advantage and environment. It is a challenge for executives in industry to solve the internal resource issues and raise the productivity to match the performance of telecom industries of region and the world.

(vi) The knowledge-based view

Nigeria may choose to apply knowledge based approach towards managing its service industries specially the telecom sector. This is because the knowledge based approach focuses on improving the skills, aptitude and knowledge of employees rather hiring additional staff that is a burden on company finances. Thus a linear workforce that is more skilled and knowledgeable will serve the industry more. Such an approach will demand executives to hire for best people from the candidate pool.

4) Research Problems

The Nigerian economy is a starter in the global competition and it is growing fast in the fields if technology particularly telecom. The government is although not offering all the services itself yet in the budget constraint situation, the country knows what is the right thing to do- commercialize and privatize industries that have potential for growth.

1) Nigeria Economy

The Nigerian Privatization Act enables its bodies like National Council on Privatization to understand how privatizing will help each separate industry. The macro level privatization is a strategy adopted to have a rapid development in the country (Privatisation and Commercialisation, 2013). The privatization in Nigeria is carried by selling assets and equity capital of the enterprises. The Nigerian Communications Commission operates as independent authority that enables environment for competition. The authority ensures that there is industry driven competition (Nigerian Communications Commission, 2013). The commission believes in competition, responsiveness and innovation.

5) Nature and characteristics

The country is full of potential like other African countries including Egypt and South Africa. There are investment opportunities as well as cheap labor available for growth of power, telecommunications, oil and gas, and manufacturing (Telecommunication Investment Opportunities, 2013). There is a market oriented economic development strategy being used in Nigeria. The country promotes both domestic and foreign investments (Information on privatizing & commercialization in Nigeria, n.d.).

a. Firm histories and the privatization process in Nigeria

The history of Nigeria with respect to privatization of power sector is successful. The firms in Nigeria basically faced the issue of power control. The same problems are faced in telecommunication companies and the experts believed that the industry can serve better in private hands. These private partners are competent enough and can help the company develop a competitive telecom sector that competes on the basis of quality (Crude, 2013).

b. Privatization development in Nigeria

The development sectors in Nigeria that are IT, telecom, power and oil & gas are leading the country through globalization process. The foreign investments in Nigerian telecom industry make it more profitable and globally competitive. The privatization development in Nigeria ensures that the management runs organization in a people-oriented manner (Daniel, 2013). The telecom companies till year 1999 were not working satisfactorily. About 80% companies were not working effectively before privatization (Dikki, 2013).

c. Management structure

The favorable management structure in telecom industry is a horizontal structure whereby the emphasis is on productivity, relationship management and responsibility sharing rather than simply control organizational decisions. Nigerian….....

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