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Nigeria operations

Nigeria is the largest economy in Africa and within the top 50 worldwide, with a GDP of $475B in 2019. This figure is projected to grow to $736B by 2023 (The Economist Intelligence Unit, 2021). It is also the largest country in Africa by population and 7th worldwide, with a population of 206M (2020). (The World Bank, 2021)

Country profile

Nigeria country profile Figure 32 Nigeria country profile

3air, in cooperation with K3, will build the K3 Lastmile solution infrastructure in Nigeria. Nigeria is considered the biggest market in Africa and the “golden country” for 3air. The aim is to build K3 Lastmile solution infrastructure in Abuja and Lagos simultaneously, cities with a combined population of over 26M.

Nigeria suffers from a lack of modern broadband access in all cities.

The Nigerian Federal Government is working hard to provide education, infrastructure, and financial support for information technology and literacy. Currently, it is running 3 major campaigns:

  1. Government-supported Universal Service Provision Fund (USPF) intended to achieve national policy goals for universal access and universal service to information and communication technologies (ICTs) in rural, unserved, and underserved areas. (USPF, 2021)
  2. Intensive nationwide awareness campaign to educate the population about the value of ICT services. (Agyeman, 2007)
  3. Introduction to digital literacy education and training programs across all levels of education. (Federal Ministry of Education, 2019) (Oye & Aiahad, 2015)

The Federal Government is also driving various initiatives aimed at infrastructure improvement, funding & incentives, and demand drivers to achieve improved coverage, quality, and penetration as contained in the Nigerian National Broadband Plan for 2020 – 2025. (Nigerian Communications Commission, 2020)

K3 already holds an Internet Services License (“ISL”) issued by the Nigerian Communications Commission (“NCC”) under the Nigerian Communications Commission Act. This license allows K3 to operate in Nigeria within its ISP scope, including broadband, digital TV, and IP telephony services. Following the funding, K3 will set up the network, build the infrastructure, train the local team, and launch operations with 4 base stations.

This setup will achieve coverage of about 90% in Abuja and Lagos.

The setup duration from the time of funding till launch will take about 22 weeks.

Nigeria implementation time schedule Figure 33 Nigeria implementation time schedule

After launch, each person in the coverage area will have access to modern triple-play services (internet, Digital TV, IP telephony) equal to that of cable. Upon reaching profitability (with 100 businesses or 2.000 retail clients), we will expand services to other areas in Nigeria.

To remain conservative, the projected economics only considers operations in Abuja and Lagos.

Market Sizing

By 2022, the estimated market size of the fixed broadband segment in Nigeria will be $752 M, representing a 96% growth from 2017 revenues. This growth is expected to be driven by increased demand and improved purchasing power.

Entertainment and media outlook: 2017 – 2021 An African perspective Figure 34: Entertainment and media outlook: 2017 – 2021 An African perspective

Figure 34 Entertainment and media outlook: 2017 – 2021 An African perspective: * NNigeria’s telecoms and media revenue is expected to increase from $7.3B in 2017 to $11.2B by 2022, at a CAGR of 7.5%. * Mobile revenues continue to dominate the market, accounting for 88.9% of revenues in 2017 and expected to grow to 90.5% by 2022. * The fixed broadband segment, the fastest growing segment driven by increased demand from high-end users, will see its revenue share grow from 3.7% in 2017 to 4.5% by 2022. * Key drivers include improved household spending & increased demand.

High level Economics:

  • Expected to yield EBTIDA margins of about 50%-60%.
  • Profitability is reached with only ~2,000 customers.
  • Break-even time per customer is 2-4 months.

210,000 customers in Nigeria will yield an entity value of $1.6B (210,000 customer equates to about 20% of the addressable market).

2022 2023 2024 2025 2056
Users 9,000 35,000 80,000 140,000
Base stations 4 10 18 28
Total revenue $7 M $46 M $105 M $184 M
EBITDA ($1,5 M) $41 M $99 M $177 M

Table 10 Nigeria operations Profit and Loss statement

We intentionally remain conservative in our projections. In Abuja and Lagos alone, the data indicates exponential growth potential. With 26 million people in both cities, a high cost of living by western standards (>$5,500 rent per month for a 3-bedroom apartment) (Numbeo, 2021), and a shocking lack of proper broadband and modern entertainment services, the market is in desperate need for modern standards.

The total capital expenditure until profitability is $15 million, including prudent reserves. Of that required capital, $3 million will go toward providing the initial infrastructure set up to cover Abuja and Lagos. $3 million will be used for CEP / User inventory for the first 6,000 customers, and $6 million for the working capital until we reach profitability ($3.0 million in reserve).

The detailed business plan is available for interested and registered investors upon request.