Nigeria will award new licences to provide fixed-line internet services early next year as Africa's most populous country aims to transform its underdeveloped and unreliable network.

Nigeria is forecast to have 120 million mobile subscribers by the end of 2013, out of a population of 170 million, but its internet network is undeveloped. The West African country had 216,000 fixed broadband connections in 2011, according to data from the International Telecommunications Union (ITU).

Fixed-line licences will be sold via an auction, whereby winning bidders will be those requesting the lowest government subsidies to build the network, Eugene Juwah, chief executive of the Nigerian Communications Commission, told Reuters on the sidelines of a conference in Dubai.

"The government wants to put in an incentive to bring the price down," he said.

Fixed line will be divided into three tranches. The first two will be to operate the electrical and non-electrical infrastructure, while the third will be for licences to sell services to end users. All will be sold on a regional basis.

The licence sales come as the regulator considers whether it should again punish mobile firms for their poor service.

In May, it fined four operators - Etisalat Nigeria, a unit of United Arab Emirates' Etisalat, Airtel Nigeria, Globacom and MTN Nigeria, a unit of South's Africa's MTN - a total of 1.17 billion naira after missing targets they said were unfair.

"We have a gentlemen's agreement that no fines will be issued until December, so they've more than six months to make the necessary investments to improve the network," said Juwah.

"We will measure our key indicators and hope they have improved by then because if they haven't there's a chance we may penalise them again."

Nigeria will also sell two lots of nationwide spectrum at 2.3 gigahertz primarily for use by WiMax technology, Juwah said, with these sold via a conventional auction by year-end.

Additionally, some frequencies used by television broadcasters will be allocated to telecom operators by 2015. This spectrum will also be auctioned and is slated to be used for high-speed long-term evolution (LTE) mobile networks.