21st January, 2013
BY FUNSHO BALOGUN
A proposed merger within the telecoms industry offers a boost to Code Division Multiple Access operators
With a mere 12 per cent share of the market, the surviving players in the Code Division Multiple Access, CDMA, market have been at the edge of a cliff for a while. In this category are operators like Visafone, Multi-Links, Starcomms and Zoom Mobile, which have been virtually suffocated by the might of mobile giants like MTN, Globacom, Airtel and lately, Etisalat.
Now, they have a chance of getting out of the suffocating grip of the giants, courtesy of a $210 million capital injection into the CDMA sub-sector through the birth of CAPCOM Limited.
A major constraint for the CDMA operators has been their inability to muster enough capital to boost their operations by investing in the appropriate technology. In terms of investments into the upgrade of services and operations, the mobile network players are far ahead.
Only Visafone was able to invest a decent sum in 2012 towards boosting its broadband infrastructure in Lagos and growing its network across 26 states. The $20 million agreement it signed with Huawei for the expansion is, however, meagre when compared with MTN’s $1.4 billion investment in the same year for the same purpose. Airtel Nigeria has also expended $600 million on network upgrade since it transformed from Zain less than two years ago. And on its part. Etisalat has built 1,000 additional base stations in 2012 to boost the 3000 base Transceiver Stations it had in 2011.
Consequently, the CDMA operators have failed to maximise their potential even where they have an edge, particularly in terms of offering efficient data services. The huge amounts spent on network upgrades and expansion by the GSM operators notwithstanding, subscribers remain largely frustrated in terms of business transactions that relied on heavy data in 2012. CDMA operators thought to be stronger at offering such services. But hitherto, the level of investments required to fully make the advantage count has never been achieved by the operators. CDMA operators have always had problems of funding limiting their capacity to expand, despite the Unified Licence granted them by the Nigerian Communications Commission, NCC.
Apart from problems like inadequate capital, CDMA’s fortunes have also suffered due to poor decision making, ownership structure, poor promotion of the CDMA technology and the tendency for majority of subscribers to prefer GSM telephony.
With core investors pumping $210 million into the new firm, CAPCOM, the next step will be the fusing of Starcomms with Multi-links and Cyancom (former MTS), melting into a single national Long Terms Evolution (LTE) Broadband operator with 20mhz of bandwith in 1900mhz frequency range.
The investment is for the acquisition of Multi-Links and Cyancom, with the recapitalisation of Starcomms, offering it sufficient capital and liquidity to take care of creditors and working capital as well as enabling it to expand its existing network through the introduction of 4G/LTE (Long Term Evolution) technology. Major shareholders of the emerging CAPCOM include MBC with 53 per cent shares, Middle East Capital Group, 25 per cent; and Helios Investment Partners, 11 per cent. Others include Oldonyo Laro Estate, 5 per cent; Bridgehouse Capital Limited, 3 per cent; Asset Management Company of Nigeria, 2 per cent; and Private Equity Investors, 1 per cent.
CAPCOM was founded by MBC, a trust that has been in existence for two decades and has a reputation of managing over $1.25bn in asset management and commercial banking sector, with focus on emerging markets.
CAPCOM’s investment in the merger is aimed at creating a national broad invest system to facilitate government’s programme of achieving a bridge between Nigeria as an emerging market and other developed world markets. Post-consolidation Starcomms will have an edge over other competitors by controlling 20MHZ of spectrum, while others are still limited to their present status of having nothing more than 10MHZ of spectrum. The advantage is increased by the fact that even the 10MHZ of spectrum is currently congested with voice and SMS traffic, while the stance of government is still to make no additional spectrum allocations until 2015. Starcomms (soon to emerge CAPCON) should become the market leader in mobile high speed broadband services using 4G/LTE technology. The company’s target will be Small and Medium Enterprises, SMEs, small offices and household consumers segment of the market. It will also be poised to snatch about 70 per cent of data market in Lagos. The new company’s focus will be on data rather than voice services.
Demola Elesho, the Chief Executive Officer of CAPCOM, is convinced that the newly empowered Starcomms is on the fresh path to profitability. “We will be successful because we are trying to satisfy a demand that already exists, not creating a demand,” he noted.
The history of CDMA in Nigeria is replete with failed attempts at merger and acquisition. In 2003, there were 23 licesed telecom operators in the country, but by 2011, the number had decreased to 16. The list of operators still active in fixed mobile telephony in Nigeria includes Visafone, Multi-Links, Starcomms, Zoom Mobile, Intercellular, VGC/MTN, MTS 1st Wireless, 21st Century Technologies, Disc Communications, Witel, Onet (Odua Telecom) XS broadband, Rainbownet, Monarch Communications, Webcom and NITEL.
.This article originally appeared in TheNEWS magazine of 28 January 2013