Visafone acquisition, end for CDMA?

By Prince Osuagwu, Hi-tech Editor

IT  became official, January 5, 2016, that the last Nigerian Code Division Multiple Access, CDMA operator standing, Visafone, has finally succumbed to the terrible distress in that genre of telecommunications operation and allowed itself to be swallowed by a GSM counterpart, MTN Nigeria.

However, when Vanguard carried the news eight months earlier that the CDMA operator may soon melt into another, it was quickly and unofficially, dismissed as a rumour by both players. But today, MTN has admitted that  the acquisition falls in line with the company’s determination to improve the quality of broadband services for its subscribers.

According to MTN Executive, Amina Oyagbola, the acquisition is also a reflective of MTN’s concerted efforts to deepen the growth and rollout of broadband services across the country in support of the National Broadband Plan for the benefit of Nigerians.

Visafone is one of the leading CDMA operators in Nigeria offering a number of services including voice, high speed data (3G), internet and other Value Added Services (VAS). Visafone also provides business solutions to small and medium sized companies and corporate organisations in Nigeria.

However, market forces and poor financial status which have continually bedeviled the sector have now caught up with the operator, leading to its sale. The question among industry observers is whether this is the end for CDMA operation in the country.

Is acquisition a lifeline to the sector?

Although, many have seen
the acquisition as a lifeline to the sector, MTN’s body language does not reflect a company pretty eager to go into core CDMA operation. Addressing newsmen recently, Oyagbola admitted that her company was already mulling the idea of launching 4GLTE technology even before approaching visafone.

Originally we had planned to roll out 4G network. At the end we got in touch with visafone and began negotiations. But now, our primary concern is to manage the subscribers, making sure that whatever we do now does not influence them negatively. We have the equipment on ground to roll out 4G and our plan is to roll out pretty soon though it would be limited. It’s not going to be total roll out. Another challenge we have is that it is getting difficult to import equipment now because of the forex issue. Although the mistake has been corrected by the government, it is still going to take a while to relax.

“We are taking time not to import the wrong equipment and besides, we also want to expand our broadband platform by improving significantly on our 3G offerings. We have put a team to manage the place and ensure customers enjoy the services they paid for” she added.

NCC’s bail out strategy

While the industry continues to deliberate on how to ensure this technology did not eventually collapse completely in Nigeria, NCC is hatching plans to revive the sub-Sector.

The regulator’s in house magazine, The Communicator, has quoted the Executive Vice Chairman of the commission, Prof. Umar Danbatta, as admitting that Fixed networks have been neglected and that nobody is interested in them despite the promises they hold.

According to him, operators are more interested in providing mobile services which manifests in their subscribers base; MTN having over 60 million subscribers, Glo and Airtel having over 30 million, Etisalat, 20 million and Visafone a paltry 2.5 million subscribers.

His plan is that “If we can deliberately introduce incentives to any operator to come in and roll out fixed telecoms services we can do it. The Commission is open to negotiations on how this could be done.

“We intend to convince the government to key into this important initiative of the Commission. Through this medium I send a message to operators who will be willing to buy into this important idea of availing themselves the opportunity to get the incentives that we intend to put in place in order to revive fixed telephony services.”, he stated.

Whether this would achieve better result, will depend on how much passion the commission will put into monitoring the activities and making the right interventions. Experience of hindsight has shown that several interventions in the past were either dead on arrival or not strong enough to gather momentum.

Acquisitions in the CDMA sector: The fortunes of the Nigerian CDMA operators experienced a nosedive shortly after the GSM operators opened shop in August 2001 and since then, while the Global System for Mobile communications, GSM operators keep increasing in number and financial record, their CDMA counterparts have been depleting in both numbers and bank balance.

Although things began to look bright in 2006 when their regional licences were upgraded to Unified Access Services Licences, the operators could not sustain the tempo and from a position of strength in terms of the number of operators, there are today, just about only two active CDMA operators, Starcomms and Visafone.

From the official statistics released by the NCC at the beginning of 2012, the CDMA operators lost 17 percent of their total subscriber base between January and October 2011, translating to about 1,069,485 lines in number.

The regulator said that at the opening of business in January 2011, the CDMA networks had pooled together a total of 6,186,442 telecoms subscribers from their various networks.

However, the figure kept experiencing consistent decline, slipping to 5,116,957 active lines at the end of October, 2011 from a loss of an estimated N10 bn in revenues.

This represented a monthly revenue loss of N1 bn. This scenario increased the calls for consolidation in that sector.

That call, apparently resulted in what seemed a special purpose vehicle, by an American investor-CAPCOM, which came with the hope of reviving the CDMA segment.

The plan by CAPCOM was to merge Starcomms, MultiLinks and MTS, in a deal that was worth $210 million, but retained the Starcomms as the brand name.    CAPCOM had thought that the merger in the CDMA sector would enhance Starcomms’ position in competing strongly with operators like MTN, Globacom and Etisalat.

However, the ambition was later cut short as a result of the inability of CAPCOM to raise the required money to seal the deal and to move the new company forward.

Giving an insight into how the CAPCOM deal became a flop, the Chief Executive Officer designate, who now chairs ConSol Limited, a contact management solution company, Ademola Eleso, was quoted in an interview to have said that : “The vision of CAPCOM was to help merge the CDMA operations in the country, and make them have strong financial base, hence it tried buying and merging Starcomms, MultiLinks and MTS, but as at the time I left them, which was in December 2014, funding was an issue. The funding from both local and foreign partners was not enough to realise the ambition of CAPCOM”.

The inability of Capcom to succeed in the merger of the three CDMA operators, eventually led to the death of MTS and Starcomms and others, leaving Visafone and MultiLinks as the only surviving CDMA operators in the country, out of 13.   But, the survival of the operators also continued to be threatened by market forces, as revenue and subscribers base dwindled every month.

As at December 2015, the combined subscriber number of the two surviving CDMA operators was 2.1 million as against GSM subscriber number that was 150 million.

With this development, this acquisition was just a matter of time to manifest.

How EMIS paved way for distress in the sector: Traditionally, the story of telecom revolution in the country always begins with the liberalisation of the sector in 1999. This followed with the auction of the GSM licences, which saw giant telecommunications outfits like MTN and the then Econet wireless (now Airtel Nigeria) rolling out services.

There is also the account of later entrants, Globacom, Etisalat and probably with a few additional accounts of Starcomms, Visafone and others in the CDMA sector.

However, the account of the telecommunications sector may not be complete without those companies that went under and why they went under.

Telecoms mast: For instance, among the earliest private telecommunications operators in Nigeria soon after the deregulation of the sector, was EMIS. A telecommunications company that probably had the best marketing war chest of the entire lot at the time, dominating the airwaves and nearly every inch of space in Nigeria’s leading newspapers.

It was headquartered in an impressive edifice, painted in bright colours on Ajose Adeogun Street, in highbrow Victoria Island. During working hours, expensive cars were parked in every available space in front of the edifice. Smartly-dressed security officials mounted sentry at the gates.

Beautiful ladies in smart business suits welcomed visitors at the reception. It was the darling of many well-heeled individuals and prosperous corporate bodies who at that time, could no longer tolerate the poor services and arrogance of the state-owned national telecommunications carrier, NITEL.

Early signs of distress: Suddenly, signs began to appear that all was not well with this once promising company. The hustle and bustle at the company’s premises started to ebb.