•Prefer internal organic growth to M&A
Ben Uzor Jr
Indications are that the much anticipated consolidation in Nigeria’s telecommunications industry will not take place anytime soon as major GSM operators are increasingly shying away from mergers and acquisitions (M&A), and paying more attention to improving internal organic growth, analysts said. Most GSM operators, according to analysts, note that growth generated internally frequently result in better returns on investment (ROI) and lowers employee turnover as opposed to acquisition.
Industry analysts had earlier disclosed that a spate of hushed mergers and acquisitions moves was going on in Nigeria’s telecoms space, as the small operators struggle to acquire the critical mass necessary for survival, and bigger ones strive to acquire the small and move to positions of greater strength. Industry analysts who spoke to BusinessDay at the weekend strongly believe that by consolidating the CDMA landscape, GSM operators would be better positioned to offer more efficient data services whilst their core network would be used solely for the delivery voice services.
“GSM and CDMA are going to end up on a new technology called Long Term Evolution (LTE). In a couple of years, we would see a full scale commercial implementation of LTE. So, if you are going to have a convergence, we are gradually moving to technology neutrality or, if you like, interoperability of devices, networks, and so on. This is the time for a major GSM operator to begin to look at consolidating the CDMA sphere because it just adds value. Now, CDMA is the best technology for data service. GSM, as a basic technology, is very good for voice. GSM has to be upgraded to GPRS, EDGE to begin to do data.
CDMA in its basic form, CDMA 20001X, already does internet very well. Invariably, if you take the entire spectrum that we have on the CDMA area in Nigeria and dedicate it to data, then leave your GSM spectrum to voice only, I think you will see a lot of efficiency in that”, Aigbinode told BusinessDay in an interview. A senior executive of a GSM firm told BusinessDay at the weekend that CDMAs offer very little value to a GSM company. “For us, it is better to spend the money for acquisitions on improving internal organic growth. It is better to invest that money on rural network expansion and roll out new products and services because we can get better returns on our investment”, he added.
But another analyst argued that with the enormous bandwidth capacity coming from the Glo-1 and MainOne submarine cables, GSM operators may have no need for CDMAs to offer better data services. They further expound that the poor financial results of most CDMA operators have made CDMAs unattractive and reduced the prospects of M&A in the telecoms industry.
According to the analysts, the poor performances were a vivid manifestation of the protracted growth crisis in the CDMA market. In spite of the fact that CDMA operators pioneered the telecom revolution after the telecom sector was liberalised and deregulated in 2001, CDMA operators have failed to dominate the market. Over the years, their anecdote has been that of poor performances, low capital and weak competitiveness in the country’s GSM dominated telecoms landscape.
Starcomms, Multilinks-Telkom, Visafone and ZOOMmobile are the CDMA firms operating in Nigeria’s telecoms industry. Between January and July, CDMA operators in Nigeria lost about 1.08 million active subscribers. Subscriber information made available by the Nigerian Communications Commission (NCC) covering December 2009 to July 2010 shows that active mobile CDMA lines, which stood at 7.7 million in January 2010 dropped to a dismal 6.6 million lines by July.
Under the Ernest Ndukwe administration, the Nigerian Communications Commission (NCC) had admitted that some telecoms companies had begun to show disturbing signs of distress. The NCC disclosed that issues revolving around poor corporate governance, wrong business decisions, and the management style employed by these telcos in the economic crisis were some of the major factors responsible for the poor performances recorded by some of them.
Giving more insight into some of the reasons why CDMA networks have continued to perform poorly, Oladipupo Alabi, treasurer, Association of Licensed Telecommunications Operators of Nigeria (ALTON), a telecoms engineer, noted that the greatest problem facing the CDMA networks was funding. Alabi said: “The greatest problem confronting the CDMA companies in Nigeria is funding. The CDMAs are not as highly capitalised as the GSM operators. So, they do not have the same level of coverage or reach.
Also, the ease to change from one network to the other gives GSM operators an edge, whereas, the CDMAs have to buy handsets and subsidise them. This adds to their costs of operation. If a handset is faulty, GSM subscribers can easily buy another handset and swap their SIMs, but for CDMA subscribers, it is not like that. Most times, subscribers have to buy new handsets and re-programme their old numbers. That is one of the reasons why CDMA is not really growing”.
For more interesting articles, check out my blog, www.benedictspace.blogspot.com
No comments:
Post a Comment