Fresh mergers & acquisition deals imminent in small telcos

•Starcomms, Visafone in secret talks
Ben Uzor Jr

The Code Division Multiple Access (CDMA) segment of Nigeria’s highly competitive telecommunications market will likely witness another merger and acquisition (M&A) deal in the next twelve months, chief executive officer of Starcomms Plc, Logan Pather, disclosed yesterday.

Although, the newly appointed CEO was evasive as to who will acquire who, industry sources told Business Day yesterday that Visafone and Starcomms are in secret talks to further consolidate the CDMA segment by way of mergers and acquisition, in order to achieve scale and muster better buying power. This, according industry sources will enable them compete favorably with their GSM counterparts.

These, indeed, are not the best of times for CDMAs - also known as Private Telephone Operators (PTOs), as some of them are finding it extremely difficult to survive the stiff competition in the nation’s telecommunications industry. Analysts who spoke with Business Day yesterday, said subscriber preference for GSM technology, as well as corporate governance issues, low capitalisation and poor promotion of CDMA technology, have seen the fortunes of these CDMA operators decline over the years.

Speaking with newsmen in Lagos yesterday, Pathel said there was need for constructive measures by the CDMA networks with respect to consolidation. This, he added was necessary in light of the lopsided competition with larger GSM networks.

He also alluded to the tough operating conditions CDMA operators grapple with in their quest to provide efficient telecom services to Nigerians. According to him, CDMA networks put together control less than 10 percent of the telecoms market.

“We are very open to mergers and acquisition. It is necessary for our survival. It is necessary if we are to compete favorably in this market. There is a real possibility that within the next twelve months, the CDMA segment will witness further consolidation. Who will acquire who is another thing all together? I cannot give you that answer but I am positive that the CDMA segment will witness consolidation within the next twelve months.”

Usen Udoh, senior director, management consulting at Accenture was not surprised at the hint of another M&A deal in the CDMA segment, adding that it was inevitable going by the poor performances of CDMA operators. He said that CDMA operators must come together in the face of tough operating conditions. ‘The market points to more consolidation and it will happen”, he told Business Day yesterday. Meanwhile, Pathel is of the view that the emergence of Long Term Evolution (LTE) technology will imply that both GSM and CDMA can co-exist on this new wireless platform.

“Our technology is ready for LTE today. All our base stations are LTE ready but we need more spectrums to achieve full rollout. We are working in the background to achieve this. Our prime focus is to maintain optimum efficiency while reducing operating cost.” Pather noted that Starcomms LTE readiness will make it more attractive to investors. “When I am LTE ready, I will become an attractive company. Do you know how many investors have come into the telecoms market and failed? Those investors will want to come back given the right conditions. If there is going to be consolidation, we will have to put the business in a position where it would be valuable. The cost cutting will be very aggressive. However, consolidation will be self-induced.”

Speaking on his plan for the company as the new CEO, he stated: “My agenda for this company is survival. I have to make sure I acquire more subscribers. I must ensure that we are extremely efficient when it comes to cutting costs. We have made significant in-roads in cost reduction. Besides, what will differentiate us from other operators is customer service delivery.”