Saving CDMA Enter...CAPCOM
The Emergence of a Big, Strong CDMA Operator—CAPCOM
A wind of change is currently blowing in the Nigerian telecom landscape and that wind has rekindled the hope in the CDMA segment of the industry with the injection of $200 million into Starcomms by core investors. Hopefully, this leads to the emergence of a big and strong CDMA operator as Multi-Links and MTS are being merged with Starcomms to form one company.
For years, it remains a great issue of concern to many stakeholders in the Nigerian telecommunications industry that the Code Division Multiple Access (CDMA) segment is not thriving as it should. Indeed, many had predicted a probable extinction of the CDMA operators in the country considering the tough environment they are operating and their lack of financial muscle wrest the market from the big GSM operators.
Alas! Hope is here. Unexpectedly, it crept in like a thief in the night and with the arrival of hope brought by a group of new core investors, the Nigerian CDMA segment may never be the same again. Although for now, the closely guarded deal is still being finalised by the parties involved before it would be made public, information gathered by IT & Telecom Digest revealed that plans are at the conclusion stage for the acquisition of Starcomms Plc by a group of core investors.
But this is not just about Starcomms acquisition alone; it is about the formation of a new strong and financially buoyant CDMA operator in Nigeria. The acquisition of Starcomms is coming after the group had acquired 100 per cent shares of Multi-Links and MTS, thus having the full ownership of the two embattled CDMA operators. And now with Starcomms Acquisition, the group is set to merge the assets of Multi-Links and MTS with Starcomms, thus forming a big and strong single CDMA operator to be known as CAPCOM Limited with focus on broadband delivery at its full capacity.
The deal document obtained by the magazine shows that the arrangement has gone through the necessary process with the approval of relevant regulatory agencies. From the Securities and Exchange Commission (SEC) to the Nigerian Communications Commission (NCC) and of course the Nigerian Stock Exchange, all have given their nod to the deal. In the same vein, shareholders of Starcomms and other companies involved, including were said to have given their consent, thus giving the deal a smooth sail.
According to the deal document, Starcomms, the only listed telco in Nigeria is to be recapitalised with $ 90 million (Ninety million dollars) in addition to the injection of $110 miilion (one hundred and ten million dollars) worth of assets. Thereafter, three companies, namely; Starcomms, Multi-Links and MTS will be consolidated to become one.
Highlighting the strong competitive advantage of the new company to be formed, the investors noted in the document that “Post consolidation Starcomms will control 20Mhz of contiguous spectrum, the sweet-spot for mobile broadband services using 4G/LTE technology, which is the new global standard for 4G. The Government’s standstill on the allocation of new spectrum until 2015 will be a window of opportunity for Starcomms. With other competitors each constrained by having not more than 10Mhz of spectrum, currently congested with voice and SMS traffic, Starcomms is poised to become the market leader in mobile high speed broadband services.”
As part of the strategic growth plan post consolidation, the investors are looking at the positioning of Starcomms (Capcom) as the first pure-play national data network with emphasis on Quality of Service. The company will also enjoy a unique advantage of dense network-installed infrastructure—of towers/sites. Besides, the will also be targeting SMEs, Small office, household office and consumers segment of the market, while focusing on controlling 70 per cent of data market in Lagos.
“The combination of assets in the enlarged Starcomms under the direction of new board made up of individuals with considerable business and technical experience, benefiting from government support and strong demand for fast broadband services (70 million under 25s in Nigeria, an economy growing at 8 per cent) make this an extraordinary opportunity in a key emerging market,” the document read.
The Investment Strategy
As contained min the deal document, the strategy of the investment is “to invest $50 million in the equity of Capcom, transferable into the ordinary shares of Starcomms PLC—a 10-year established Nigerian telecoms mobile CDMA operator with spectrum in the 1900Mhz range—alongside $150 million of equity derived from Capcom’s existing shareholders.”
“To simultaneously consolidate Starcomms with two other Nigeria CDMA—Multi-Links and Cyancom, formerly MTS—creating a single national LTE Broadband operator with 20Mhz of bandwidth in the 1900Mhz frequency range to build from an existing combined 2012 base of 160,000 data consumers each paying $24- $32 per month to a base of 2, 500, 000 data customers by 2016.”
“The $200 million investment funds the acquisition of Multi-Links and MTS; recapitalises Starcomms and provides it with sufficient capital and liquidity to finance its existing creditors and working capital; and permits it to expand its existing network through the introduction of 4G/LTE technology to become a major provider
of Broadband services to Nigeria’s burgeoning consumers.”
The New Starcomms’ Owners
At the end of the consolidation, the company to be formed as Capcom, will be owned by MBC, with 53 per cent of the company’s shares; Helios Investment Partners Plc, holding 11 per cent; Asset Management Company of Nigeria (AMCON) 2 per cent; Middle East Capital Group, holding 25 per cent; Oldonyo Laro Estate, 5 per cent; Private Equity Investors, 1 per cent and Bridgehouse Capital Limited holding 3 per cent.
MBC is a Gibraltar-registered trust of 20 years standing whose portfolio companies manage over $1.25 billion in the asset management and commercial banking sectors, primarily focused in the emerging markets. Helios Investment Partners is an African-focused investment firm. It manages funds in excess of $1.7 billion in listed investments and leveraged acquisitions across Africa.
Middle East Capital Group is a leasing financial institution specialising in investment and private banking which acts for a number of private clients and institutions from the Middle East. On the other hand, Oldonyo is a private family office based in Nairobi, Kenya, with over 40 years experience of investing in Africa and emerging markets in a variety of industries. Bridgehouse Capital is also described as a private family office based in Isle of Man, UK, with $1.5 billion assets spread across telecoms and IT infrastructures and services.
A Re-constituted Board of Directors for Starcomms
As a fall out of the new acquisition, the many known faces in the old Starcomms Plc board and management may no longer be seen. As presented in the deal document, a new board of directors has been constituted to manage the affairs of the new company.
Stefan Allesch-Taylor is being proposed as the Chairman. He is an experienced investor, Chief executive/Chairman and co-founder of companies in the property, industrial , retail, technology and financial services sectors. Over the last ten years, he has created substantial value in a number of companies, both listed and privately owned, where he has been appointed to represent the interests of significant shareholders in seeking strategic changes in those businesses. Since 1993, he has been an advisor to a number of substantial international trusts and business leaders.
For the post of Deputy Chairman, the investors have put forward the name of Dr. James Dodd, who is currently the MD of Anthem Corporate Finance, an independent financial advisory company he co-founded in 2002. From 1999 to 2006, Dodd was Chairman of ETT, an international data networking company . Between 1989 and 1999, he was head of Telecommunications research at Dresdner Kleinwort Benson.
Mr Demola Eleso, the interim Chief Executive Officer of Multi-Links Nigeria, is expected to be the Managing Director. From September 2008 to December 2009, he was Head of Technology for Vodafone Qatar. From 2001 to 2005, he was the Chief Technical Officer of MTN Nigeris, the country’s largest operator. From 1995-2000, he was Director of Engineering for Vodafone Spain.
To be in charge of Operations and Stgrategy is Nicholas Topham, who is being presented as the Director of Operations and Strategy. He has been a strategic business advisor to telco majors in the ICT sector including: Telestra, BT, Teleglobe/Tata, TeleCity, Go Plc, Globetel, and Global Switch. He was CEO of Nuetele Communications, a start-up fibre NGN service provider of VoIP, Internet & IPTV and Data Center Services and founder and CEO of Equitel Communications, an international B2B communications company. He was a director of the Global Communications and Entertainment practice of Arthur Anderson (now Deloitte), prior to which he was Head of Strategy & Business Department for BT.
Dr. Francesco de Leo, is being presented as a Non-Executive Director in the new Starcomms. He is currently a member of Capgemini’s Telco, Media & Entertainment International Advisory Board and also of the Advisory Board of SIMTONE, a leading provider of cloud computing solutions. From 2005 to date, he was Director for Business Development & International Affairs at WIND, Italy’s third largest mobile carrier and second largest fixed line telecom operator. Prior to that, and following its privatisation, he was appointed Managing Director of Telecom Italia, serving also as Chairman of Stet International and Stream (Digital TV Platform).
Also on the board as Non-Executive Director, is Babtunde Soyoye, who is the Managing director and Co-Founder of Helios Investment Partners. Soyoye is also a Manager of Business Development at Singapore Telecom International and has been a Director of Equity Bank Limited since December 2007, serving as a Board member.
The Prospects, Challenges of the New Merger
The acquisition/ merger of MTS, Multi-Links and Starcomms, no doubt, raises hope for the CDMA market. This again brings to reality what many stakeholders have been canvassing for as a way out for the troubled operators in the sector. However, while savouring the beauty and the strength of three companies combined, one is reminded of similar mergers and acquisitions that have taken place in the industry in the past.
Considering the fact that the investors are injecting cash liquidity of up to US$90 million and assets worth US$ 110, the future looks brighter for the new company to be formed. In a market segment, where fund has been a major constraint against expansion and competition, this may be this may game changer.
Besides, the combination of spectrum allocation of the three companies will also be another competitive advantage, considering the fact that other competitotrs are not having more the 10Mhz. The Post consolidation Starcomms is expected to control 20Mhz of contiguous spectrum. Interestingly, the Nigerian Communications Commission has foreclosed issuing any new spectrum until 2015, which means that the new company will enjoy the spectrum edge for some time. The big spectrum at the disposal of the new company is also expected to drive its core business of high speed mobile broadband services.
Be that as it may, for the fact that several other factors affecting the CDMA market and the telecommunications industry in general have not been addressed. An avid follower of the telecom industry will quickly point out that the problem of the CDMA operators started from their inability to expand their coverage at the initial stage of their businesses. With unified license issued to GSM operators at their point of entry in 2001, they aggressively rolled out across the country, thus boxing the pioneer CDMA operators in one corner. And since then, no amount of expansion, no amount of investment has given the CDMA operators the kind of leverages that GSM operators have.
Another major challenge facing the segment and which the post consolidation Starcomms will still have to face is the cost of deploying bandwidth and data from the undersea cables to the areas of need in Nigeria, which is quite expensive. As it stands, there is no other way around this except if the government put the necessary backbone infrastructure in place. In addition to these is the age-long issue of unfavourable interconnect rate, which the operators have claimed favoured the GSM operators at the expense of their CDMA counterparts. Until this is addressed again by the regulator, the problem in the segment may be far from over.
Another critical factor, which also poses a challenge, is the existing stereotype between usage of CDMA and GSM in the country. An average Nigeria will be proud to associate himself or herself to one particular GSM operator, whereas, same cannot be said of CDMA. For the new operator to win the heart of many Nigerians and change this perception, lots of re-branding would have to be done.
Obviously, with all these challenges, the newly emerging CDMA operators will still have to swim in the same old turbulent water. However, how far the huge fund investment can go in changing the CDMA landscape will depend on the management dexterity and corporate strategy of the new board of directors of the company.
The Visafone Experience
The current scenario playing itself in the merger of Multi-Links and MTS with Starcomms is similar to what produced Visafone Communications of today. Visafone was born out of the strategic acquisition of 3 CDMA mobile network operators that had been in operation for up to 8 years with 30,000 subscribers and coverage in different parts of Nigeria.
In 2007, Mr Jim Ovia, former Zenith Bank Chief Executive Officer, led a group of promoters the acquisition of Independent Telephone Network (ITN), Bourdex Telecoms and Cell Communications Limited.
The acquisition was at a cost of N3 billion and the new company that emerged was Visafone. Besides getting the Nigerian Communications Commission (NCC) nod for Unified Access Service Licence (UASL) for about N350million, it also injected about N1billion into the company for the new equipment to change the legacy equipment originally employed by the former network operators. The trio of Chief Adebayo Akande (ITN), Chief David Ogbah Onuoha (Bourdex) and Chief Patrick Chidolue (Cellcom) had to let go of their companies for to Ovia.
After its incorporation in June 20, 2007, Visafone positioned itself to offer mobile, fixed and any other telecommunications service to its subscribers. Visafone, in the intervening yawn of time, amassed over 3 million subscribers after 16 months of operation and crossed the 1million subscriber mark in just 6 months from its launch in February 2008. Thus, recording an unprecedented industry milestone as the fastest growing mobile company in Nigeria since the earliest it took a Nigerian based GSM company to hit 1 million was 9 months.
Visafone has displayed considerable leadership in the mobile sub-sector of the Nigerian telecoms marketing its four years of operations. Aside crossing the 1million subscriber mark in 6 months, amassing 2.5m in 10 months and extending its coverage to 20 states and over 160 cities and towns in Nigeria, the company has been honored with a slew of industry and consumer awards.
Some of the awards, which go to validate the company’s remarkable strides and unprecedented achievements include: best new Entrant at the NITTA awards 2008; Best Emerging Brand at the City people awards 2008, Best Brand of the Year at the Telecom News Awards 2008; Most Youth Friendly Telecoms Company at the National Youth awards 2008, Best Brand at the COBRAA awards 2008 as well as best ICT Company of the Year at the Thisday Awards 2008 amongst others.
In order to achieve the company’s objectives, the management team formulated innovative and winning strategies encompassing a handset strategy, a marketing strategy, an operational strategy, a financial strategy and a HR strategy. Adopting a thought leadership approach, the Company strives to set itself apart from the pack by creating a unique value proposition that will prove attractive to all stakeholders; from the customer to the lender and shareholder through to the employee.
However, as much as these strategies and the initial aggressive roll out has helped the company attain some levels, Visafone as the one of the surviving and strongest CDMA operators in the country today, cannot say all is rosy in the business. In fact, in the heat of daunting challenges facing the CDMA segment, the company had unequivocally blamed the Nigerian government for the woes of the CDMA operators.
The bottom line is that Visafone that came strong and sturdy four years ago with heavy financial backing is also feeling the heat of the industry challenges now. This again, is a clear signal for the emerging company out of Starcomms, Multi-Links and MTS that it may not be all rosy as anticipated.
Current State of the Nigerian CDMA Market
Nigerian CDMA operators in the past two years have carried few expansions of their national coverage plans. Beyond their present locations, the operators have added few new cities, towns and villages on their footprints as they battle to stay afloat in their business.
While GSM operators are working hard to drop new base transceiver stations (BTS) and towers in new locales, their counterparts in the CDMA business are instead crying foul of the hash market conditions they face.
They say over taxation from all levels of government, delay in getting Right of Way permits from the ministries and parastatals of different governments, unfavourable interconnect exchange rates, unstable foreign exchange rate, high overhead costs like the skyrocketing price of diesel to power their base stations, incessant demands and harassments from local communities and areas boys are driving up the cost of doing business in the sector.
CDMA operators cannot compete on the same financial level with GSM operators. They don’t have equal access to funds. In fact, most of them don’t have access to international financiers. Starcomms few years ago got some capital injection from international joint venture capitalists. That financing energised the company and it was able to spread its footprints across several cities and towns in Nigeria like wildfire. When that financing matured, the JV divested.
After that Starcomms is presently focused on ensuring quality on its network and expanding its data communications market. It is one of the best internet service providers in the land with high quality internet service. It has not taken its footprint like before to new communities as it still struggle to recover from the dip its share price took at the Nigerian Stock Exchange following the crash that occurred at the capital market in 2008-2009.
ZOOMobile on the other hand is one of the second generation CDMA operators. Since the past two years, it has been trying to find its bearing. Since late 2010, the operator previously known as Reltel has been seeking new investors from abroad to acquire.
A number of due diligences has been conducted and acquisition talks keep resounding. ZOOMmobile owned by businessman turned politician, Chief Annie Okonkwo, after restructuring its debts with some banks, it changed its brand name and logo to the present one, and this helped to push up subscriber figures and increased its market hold of the internet data services challenging traditional players like Starcomms, MTN, and Multi-Links.
Visafone, promoted by Mr. Jim Ovia, founder of Zenith Bank Plc, an avid technology investor and ICT icon, is currently the leading CDMA operator chart in the country. Visafone came into the market with a new UASL and went ahead to acquire Cellcom, ITN and Bourdex Telecom in the South East.
This gave it a strong foothold in the market going forward. After the fiery pace with which Visafone entered the market in 2007 on the back of a $200 million syndicated loan from Nigerian 12 banks, the CDMA operator has virtually covered all the states but yet to blanket all the rural communities in the country. Visafone is one of the strongest internet services in the land.
For Multi-Links Telkom, it has been riding in turbulent weather since it was acquired by Telkom of South Africa in 2007. Multi-Links was unable to spread due to cash-crunch but the entry of Telkom energised it, leading to as much as 1.7 million subscribers in 2009.
Multi-Links Telkom has waxed strong with its internet data segment but has found it tough to be profitable on the voice telephony segment. Loss making has been difficult to mitigate and a number of management changes with about four chief executive officers seconded from South Africa hasn’t been able to reverse the bad situation.
In November 2010, the owners of the Nigerian investment said they would divest from CDMA and concentrate on their bandwidth market where it has over 400 kilometres of fibre optic cable broadband network spread across the country servicing big corporates and multinationals.
Then Acting Chief Executive Officer of Multi-Links Telkom, Vincent Raseroka, said the decision to exit the market was purely based on business realities. “It is strategically, financially and commercially challenging for us to continue to do business in this segment.”
Despite low tariffs aimed at enticing and keeping subscribers to CDMA networks, these operators have struggled with churn out on their networks and sometimes poor customer service as GSM operators thin out their customer base with irresistible offers and gifts.
Inability to access free flowing funding from banks and international financial markets due to their small size and technology use has been their greatest handicap. This can be seen in their share of Nigeria’s mobile market where they only control 4.2 per cent of the market as the end of 2011.
History of M&As in Nigerian CDMA Market
While the term Mergers and Acquisitions (M&A) became more pronounced in the consolidation era of the Nigerian banking system in 2005, it is not actually new in the Nigerian telecommunications sector. It gained traction with the revolution that has taken place in the sector in the past ten years.
CDMA in Nigeria has had a more chequered history, with its lack of national coverage and comprehensive geographical coverage weighing against it. A number of mergers and acquisitions have taken place. Some were on the verge of being cemented and failed to materialise while some were only touted and never made it to the roundtable.
In 2003 there were 23 licensed telecom operators in the country, but in 2011 that number had shrunk to 16. Currently there are four CDMA mobile operators in Nigeria: Visafone, Multilinks, Starcomms and ZoomMobile.
The list of operators doing fixed/fixed mobile telephony includes Starcomms, Visafone, Multi-Links, ZOOMmobile, Intercellular, VGC/MTN, MTS 1st Wireless, 21st Century Technologies, Disc Communications, WiTel, Onet (Odua Telecom) Rainbownet, Monarch Communications, XS Broadband, Webcom and Nitel. The mergers and acquisitions almost earned about $2billion for the CDMA segment but some of them failed to transform the network.
Signs that the CDMA segment was heading for consolidation began to manifest early in 2007 with the acquisition of Independent Telephone Network (ITN), Bourdex Telecoms and Cell Communications Limited by a group of promoters led by former Zenith Bank Chief Executive Officer, Mr. Jim Ovia and African Petroleum (AP) Chairman, Mr. Femi Otedola.
The acquisition was at a cost of N3 billion and the new company that emerged was Visafone. Besides getting the Nigerian Communications Commission (NCC) nod for Unified Access Service Licence (UASL) for about N350million, it also injected about N1billion into the company for the new equipment to change the legacy equipment originally employed by the former network operators.
The trio of Chief Adebayo Akande (ITN), Chief David Ogbah Onuoha (Bourdex) and Chief Patrick Chidolue (Cellcom) let go their companies for Ovia and Otedola. The fate of these companies also became the lot of Prest Cable and Telecom Limited Prestel, originally promoted by Chief Tony Prest. Prestel was acquired by Oceanic Bank early in the 2008 thus joining the growing list of acquired or merged companies.
Intercellular Nigeria, a pioneer company in the CDMA arena was also swallowed up by Sudatel of Sudan. Sudatel was said to have paid $60m to acquire stakes in Intercellular, though acquisition is still shrouded in boardroom mystery as Intercellular never bounced back after the so called acquisition.
While some deals were done quietly, like Multilinks' acquisition by Telkom of South Africa for $750million, Intercellular's acquisition by Sudan Telecommunication (Sudatel) for $60 million, the acquisition of Prest Cable and Telecom Limited (Prestel) by Oceanic for an undisclosed amount and MTN's acquisition of VGC Communications for $70million, it made the industry believe that more mergers or acquisitions may take place.
The biggest acquisition to date was that of Multilinks Telecommunications Limited. The company that was originally promoted by two Indian friends, Mr. C.K. Ramani and P.A. Dave and some Nigerians including Chief Bisi Omidiran and Chief Bode George. They opted to sell about 75 per cent equity to Telkom South Africa at a cost of $750m. In 2008, Multilinks Telkom had a subscriber base of 1.9million, Visafone about 1.6million, ZoomMobile, 1.5m while Starcomms had about 2.5 million.
The late Miko Rwayitare, a Rwandan businessman who later naturalised as a South African, originally promoted GVT/Telecel and had an eye for Intercellular before he pitched his tent with Prestel. He had 60 per cent shares in Prestel prior to his death.
The foundation set up by Miko Rwayitare asked to withdraw from the deal thus paving the way for Prest to sell to Oceanic Bank.
RainbowNet, MTS, First Wireless, Disc Communications, Startech Connections, ONET, Webcom, XS Broadband, NITEL have not sufficiently grown their networks in the last one year. Onet, owned by the Odua group was speculated to be on the verge of being taken over by an American firm but it is yet to materialise till date.
MTS market share as at December 31, 2008 was 2.73 per cent and by June 2009, it had dropped to below one per cent. Disc Communications, Startech, RainbowNet, XsBroadband's market shares were also below one per cent.
By the Nigerian Communications Commission (NCC) assessment, Visafone, Multi-Links ZoomMobile and Starcomms are doing well as CDMA and Unified Access Licence operators. By the NCC's assessment, 21st Century Technologies and VGC Communications are doing well in the optic fibre connectivity. They are both providing services through deployment of copper cable which is believed to be the best for internet connection and voice services.
Despite the mergers and acquisitions in the Nigerian CDMA segment, Prestel network has not taken off after it new owner, Oceanic Bank was engulfed in the banking crisis that hit the sector in 2009. Intercellular, ZOOMobile and Multi-Links are still in search of reputable investors. A successful acquisition that took place in December 2010 was the 3G licence of Alheri Engineering acquired by Etisalat. Alheri, a subsidiary of Dangote Group won the licence in 2007 but never deployed a network.
There are different kinds of telecom operators with licences. In fact, there are four categories of them. The first category are those who have licence and are operational, the second are those who have licence and are not operational, the third category are those who have licence but do not have network, while the fourth category are those that have licence, were once operational, but no longer in operation.
Some experts believed that to address the problem facing operators, there is need to allow natural market forces to determine their survival while some are of the opinion that there is some need for guided regulation to avoid an implosion of the CDMA segment.
Mr. Maher Qubain, former Chief Executive Officer of Starcomms, in 2010 called for proper government regulatory policies, as the best measure to tame proliferation of telecom operators in the country. He called on government to enforce merger and acquisition among telecom operators, especially with operators that have licences and could not rollout their operations.
If done, it would further strengthen the entire networks, he added. India, with three times the size of Nigeria's population has about four operators managing the entire country's network, and wondered why Nigeria with smaller population compared to China, would be interested in multiple operators.
Engr. Gbenga Adebayo, President of the Association of Licenced Telephone Operators of Nigeria (ALTON) however said there is need to allow market forces to determine the growth of the market, but urged government to probe cases where operators apply for licence, get such licence and refused to rollout for reasons best known to them.
Howver, Engineer Titi Omo-Ettu, President of the Association of Telecom Companies of Nigeria (ATCON), said it would not be in the interest of the telecom industry to enforce policies of merger and acquisition, and suggested that natural market force be allowed to drive the market.
Pioneers in the CDMA Market in Nigeria
Multi-Links Telecommunications Limited has been at the forefront of the telecommunications revolution that has swept across Nigeria in the last few years, having been the first PTO to be licensed in 1996. The Unified license was awarded to Multi-Links in 2006 which permits Multi-Links to provide the full range of telecommunications services over a broad range of technologies. Telkom SA, the largest integrated communications operator on the African continent, acquired 75 per cent of Multi-Links Telecommunications Limited in May 2007, and purchased the remaining 25 per cent in December 2008.
The company offers an exciting bouquet of superior telecommunication services that encompasses the very best of voice, high speed data, internet and other innovative value added services to individual subscribers while also providing unequalled business solutions to both corporate bodies and small & medium scale enterprises in Nigeria.
Communications Infrastructure was a division of constructions giant, H.F.P. Engineering Limited. The exchange provided services exclusively to residents of the VGC, a model city on the outskirts of Lagos. Siemens laid a full swing fibre optic cable from Nitel’s Saka Tinubu interconnection point to the Victoria Garden City (VGC) on behalf of Communications Infrastructure whose telephone exchange was located at VGC, Ajah, near Lekki Peninsula. Its services were extended to the environs including Ajah and part of the Lekki Pennisula phases I and II. VGC Communication was later in 2007 acquired by MTN Nigeria for $65 million.
Intercellular Nigeria Ltd., founded by Mallam Bashir el-Rufai and some key investors flagged-off the early telecom revolution with the entrance of their fixed mobile telephony. It offers cellular and fixed wireless telephone services. It also operates as an Internet service provider. The company was founded in 1998 and is based in Lagos, Nigeria. Intercellular Nigeria Ltd. operates as a subsidiary of Sudan Telecommunication Co. Ltd.
Mobitel commenced operations in 1998 with a national license to provide telecom services in the 2.0/2.2GHz band and a regional licence to operate in Delta State Nigeria in the 3.5GHz band. Mobitel provided both wireline and Wireless Local Loop (WLL) solution and was considered a pioneer in the Nigerian market.
The company underwent a challenging period in 2005 following the death of its CEO, and ultimately ceased operations in 2006 with a subscriber base of nearly 20,000. Mobitel was acquired 100 per cent in June 2008 by a new investor consortium led by Omni-Ventures Limited. Mobitel was awarded 2.3GHz frequency for national coverage on the 22nd of March 2010 after having won the license in a bid process that took place in May 2009. Mobitel Nigeria runs high-speed broadband service based on WiMAX technology.
The company's initial roll-out plan was derailed by controversies surrounding its acquisition of spectrum in the 2.3GHz band from the Nigerian Communications Commission (NCC). Having got its network deployment plans back on track, Mobitel is keen to take advantage of the huge supply gap in Nigeria's high-speed internet market.
Independent Telephone Network Limited (ITN) started operation in 1998 with a network capacity for 10,000 subscribers to cover the Ikeja market. ITN was promoted by Chief Adebayo Akande and other investors. ITN and Cell Communications Nigeria Ltd (Cellcom) were later acquired alongside Bourdex Telecom by Visafone Nigeria in 2006.
How IT& Telecom Digest Reported the CDMA Dilemma
Who is Killing CDMA Operators in Nigeria?
For years now, the cry continues to ring out loud. They say it anywhere and to whoever cares to listen that all is not well them, that is the CDMA operators in Nigeria. Of course many causalities have been recorded in the struggle and for the surviving ones, the struggle continues. But then, who is killing CDMA operators in Nigeria?
The Battle for Survival
They came, they saw, nearly conquered then another conqueror came and snatched the glory from them. And since then, it has been a story of struggle for existence. Many words have been used to describe the ordeal of Code Division Multiple Access (CDMA) operators in Nigeria in an attempt to empathise with the players in this critical segment of the Nigerian telecommunications industry after the entry of GSM operators. In fact, it has been a reversal of fortune for the CDMA operators, who were already gaining ground in Nigeria before the advent of GSM in 2001.
Yet, the situation has kept growing from bad to worse, while many are already foreseeing a worst scenario. From about ten operators in the early years of mobile telecommunications in the country, only four managed to survive while two of these are still between live and death. Day after day, the number of subscribers in this segment keeps shrinking while the operators battle with dwindling revenue even as they go out of their wits to introduce new innovative products and enhance their marketing strategies.
The CDMA situation is in sharp contrast to what obtains in the GSM segment, where even the latest entrant can boast of subscribers well above the total subscriber base of the four CDMA operators. Etisalat, which entered the Nigerian market in less than four years ago to become the fourth GSM operator in the country is today said to be having about 10 million subscribers, whereas the total active lines for the four CDMA operators as at November 2011, is 4.7 million, according to the statistics recently released by the Nigerian Communications Commission.
From total active lines of 95 million active lines as at November 2011, GSM lines were put at 89.8 million while CDMA had only 4.7 million active lines. This figure was against the 5.5 million they had in the same period of 2010, meaning that the declining fortune of CDMA operators has continued unabated. CDMA networks are also losing money as the drop in subscribers represents a loss of an estimated N10bn in revenues that would have accrued to the networks during the period under review. This figure was calculated using the Average Revenue Per User ARPU which is pegged at N1000 in Nigeria by industry experts.
Suffice it to say that the death of pioneer CDMA operators like Intercellular, EMIS, ITN among others, did not really spark the concern that there were serious challenges in the sector in late 2010 when the core investor in Multi-Links, South African Telkom, decided to pull out from the CDMA business citing unfavourable business realities. In fact, in a survey conducted in 2008, it was reported that there was a growing demand for CDMA despite the domination of the market by GSM technology. Affordability of CDMA phones and clarity of communication when compared with GSM were cited for this rising demand.
However, the reality was laid bare with the Multi-Links’ case. In an announcement that saw the exit of Telkom from Nigerian market, Multi-Links Telkom Nigeria's Acting Chief Executive Officer, Vincent Raseroka, had said the decision to exit the market was purely based on business realities.
"It is strategically, financially and commercially challenging for us to continue to do business in this segment. With a current market share of 2.6 per cent in a market dominated by the GSM technology, it has become imperative that we explore other options and chart a new path to growth and profitability for ourselves as a business by utilizing our fixed infrastructure here in Nigeria ,"
He said despite the comprehensive turnaround programme of the company in March this year, the CDMA business in Nigeria is still facing stiff challenges in a highly competitive environment, requiring scale to successfully compete. According to him, despite recent intervention, Multi-Links operating revenue decreased by 1.7 per cent.
According to him, the subscriptions and connections revenue of the company decreased 18.2 per cent due to termination of access fees as a result of increased competition. Traffic revenue decreased 24.6 per cent mainly due to decrease in traffic volumes and higher churn rates.
And after Multi-Links was left in the cold, it became the unattractive bride, even for local investors, because the so called big operators in the sector, Starcomms and Visafone are also groaning in pain owing to the unfavourable business climate. Industry watchers are also waiting to see the outcome of the recent moves to restore the glory of Multi-Links with the acquisition by Helios Investment Partners (HIP). Will this result in a magical turnaround for the company? Only time will tell.
What Went Wrong
For the operators, a great limitation has been put on their business from the earliest days with the Nigerian government’s licensing policy, which initially gave the CDMA operators regional-based licences. This, they say, had been a cog in the wheel of their spread, whereas their GSM counterparts upon entry in 2001 were issued open license to operate anywhere across the country.
According to the Deputy General Manager, Marketing and Strategy, Visafone, Mr. Cliford Onyeike, the harsh licensing policy of the government made it impossible for the earliest CDMA operators to have a good spread in the country. And this gave the GSM operators ample opportunity to overtake them upon their arrival.
“It is the CDMAs, which took the first step to empower the man on the street and not Global System for Mobile Communications (GSM), but When CDMA licences were given by the Nigerian Communications Commission, they were regional licences. An operator given a licence to cover Enugu only covered Enugu specifically. It was in 2007 when universal licences were given that CDMAs were able to broaden their coverage. At that time, GSM had gained ground. We lost about eight years of advancement; GSM prevailed and ruled the luxury market,” Onyeike had lamented.
Some telecom experts have also blamed the challenges on the exclusivity rights given to GSM operators by the NCC, which allowed them to operate for five years before the regulator could licence other operators, some blamed it on fierce and unhealthy competition between GSM and CDMA operators, which largely affected their interconnect rate agreement. Another angle was the three year pioneer status granted the GSM operators which exempted them from paying certain taxes and levies for importation of telecom equipment into the country.
But for the Managing Director of Starcomms Plc, Mr Logan Pather, the failure of the CDMA operators to roll out aggressively in the beginning like the GSM operators is perhaps the major impediment to the subsector’s growth. The competitive environment and the difficult terrain in the country made it impossible for co-location in the beginning. Hence operators have to build, own and maintain their infrastructure across the country.
Obviously, one of the major factors working against the Nigerian CDMA operators is their network spread. Most of them were located in few cities like Lagos and Abuja and for them to extend their services to other cities and towns; they needed to go back to the regulator for additional spectrum.
Also, the CDMA operators did not have national roaming and it was not until 2006 when Unified Access Service Licence (UASL) came in that they were able to expand their services more whereas their counterparts in GSM service from day one were roaming nationally without any inhibitions. Any CDMA operator that wanted to move to a new location would have to go to the NCC with money for new spectrum. The guidelines on their licensing were a bottleneck. It hampered their spread.
A good watcher of Nigerian telecommunications could conveniently look at the business model of an average Nigerian CDMA operator and tell why they could not compete on the same pedestal with GSM service providers. Almost all the CDMA operators were local promoters with no international investors and technical partners involved in the operation and management of their service.
All they did was get international vendors to come and deploy the network and look for vendors that could offer lower cost of equipment. The founders of the networks were mostly former NITEL staff who brought in retired military officers with deep pockets and other businessmen interested in exploring an uncharted territory.
This was a serious handicap. It caused serious mistrust as boardroom fights over who should control the operations and funds available for the network were a common thing with companies like MTS First Wireless, Mobitel and Independent Telephone Network (ITN) consumed by the boardroom infighting.
The absence of foreign investments also contributed to the challenges CDMA operators had to face. While GSM service providers like MTN, Airtel formerly (Econet), Globacom and Etisalat easily attracted vendor equipment financing and support from foreign banks and international financial power brokers because of their size and international connections, however, the business model, limited network capacity and technology utilisation of CDMA counted against them.
As Technology Edge Fails to Lift CDMA
Experts have described the underlying technology in CDMA as one of the best, given its inherent quality in terms of data speed and capacity. Unfortunately, this has not translated to the operators having the upper hand against their GSM counterparts in Nigeria. Rather, the reverse has been the case.
CDMA is a digital wireless technology that uses spread spectrum techniques. Unlike competing systems, such as GSM, CDMA does not assign a specific frequency channel or time slot to each user but instead individual conversations are encoded with a pseudo-random digital sequence. By assigning unique codes to each communication to differentiate it from others in the same spectrum, CDMA allows many users to occupy the same space time and frequency allocations in a given band/space, thereby allowing many more people to share the airwaves simultaneously than do alternative technologies.
It is also believed that CDMA technology is more cost effective for operators as the CDMA capacity advantage leads to lower tariffs. Greater spectral efficiency leads to greater capacity where greater call volume and greater data throughput can lead to reduced tariffs for voice and data services.
In the words of the Managing Director, Visafone Communications, Mr. Sailesh Iyer, “in CDMA we have three times more capacity than GSM; this is the biggest advantage that we have. A spectrum in a single sector gives me three times more in return of the base of customers that I can manage vis-à-vis GSM.”
Aside from the technology leeway, CDMA operators here in Nigeria, came with the advantages of offering lower on-net and off-net call rates than GSM operators. In addition, the fact that they have considerably fewer subscribers reduces the strain on their networks; resulting in better service quality than the average GSM operator. The CDMA market segment also benefitted from the introduction of cheap and partly subsidised mobile handsets that appealed to the low end of the market. Visafone for instance, launched its operation with handsets that were selling for prices as low as N2,000.00 in 2008; handsets that ended up in the hands of many first time users of mobile phones.
But then, these may not just be enough for the CDMA operators to be where they want to be. Several other militating factors as mentioned earlier appeared to be strangling the operators even with the inherent advantages of their technology.
Suffering in Silence?
While the plights of the CDMA, both internally and externally induced, are in the public domain and of course generating discussion at several fora, it was shocking to know that the operators in the segment have not deemed it fit to file official complaint or give situation reports to the regulator, as the NCC claimed.
For the regulator, up until this time, CDMA operators have not made any official claim of any challenge that might warrant its intervention and such, whatever is being said concerning the situation of the CDMA operators remained unofficial and can not be acted upon. Addressing newsmen recently in Lagos, the NCC Executive Vcice Chairman, Dr. Eugene Juwah, who was asked about what the regulator would be doing to rescue the CDMA operators, said the commission only read about the issues in the papers like many other people and it could not act on such.
“There has no t been official request from the CDMA community on any issue except issue that I read in papers as some of you read in papers. I have always told them that if the CDMA community comes together, we would look at it and if we think that the case they have is genuine then we would forward it to the Federal Executive Council for consideration,” the EVC had said.
This happened to be the second time the regulator would be throwing the challenge at the operators to make their case official. Juwah had also noted unequivocally noted at a forum last year that none of the operators had made a substantive case to the regulator that they needed help. In his words, “I must say this, it is not in our right to provide funding, it is only government that can do that. But if there are logical and substantiated cases, which are official, the government would come in.”
Although many have also accused the regulator of favouring the GSM operators at the expense of the CDMA, Juwah debunked this saying that the regulator does not give preferential treatment to either party. “We are regulator and we provide a level-playing ground for al the players,” the NCC Executive Vice Chairman had said.
This supposed ‘suffering in silence’ appeared to have exonerated the regulator from any blame, though it is being fingered as the root cause of the problem given its slanted licensing policy at the early days of telecommunications, which many see as unfavourable to the CDMA operators. But, it should be noted that if the NCC, feign ignorance of the whole saga or is still waiting for official filling as it claimed, many may be right to have accused it of favouritism or insensitivity as the case may be.
Again, a recent admission by the Honourable Minister of Communications Technology, Omobola Johnson, whose Ministry oversees the NCC, the regulator’s claim may not be tenable. Johnson had at a recent forum expressed concern about the plights of CDMA operators in the country, noting that they are presently facing tough time, with the gap between them and their GSM counterparts getting wider daily.
The minister said the ministry had carried out some investigations to determine the cause of the problems the CDMA operators are facing in the country. She said, “from the investigation conducted, we discovered that their greatest challenge arose from the cost of carrying their traffic to the point of destination. The cost of deploying bandwidth and data from the undersea cables to the areas of need in Nigeria is quite expensive and this has brought a lot of strains on their interconnect charges from other operator.”
The minister informed that, presently, the ministry is disturbed and looking for ways to bring this cost down. According to her, the CDMA operations in Nigeria is plagued by myriads of challenges, stressing that, the ministry is getting more clarity on how to handle the situation.
“In December 2011, we identified their problem. We are presently working with them so that we can resolve their challenges. Most of them are indigenous players, there must be a level playing ground for all the players in the sector for them to succeed,” she explained.
With this explanation from the Communications Technology Minister, there may be a silver lining behind the cloud for the CDMA operators. However, how far the resolutions being worked upon would take the operators and to what extent it would alleviate their sufferings are questions of time.
Stakeholders Chart the Way Forward
As it stands, the future looks bleak for CDMA operators in the country. But despite the gloomy outlook, many have put forward several theories to channel the way out for the operators. While some see the major problem confronting the CDMAs as shortage of fund, hence the need for a bail out by the government, many are quick to advise the operators to change their strategies and of course get out of their comfort zones to boost their subscriber base.
For the the Chairman of the Association of Licensed Telecommunications Operators of Nigeria, Mr. Gbenga Adebayo, the major problem bedevilling the CDMA networks in Nigeria was low access to capital, which, he believed, can only be solved by the government by salvage the ‘pioneer operators’ from imminent extinction. The ALTON Chairman, who decried the huge decline in CDMA subscriber base had said a bail-out option is inevitable for the CDMA segment. The bailout, he said, would enable major operators such Starcomms, Multi-Links, ZOOMmobile and Visafone to deploy better infrastructure.
While decrying what he described as lopsided interconnectivity rates, which compel CDMA operators, regarded as smaller operators, to pay higher interconnect fee to the GSM operators, classified as bigger operators, the immediate Chief Executive Officer of Starcomms, Mr. Maher Qubain, urged the regulator to look into the issue of interconnect rate and unused spectrums to allow for proper development of the industry and effective deployment of different technologies to serve Nigeria better.
He said, currently, there is a lot of incongruence in the interconnect rate even as he notes that Nigeria charges the highest percentage of interconnect rate in the world, pointing out that GSM networks are growing in number because they have scale and they are favoured by the interconnect rate allowed in the industry.
However, some industry analysts are canvassing a change of strategy by the CDMA operators, noting that they may not succeed by marketing to the mass market but by identifying and targeting specific segment of the market.
They pointed out that the CDMAs, given their scale and resources, cannot take on the GSM companies head-on in getting the mass market and especially in terms of adverts and promotions, hence the need to focus on specific segments to meet their peculiar needs.
But for the Chief executive Officer, Open Media, telecoms consulting firm, and and the immediate past EVC of NCC, Dr. Ernest Ndukwe, the most important thing is for the CDMA networks to come together in the face of the operating conditions and play as a dominant player. According to him, with that, they can achieve scale and muster greater buying power.
This again brought to fore the issue of merger and acquisitions which have been attempted by some of the operators. Obviously, Major CDMA operators like Starcomms, Visafone, ZoomMobile and the just- resuscitated MultiLinks are believed to have engaged in some forms of discussion or the other on how to cooperate to move the segment forward. The Chief Executive Officer of Starcomms, Logan Pather, had clearly maintained this position with the believe that the possible merger will make the CDMA operators compete favourably with their GSM counterparts, increase subscriber base and also to grow their networks through expansion in telecom infrastructure to the nooks and crannies of the country.
Apparently, the hard way appears to be the only way for the operators in the CDMA segment of the Nigerian telecommunications industry. While it is not too late for them to change strategy and create a niche market for themselves, the idea of merger may be the best option for them to pull enough muscle to compete favourably with their GSM counterparts in the country.
The Sour Side of CDMA in Nigeria
History of the Nigerian telecommunications industry can never be completed without mentioning Multi-Links for its pioneering role in mobile telephony as the first Private Telephone Operator (PTO) to be licensed in 1996. The company was Incorporated in Nigeria in 1994 as a private limited liability company to provide telecommunication services. On 6th November 2006, the Sector Regulator, the Nigerian Communications Commission (“NCC”) issued Multi-Links a Unified Access Service Licence (“UASL”) with an initial 10 years validity with an option to renew for a further 5 years and enabling it further expand its services and provide a wide ranging bouquet of services covering Digital mobile & fixed telephony, ISP, VAS and payphone, Full international gateway and National long distance services
In May 2007, Telkom South Africa, a large African integrated communications company extended its footprint to West Africa through the acquisition of a 75 per cent majority stake in Multi-Links. Telkom increased its ownership interest in Multi-Links to 100 per cent in January 2009, extending its total acquisition costs to $400 million. This obviously marked the beginning of trouble for the CDMA operator, as the huge investments made by Telkom later turned out to a huge loss.
Multi-Links Telkom, an Investment Gone Awry
Telkom Group decided to pullout from Multi-Links CDMA business because it could not break even and the business was taking a toll of the finances of the parent company. Telkom had in November 2010 announced that it could no longer sustain the CDMA business in Nigeria.
The then Multi-Links Telkom’s Acting Chief Executive Officer, Vincent Raseroka, said the decision to exit the market was purely based on business realities.
“It is strategically, financially and commercially challenging for us to continue to do business in this segment. With a current market share of 2.6 per cent in a market dominated by the GSM technology, it has become imperative that we explore other options and chart a new path to growth and profitability for ourselves as a business by utilising our fixed infrastructure here in Nigeria,” Raseroka.
He said a number of contracts have rendered Multi-Link Telkom’s CDMA business unprofitable and unsustainable. Raseroka said his company was committed to reducing costs in a manner that ensures sustainable long-term benefits.
Raseroka said despite the comprehensive turnaround programme of the company in March 2010, the CDMA business in Nigeria is still facing stiff challenges in a highly competitive environment, requiring scale to successfully compete.
According to him, despite recent intervention, Multi-Links operating revenue decreased by 1.7 per cent. Subscriptions and connections revenue decreased 18.2 per cent due to termination of access fees as a result of increased competition. Traffic revenue decreased 24.6 per cent mainly due to decrease in traffic volumes and higher churn rates. “For the time being, our CDMA operations will continue to run as usual. Multi-Links will work with the NCC to find a solution. Once the decision is finalised, Multi-Links will notify customers accordingly with sufficient lead time.”
Analysts say the CDMA market in Nigeria is not lucrative because of their unattractive product and service offerings, saying they were originally meant for rural telephony services.
Industry stakeholders in Nigeria attribute the woes of the CDMA segment to the restructuring carried out by the Nigerian Communications Commission (NCC) in 2006 when it doubled the interconnect rate of CDMA operators. They contend that everywhere in the world, CDMA interconnect rates are not at par with GSM interconnect rates.
How Telkom lost R6bn on Multi-Links CDMA
The pulling out of Multi-Links Telkom’s Code Division Multiple Access (CDMA) network market segment by Telkom Group has been attributed to investment in wrong technology, poor business plans and a series of vendor agreements which instead of adding to the bottomline of the parent, milked it of over Rand 5.6 billion.
In November 2010, Telkom shareholders ordered the parent company to re-align its business and exit the CDMA market segment as part of its strategic re-positioning efforts in the Nigerian market. Telkom is in talks to dispose of Multi-Links' CDMA unit and expects to wrap up the sale over the next few months.
Multi-Links has been a thorn on Telkom's flesh the company initially invested in Nigeria, in 2007. The fixed-line operator has written the unit down by more than R5.6 billion since entering the West African country. Telkom bought 75 per cent of the company in May 2007, for R1.96 billion. In January 2009, it bought out the balance of Multi-Links, investing a further R1.224 billion in the company.
Mr. Jeffrey Hedberg, immediate past CEO, Telkom Group and former CEO of Multi-Links Telkom conceded that the entity has been bleeding cash and was no longer a viable business. Telkom South Africa (TSA) according to him was under pressure as well. Telkom's interim results saw revenue down 5.4 per cent, to R17.6 billion, EBITDA down 0.6 per cent, to R5.1 billion, and profit from continuing operations down 9.3 per cent, to R1.4 billion.
Hedberg, who has been famed as a turnaround specialist, indicated then that Telkom needs to focus on cash-generating areas of its business. He explained that his first priority was to stabilise the South African business, before embarking on new investment opportunities across Africa.
Hedberg disclosed that Multi-links “will focus international activities primarily on corporate customers.” This means that Multi-Links Telkom will concentrate on its ownership of the highly sought-after optic fibre cable transmission network reckoned to be one of the largest in Nigeria and estimated to be over 8,200 kilometres.
Hedberg was committed to consolidating Telkom's African assets, including Multi-Links' data and fibre business and iWayAfrica. He was confident of the success of Multi-Links' data and long-distance fibre network offering, arguing that the vertical industries in Nigeria provide a strong business case for the asset. Especially since no incumbent operator currently exists in Nigeria. Hedberg pointed out then that Telkom would reposition iWayAfrica to focus enterprise customers across 32 countries across Africa.
Vincent Raseroka, acting CEO, Multi-Links Telekom and Ms. Zeona Jacobs, Telkom Group spokesman had in November 2010 said the decision to exit this market segment was purely a business imperative.
According to Raseroka, “It is strategically, financially and commercially challenging for us to continue to do business in this segment. With a current market share of 2.6 per cent in a market dominated by the GSM technology, it has become imperative that we explore other options and chart a new path to growth and profitability for ourselves as a business by utilising our fixed infrastructure here in Nigeria.
“Additionally, a number of onerous contracts such as Blue Label Africa have rendered Multi-Links Telkom’s CDMA business unprofitable and unsustainable,” he said explaining that the company was committed to reducing costs in a manner that ensures sustainable long-term benefits.
Jacobs also revealed that the Telkom Group Board mandated management to review options for the exit of the CDMA business in Nigeria saying, “a number of expressions of interest have been received from some industry players within and outside Nigeria and these would be evaluated and quantified appropriately before a final decision is reached on the myriad of options open to us”.
Raseroka however disclosed that, as Multi-Links Telkom commences an exit of its CDMA business, it is cognizant of the need to protect its existing customers and employees who are rendering the CDMA services. He assured existing customers using of the CDMA services of the company’s commitment to ensuring that they continue to enjoy the same qualitative service during this phase as the company considers market segment migration.
An analyst, Mark Walker, director of vertical industries and insights for the MEA region at IDC said Telkom was wisely adopting a longer term strategic view that focuses on its most lucrative market and fixing shortcomings locally, while effectively sitting out this round of African investment in anticipation of a maturing/shakeout in the African marketplace.
Multi-Links Sold to Helios
After months of litigations and boardroom permutations on what to do with its Nigerian subsidiary – Multi-Links, South African telecom giant Telkom finally decided to sell the company to Helios Towers Nigeria, a company that only recently secured a court ruling annulling the earlier sale of Multi-Links wireless business to Visafone Nigeria Limited.
“We just want to wash our hands off that disappointing deal and concentrate on more serious challenges on the home front,” a senior executive of Telkom South Africa told BusinessDay by telephone from South Africa after the company announced its decision to hand over the company to Helios yesterday.
“Multi-Links has caused us multiple problems and there is no need hanging on to it, even with the imbroglio caused by the recent Lagos court ruling. Our shareholders want an end to the ugly situation and so also the new management,” he added.
The full takeover of Multi-Links by Helios Towers later took over in November 2011. The $10 million price that Telkom will receive from Helios is seen as a buyout offer that cancels all outstanding indebtedness to the new owners by the former ones. The development seals earlier attempts by Visafone to acquire the wireless business of Multi-Links.
Telkom, which earlier announced that it would cease funding Multi-Links as part of a new capital allocation strategy, stated that it would continue to provide interim operational funding to the company to enable completion of the handover to the new owners.
New CEO of Telkom, Nombulelo Moholi, had earlier described Telkom’s adventure in Multi-Links as “an example of how not to do business”.
The road to Helios takeover of Telkom was charted by a $252 million debt owed it by Multi-Links for contracts entered into by both parties. Helios’ legal suit against Telkom following the initial sale of Multi-Links to Visafone was for “anticipatory breach of contract”.
A member of the Helios Towers Nigeria management who spoke with newsmen described the buyout arrangement as a good way out of the crisis: “We didn’t originally go for a takeover of Multi-Links. What we wanted was to recoup our investment. Now that it has gone this way, it is not bad. We would look through and make more detailed public pronouncements later. But I must say this is a better arrangement for us.”
…And Zoom Goes Down Too
Zoom Mobile Shuts Down Operations
Zoom Mobile (formerly Reltel Wireless), one of the nation’s CDMA operators, eventually succumbed to the weight of its lingering crisis, largely brought about by losses and massive debts, by shutting down its switches nationwide.
Industry sources disclosed that in its desperate bid to halt the losses, the company had effected the sack of some 200 skeletal staff in one fell swoop while its founder and chairman, Senator Annie Okonkwo, is said to be making frantic efforts to get new partners to resuscitate the telecom company.
The affected staff were said to be made up of those previously retained to provide skeletal services of running the company’s switches and base stations nationwide after it started its cost cutting measures last year.
Zoom Mobile, at the peak of its operations four years ago, had over 1.5 million voice and 100,000 data subscribers but industry sources said yesterday that apart from its largely whittled down customer-base that has been left out in the cold by the current development, other categories of the company’s business partners worried over the fate of the company are banks and creditors.
However, Okonkwo had claimed that what the company did was to partially suspend its operations in order to save cost. He said the company ordered the staff to proceed on indefinite suspension because it had become unprofitable to run the business until new investors are brought on board to recapitalise the business.
According to him, the company which in recent times had been generating N9 million monthly was spending N150 million on its operations on a monthly basis, explaining that it did not make good business sense to continue to run the company at a loss.
Okonkwo, who insisted the company was still in business, said some categories of staff were still being retained to provide skeletal services.
The chairman confirmed the company’s search for new investors, explaining that Zoom was already in discussions with some Chinese investors, who he said, will build a fibre network to enable Zoom compete favourably in the emerging business climate in Nigeria. Although he said the company was also looking at the possibility of bringing other investors apart from the Chinese into the company.
He described the company’s action as an ongoing development, saying zones affected include Lagos, Abuja, Port Harcourt, Onitsha, Owerri and Warri. “We are still servicing our customers, because ours is a national licence,” he said. The company’s founder explained that by shutting down its operations, the company would be able to save up to N2 billion.
On its obligations to staff, banks and other creditors, Okonkwo said the company will meet its responsibilities and will not do anything to affect the assets of the company, having established its presence in about 21 states nationwide.
Zoom Mobile was incorporated on August 25, 1998, as Reliance Telecommunications Limited (Reltel Wireless), taking advantage of the deregulation of the telecommunication sector by the then Federal Government of Nigeria. The company subsequently obtained a national licence to provide fixed wireless telephone services in Nigeria.
Nortel Networks of USA deployed Zoom’s first state-of-the-art CDMA network operating on 1900 MHz frequency, enabling it to commence full commercial operations in November 2001.
With the expiration of exclusivity period enjoyed by the GSM operators, Zoom Mobile successfully applied for the Unified Access Service License, enabling it to provide full roaming services in all of its areas of coverage.
How CDMA Evolved
October: CDMA concept conceived for commercial telecommunication applications
February: CDMA proposed as a more efficient, higher-quality wireless technology
November First CDMA system demonstration (Pac Tel Cellular, San Diego)
1990: February First CDMA field trial demonstration (NYNEX, New York City)
1991: November First large-scale CDMA capacity tests using commercial-grade equipment.
June: CTIA asks TIA to expedite adoption of CDMA standard in North America
September First CDMA network equipment ordered (U.S. West New Vector, Seattle market)
April: South Korea adopts CDMA as its national cellular telephone system
July U.S. TIA adopts CDMA (IS-95A) as a North American digital cellular standard
December CDMA Development Group (CDG) is founded
October: Field tests of CDMA networks in China successfully completed; First Korean CDMA system unveiled.
June: PCS PrimeCo selects CDMA for its PCS network
July: Sprint PCS adopts CDMA for its PCS network
November: World’s first commercial CDMA handsets shipped
December: World's first commercial launch of CDMA service (Hutchison Telecom, Hong Kong); CDG develops 13 kbps vocoder for high-quality voice communications; CDMA (IS-95A) standardized for U.S. PCS band (ANSI J-STD-008).
March: First North American launch of cellular IS-95A service (Bell Atlantic Mobile)
April: First Korean launch of cellular IS-95A service in Seoul (SK Telecom)
October: First launch of PCS IS-95A service (PrimeCo, now Verizon Wireless)
December: First Latin America launch of IS-95A (Telefonica del Peru); More than 1 million CDMA subscribers worldwide.
April: First Canadian launch of cellular IS-95A service (BC TEL Mobility, B.C.)
May: First IS-95A WLL launch (MTNL, India)
June: IS-95B standard completed (64 kbps data transmissions); cdmaOne™ trademark launched by CDG for IS-95 CDMA.
October: First Canadian launch of PCS cdmaOne (Bell Mobility and Clearnet)
December: cdmaOne service commercially available in 100 U.S. cities; 7.8 million cdmaOne subscribers worldwide
March: First cdmaOne data service launched (LG Telecom, South Korea)
April: TIA endorses wideband CDMA (aka CDMA2000®) for ITU 3G solution
June: CDMA2000 submitted to ITU to be a IMT-2000 global 3G standard
September: World's first commercial launch of IS-95B (SKT, South Korea)
November: First HDR (1xEV-DO) demonstration.
December: 23 million cdmaOne subscribers in 30 countries worldwide
April: cdmaOne Internet services launched in North America, Korea and Japan.
May: Operators complete CDMA harmonization agreement for IMT-2000.
July: CDMA2000 1X standard completed and approved by ITU for publication.
November: ITU-R selects CDMA2000 1X as IMT-2000 (3G) MC-CDMA standard.
December: 50.1 million cdmaOne subscribers worldwide (83 operators in 35 countries).
January: IDO Corporation and DDI Cellular Group launch IS-95B nationwide in Japan
March: First CDMA2000 1X voice calls completed by Qualcomm, Samsung and Sprint PCS
April: TIA approves CDMA SIM card standard for publication
June: First 153kbps CDMA2000 1X data transmission completed by Lucent and Qualcomm
June: CDMA2000 1xEV-DO introduced to global marketplace by the CDG
July: IUSACELL becomes first Latin American operator to offer wireless Internet services
October: First CDMA-GSM interoperable SIM card introduced to global market
October: World’s first 3G CDMA2000 1X commercial services launched (SK Telecom, LG Telecom, South Korea)
December: 80.4 million CDMA (cdmaOne and CDMA2000) subscribers worldwide
March: CDMA2000 1xEV-DO trials successful completed (KDDI, Japan)
June: CDMA2000 1xEV-DO recognized by ITU-R as part of the 3G IMT-2000 standard
July: Western Wireless (now Verizon Wireless) launches first CDMA2000 1X services in United States
August: World’s first mobile IP call successfully completed by Nortel and Qualcomm; 1 million commercial CDMA2000 1X subscribers worldwide.
September: 100 million CDMA (cdmaOne and CDMA2000) subscribers worldwide
October CDMA/GSM inter-standard roaming using R-UIM enabled handsets demonstrated
December: World’s first CDMA450 network commercially launched (Zapp Mobile, Romania); 111.4 million CDMA subscribers worldwide, including 3.7 million CDMA2000 subscribers.
January: World’s first CDMA2000 1xEV-DO network launched (SK Telecom, South Korea).
April: KDDI launches first CDMA2000 1X services in Japan; Telefónica Cellular launches CDMA2000 1X services in Brazil.
May: 10 million commercial CDMA2000 subscribers worldwide.
August: CDMA industry commits to delivering CDMA2000 equipment in the 2100 MHz band.
October: Monet Mobile Networks launches first CDMA2000 1xEV-DO Rel. 0 services in United States.
November: TDMA operators select CDMA2000 as the most economical path to 3G
December: 146.7 million CDMA subscribers worldwide, including 33.1 million CDMA2000 subs.
January: IUSACELL launches CDMA2000 1X network in Mexico
February: CDMA2000 dominates location-based services (LBS) market, serving 10 million users
March: China Unicom launches roll-out of nationwide CDMA2000 1X network
May: Reliance launches CDMA2000 1X services in India
May: 50 million CDMA2000 subscribers worldwide, including 1 million 1xEV-DO subscribers
August: KDDI dominates Japan’s 3G market, capturing 93 percent of 3G market share
September: Cumulative shipment of CDMA chips surpassed 1 billion; KDDI launches CDMA2000 1xEV-DO services in Japan.
December: 188.6 million CDMA subscribers worldwide, including 85.4 million CDMA2000 and 4.3 million EV-DO subs
March: 500 CDMA2000 devices from 40 vendors offered, including 50 1xEV-DO devices; 5 million commercial CDMA2000 1xEV-DO subscribers worldwide.
April: 3GPP2 approves CDMA2000 1xEV-DO Revision A (Rev. A) specification
April World’s first high-speed wireless data roaming service between China, Japan and Korea
May: NMT-450 and TETRA operators select CDMA450 as their path to 3G
June: 100 million CDMA2000 subscribers worldwide, representing 97 percent 3G market share
August: World’s first 1xEV-DO network launched in 450 MHz band (Eurotel Praha, Czech Republic)
September: World’s first CDMA/GSM WorldModeTM device introduced (Samsung SCH-A790).
November: 100 commercial CDMA2000 service providers in 50 countries across six continents
December: CDMA captures 25 percent market share in India, 14 million users (500 percent growth)
December: 240.2 million CDMA subscribers worldwide, including 146.8 million CDMA2000 and 12 million EV-DO subs
March: 100 million CDMA handsets with GPS position location technology in commercial use; First live demonstration of CDMA2000 1xEV-DO Rev. A
July: CDMA Certification Forum (CCF) is formed
December: CDMA industry celebrates 10 years of commercial success
December: 950 CDMA2000 devices from 64 device manufacturers offered commercially since 2000
December: 143 CDMA2000 operators commercially deployed in 67 countries on 6 continents; 301.9 million CDMA subscribers worldwide, including 225.1 million CDMA2000 and 24.4 million EV-DO subs.
January: Entry-level (sub-$50 USD) CDMA2000 mobile phones are commercially available.
March: Portable computers with embedded EV-DO modems are commercially available; TIA/EIA publishes CDMA2000 EV-DO Revision B (Rev. B) standard.
June: First CDMA450 network launched in Latin America (Valtron, Peru)
October World’s first CDMA2000 1xEV-DO Rev. A network launched (Sprint PCS, USA).
December: 373.5 million CDMA subscribers worldwide, including 325.1 million CDMA2000 and 55 million EV-DO subs.
February: 103 operators in 60 countries select CDMA450 to deliver 3G services; Ultra low-cost (sub-$35 USD) CDMA mobile phones are commercially available
March: CDG launches CDMA University.
October World’s first wireless broadband public safety solution deployed (Washington, D.C.); First WorldModeTM chipsets embedded into notebook computers
November: ITU WRC-07 approves 450 MHz and 700 MHz band for next generation IMT services.
December: 431.1 million CDMA subscribers worldwide, including 417.5 million CDMA2000 and 90.5 million EV-DO subs.
February: 65 operators 38 countries in the Middle East and Africa select CDMA2000
April: World’s first Advanced Wireless Services (AWS) launched (Leap Wireless, USA); 24 operators 16 countries in Europe select CDMA2000.
May: World’s first CDMA Open Market Handset (OMH) trials completed in India
June: EV-DO subscribers surpass 100 million globally.
July: CDG and IA450 combine efforts to strengthen CDMA450 industry.
October: China Telecom takes control of China's CDMA2000 network.
December: 464.7 million CDMA subscribers worldwide, including 454.9 million CDMA2000 and 112.4 million EV-DO subs.
April: World's first CDMA2000 Android smartphone is launched (HTC Hero)
April-October: Multiple operators trial and announce plans to deploy EV-DO Rev. B
August: CDMA surpasses half a billion subscribers
August: 1X Advanced standard is published by 3GPP2, quadrupling CDMA2000 1X voice capacity
October: CDG becomes 3GPP Market Representation Partner (MRP)
November: CDMA Roaming Hub announced; More than 300 CDMA2000 operators in 116 countries and territories.
December: 528.1 million CDMA subscribers worldwide, including 524.2 million CDMA2000 and 141.3 million EV-DO subs.
January: First EV-DO Rev. B network deployed (PT Smart Telecom, Indonesia)
April: DO Advanced specifications are published by 3GPP2; First 3G/4G (Mobile WiMAX) Mobile smartphone launched by Sprint (HTC EVO).
September: MetroPCS launches first CDMA2000 1X/LTE network; First 3G/4G (LTE) Mobile smartphone launched by MetroPCS (Samsung SCH-R900)
December: 4,255 CDMA2000 devices from 133 device manufacturers offered commercially since 2000; 314 CDMA2000 operators in 120 countries and territories.