MTN Acquires Visafone to put end to CDMA in Nigeria

Like sounding the death knell on the once promising technology, the last one standing of the Code Division Multiple Access (CDMA) operators in Nigeria is for grabs. And the buyer is none other than the biggest mobile operator in the country, as also on the continent. By OUR REPORTERS.

What started like the harmless musings of peers, those words that appear like banters meant to produce laughter and soften charged atmospheres, meaningless to the onlooker and the uninitiated, but full of loaded meanings to those within the inner caucuses, has indeed snowballed into a full scale business scenario that had been brewing months before.

And, who would have thought that Alhaji Aliko Dangote’s ‘harmless charge’ at his friend, Mr. Jim Ovia, during a session with President Goodluck Jonathan, with the business community at the Eko Hotel, Lagos, during which Alhaji Aliko jocularly told the president that Mr. Ovia was exiting the telecom industry, is the sale of Visafone already foretold! But that indeed, is what has happened.

MTN, Africa’s leading mobile phone operator, has acquired Visafone, the only surviving Code Division Multiple Access (CDMA) operator in Nigeria, owned by the banking magnate, Mr. Jim Ovia.

The acquisition of Visafone, the only surviving CDMA operator in Nigeria, by MTN, a GSM operator, marks the final death of CDMA operations in Africa’s largest economy.

Smart as ever though, MTN is not taking along the purchase of the CDMA company with its liabilities. Rather, the mobile operator is only taking Visafone’s 700 MHz spectrum. But that is not all; the LTE-compliant spectrum acquired by Visafone just 15 months ago is also in the kitty for MTN in the deal.

Actually, persons familiar with the deal told IT & Telecom Digest that MTN is acquiring all those spectrum held by Visafone as a result of its preparation to launch and play big on Long Term Evolution, the all Internet Protocol

Mum is still the word, though, on how much will exchange hands in the deal that is likely to see a lot of tongues wagging across Africa for the next 12 months or more.

Now the reverberations: Visafone has already laid off slightly more than 50 per cent of its staff as a result of the purchase.

But contacted, the Visafone CEO, Mr. Srinivasa Venkatappa expressed surprise by the news, saying he had no information regarding such a deal.

“I am not aware of such. I am just hearing it from you. And, I cannot comment on rumours or on anything that I have no information about,” he told IT & Telecom Digest when contacted on phone.

Closely Kept to Jim’s Chest

Naturally, a deal as huge as this could be, or is likely to be, would be held tightly to his chest by the promoter and founder of Visafone, Mr. Jim Ovia, according to an industry expert, who argues:

“Mr. Jim Ovia is an astute business person, a consummate banker and someone who knows what it is to trade a company off or to buy one. After all, he bought into the Multi-Links operations for a huge sum of around N8 billion.

“Therefore, I do not expect him to make any noise about such an important step as exiting the telecom sector, selling Visafone, a company he established to show he is not only a banker but someone with interests and capabilities in other areas as well, especially telecommunications.

“So, if he is selling Visafone, it can only be that until he has the money in his account, or has all the assurances of payment, he may not make any comment about it; and, you may therefore not hear this from his staff members, if they be management cadre level such as a CEO,” the source hinted.

Jim’s Target

The more the scenario of the deal plays out, the more intriguing the outcome of the facts become. For instance, while ordinarily an observer would see the deal as an opportunity for Mr. Ovia to net some good cash from MTN, one of our experts with insider information on the deal says that’s not what the situation is playing to be.

“Jim doesn’t want cash. He wants more than just cash; because if it’s cash, he’s got it. Visafone has not been performing at the optimum as he would have like it. He’s obviously not getting the sort of revenue stream as he thought it would be when he invested in the telco.

“So, not being one to just opt out, and being a smart man that he is, his game plan in this sale is to get equity and at the same time be a part of the MTN family,” our source informs, explaining that in this way, Mr. Ovia will surely net home more than just the cool cash that will fall into his pocket once the deal falls through.

According to the source, it is the working of the details of equity and being a part of MTN that has kept the discussions long in being concluded. As, indeed, talks have been going on for over three months already, having begun during the second half of 2014.

Mum is the Word at MTN

Within the MTN hierarchy the deal is still being guarded as top secret with little or no information being let out. Someone with insider information but who cannot be named said:

“You know MTN is a quoted company. So don’t expect them to give you any official information until the deal is finally consummated and they can issue a formal statement. If you expect anything beyond this, I would say you’re not being fair to those you are contacting.

But take it from me, and I know what I’m saying: the deal is through; they’re only putting the final finishing touches together before a formal announcement is made.”

The source also added that then might be the right time to know how much MTN is paying for the purchase of Visafone – or more succinctly put, to buy all the bouquet of the CDMA company’s spectrum.

 

Why MTN Bought Visafone: the Fear of Globacom

Competition is the name of the game in the business world; even more so, on the mobile phone horizon in Nigeria as everywhere else.

Nigeria’s National Carrier, Globacom, has acquired the 700 MHz from the Nigerian Communications Commission. That gives it the capability to do LTE (Long Term Evolution), which is obviously the next big area, thereby laying the foundation for reality on the broadband.

Globacom is the only other operator that has the licence on the 700 MHz spectrum; hence, it plans to launch LTE services. So, sensing this scenario, MTN, not wanting to be beaten to the second place in the LTE offering, wants the Visafone licences, that is the 800 MHz and the 700 MHz, the latter which is LTE-compliant, to also quickly latch on them and begin offering LTE in Nigeria.

VGC to memory

Recall that MTN bought VGC Communications, the private telephone operator whose services were seen as very reliable, although it was almost a Lagos-based operator. MTN had acquired the company due to its spectrum and the fibre ring it has across Lagos. This was also another proactive move by MTN to prepare itself for landline telephony services, especially as Glo has licence and apparent capability to offer landline telephone service.

In 2006, MTN Nigeria bought VGC Communications Limited (VGCCL) to the tune of $70 million (N9.3 billion).

VGCCL was licensed by the Nigerian Communications Commission (NCC) to provide cabling and radio telephone services nationwide and had laid extensive fibre optic cables, and internet service provision.

The company was established in April 1995 with the primary objective of providing all the communications related services required by the residents of Victoria Garden City and Ikota shopping Complex.

VGCCL was a subsidiary of Modern Communication Technologies (MCT) Limited a company registered in Gibraltar and itself a wholly owned subsidiary of Globe International Holdings South Africa, which is a holding company of many subsidiaries in Nigeria with activities in the construction industry, manufacturing and other activities.

Modern Communication Technologies Inc. (MCT) is the Communications arm of Globe International Holdings S.A. and until the held 100 per cent ownership of VGCCL shares.

Glo to Launch LTE June

Now, here is how the MTN’s Visafone deal would have to be wrapped up sooner than anyone might guess: Globacom has set a deadline of June 1 to launch LTE services. The company only recently held series of meetings, taking presentations from all the leading vendors and network equipment companies, among them Huawei, ZTE, Nokia Networks, Ceragon, on launching LTE services on June 1.

In fact, the company has already hired a leading international technology consulting company on this area for the purpose. Glo plans to launch LTE services six cities of the country in the first phase of the planned nationwide launch.

And, as information goes round on the Glo’s imminent launch of LTE come June 1, MTN is not leaving anything to chance; hence, the race to finalise the deal for the purchase of Visafone as soon as possible.

Visafone has the spectrum for the operations of LTE; Glo already has this spectrum. MTN’s calculation therefore is to quickly acquire Visafone and put itself in good stead for real showdown with Glo come June.

 

LTE as the Broadband Cracker

Nigeria’s government has declared year 2015 as the Broadband Year. And, for mobile operators, the most technically advanced technology for broadband offering is the Long Term Evolution, hence the race to acquire the necessary but scarce spectrum to enable them roll out services and offer broadband.

Broadband and the Race to LTE

LTE (Long Term Evolution) is a wireless broadband technology designed to support roaming Internet access via cell phones and handheld devices. Because LTE offers significant improvements over older cellular communication standards, some refer to it as a 4G (fourth generation) technology along with WiMax.

With its architecture based on Internet Protocol (IP) unlike many other cellular Internet protocols, Long Term Evolution supports browsing Web sites, VoIP and other IP-based services well. LTE can theoretically support downloads at 300 Megabits per second (Mbps) or more based on experimental trials. However, the actual network bandwidth available to an individual LTE subscriber sharing the service provider’s network with other customers is significantly less.

Long Term Evolution service is only available in limited geographic areas, but telecommunications providers have been actively expanding their LTE services.

Some Key Facts About LTE

Long Term Evolution, is the global standard for the fourth generation of mobile networks (4G) supported by all major players in the industry. LTE offers the capacity and the speed to handle a rapid increase in data traffic. According to latest Ericsson Mobility Report, there will be 9.3 billion mobile subscriptions in 2019. 65% of the world’s population will have LTE coverage 2019.

Currently there are 279 commercially launched LTE networks in 101 countries and 482 LTE network commitments in 147 countries. (GSA March 2014)

Performance and capacity – One of the requirements of LTE is to provide downlink peak rates of at least 100Mbps. The technology allows for speeds more than 300Mbps and Ericsson has already demonstrated the next step of LTE at the MWC 2010 with theoretical peak rates up to 1.2Gbps.

Simplicity – LTE supports flexible carrier bandwidths, from 1.4MHz up to 20MHz. LTE also supports frequency division duplexing (FDD) and time division duplexing (TDD).

Latency – The user plane latency achieved in LTE is less than in existing 3G technologies providing a direct service advantage for highly immersive and interactive application environments, such as multiplayer gaming and rich multimedia communications.

Wide range of terminals – In addition to LTE dongles and mobile phones, many computer and consumer electronic devices, such as notebooks, ultra-portables, gaming devices and cameras, will incorporate embedded LTE modules.

 

Points to Ponder on LTE

What are the advantages of LTE for users?

LTE gives a superior user experience when it comes to stability, throughput, and latency. The increased capacity will bring new and better services to users.

What are the advantages with LTE for operators?

LTE offers existing and greenfield operators the advantage of a future proof network delivering capacity, throughput and user experience creating new business opportunities and revenues. LTE offers low long-term capital and operational costs. Networks deployed today can be used for all generations of communication; 2G, 3G and 4G.

How fast is LTE?

Today’s LTE networks are able to provide speeds up to 100Mbps. However user experience may vary depending on location and present network load. The technology allows for speeds more than 300Mbps and Ericsson has already demonstrated the next step of LTE at the MWC 2010 with speeds up to 1.2Gbps. Live measurements in north of Stockholm in June 2011 gave speeds above 1Gbps.

When will I be able to use LTE?

This depends on where you live. LTE is being deployed already today in large parts of the world, with North America, Korea and Japan currently having the highest LTE penetration. Today there are more than a 1563 LTE-ready devices (smartphones, tablets, modems) announced (GSA March 2014).

Currently there are 279 commercially launched LTE networks in 101 countries and 482 LTE network commitments in 147 countries. (GSA March 2014)

Will LTE make previous standards like HSPA (3G) obsolete?

No, in many markets HSPA and EDGE will continue to do a perfectly good job in delivering broadband to billions of mobile users for many years to come.

The introduction of LTE is an evolutionary step, rather than revolutionary, as large parts of existing infrastructure is re-used providing a future-proof technology path for flexible migration of services between 2G, 3G and 4G mobile technologies. But in order to meet customer expectations and demands for capacity and speed tomorrow, all major players need to put an LTE strategy in place today.

What will happen with voice calls over LTE?

Unlike previous generations of mobile networks, LTE is completely IP-based and supports only data transfers in its basic form. However most operators are likely to offer their customers solutions for voice services. Already 3 VoLTE networks are live in Korea.

Operators will benefit from an early voice over LTE strategy supporting their existing and future services.

Some experts say GSMA VoLTE, a solution supported by the governing body of GSM telecommunications systems, offers the best opportunity for operators to evolve their services toward full multimedia while protecting and expanding their business.

For LTE to support voice and messaging, an IP-based solution is required that will offer the same interoperable and seamless experience that 2G and 3G wireless technologies offer today. IMS (IP multimedia subsystem) can achieve this, and supports all voice call service features such as call waiting, call hold and call barring, and is highly scalable to serve very large subscriber bases. IMS also provides mobile operators with the ability to offer services that can integrate voice calls with enhanced, rich features such as presence, instant messaging and video content, delivered in an interoperable and multi-operator environment.