On the strength of the underlying technology, Code Division Multiple Access (CDMA) operators globally are believed to be better equipped to deliver best of services at affordable costs to the consumers. And on that basis Nigeria would have been counted so ‘lucky’ to have had its first set of Private Telephone Operators (PTO) delivered services using the CDMA technology.
CDMA, a digital wireless technology that uses spread spectrum techniques is globally acknowledged as the better technology compared to GSM, given its inherent quality in terms of data speed and capacity. Unlike 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.
Consequently, that Nigeria started the telecom revolution with CDMA operators could have been seen as a plus for the country. Of course, the likes of Multi-links, VGC Communications, Intercellular were the darling networks of many Nigerians in the early days of the revolution with cheaper call rates compared to the new entrants GSM operators whose SIM cards were sold for as high as N30,000 on entry.
Credit for the first private telephone call in Nigeria goes of course, to Multilinks, which began the slow but now apparent revolution with operations in December 1998. While Intercellular, Mobitel and EMIS provided ample complementary to the Multilinks operations on the private telephone operator level in the early days, it was indeed, Reliance Telecom, (which would later metamorphose into Reltelwireless and finally into Zoom Mobile), that came with the commercially competitive edge that placed all operators on their toes. The company became the first PTO to offer services and operations in three cities in Nigeria, namely Lagos, Port Harcourt and Onitsha, within one year of commencing operations. It was an indication that CDMA has potentials.
But it was Starcomms that came with a bang. Starcomms did the unexpected by getting listed on the Nigerians Stock Exchange in July 2008, thus becoming the first and only telecom company to be listed on the bourse. With the slogan ‘We Speak Your Language’ and a couple of near-smartphones sold for the first time on a CDMA network, Starcomms wormed itself into the heart of many Nigerians, overtaking the pioneer operators in terms of subscriber number and started rubbing shoulders with the GSM operators.
But the enthusiasm around CDMA operators was short-lived, perhaps as a result of the eruption of stiff competition among the GSM operators, prompting each to churn out myriads of innovative and exciting products for the subscribers and at the same time lowering call tariffs and cost of SIM cards. With such development, it did not take time before the tide started turning against the CDMA operators.
From then, number of subscribers on the CDMA networks began to dwindle. Conversely, GSM operators’ subscriber base continued to swell up to a point that even the last entrant into the GSM market could boast of subscribers well above the total subscriber base of Multi-Links, Zoom Mobile (formerly RELTEL), Starcomms and Visafone.
By November 2011, Etisalat which entered the Nigerian market in 2008 to become the fourth GSM operator in the country had garnered about 10 million subscribers, whereas the total active lines for the four CDMA operators as at the same period had declined to 4.7 million, according to statistics from the Nigerian Communications Commission.
Before 2011, many CDMA operators like Intercellular, EMIS, ITN among others, had gone under, leaving only four operators struggling for survival in that segment. But the down trend in CDMA would not cease and would eventually consume Multi-Links, Zoom and Starcomms, leaving only Visafone.
Industry statistics as at January this year shows that while the figure of connected lines on GSM networks has jumped to 138 million, CDMA only managed to have 2 million connected lines.
The Death of Multi-Links
It would seem 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 until 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 Struggle Continued for Zoom, Starcomms
With Telkom out of the deal, Multi-Links was relegated to the background while a few Nigerians in the management of the company continued to salvage what is remaining of the company to sustain their services to a few loyal customers still on the network. But for Zoom and Starcomms, things were not the way it used to be. The revenue crunch was biting harder and to keep afloat, they began to shed staff. At some point, the few subscribers remaining on their networks began to complain of lack of service in some areas, and that was because their transmission radios on collocated base stations have been shut down due to their inability to pay the required rent.
All hopes seemed to have been lost for all the remaining CDMA operators except for Visafone, which continued to hold the CDMA ace by introducing some new innovative products, even though things were not rosy.
Last Ditched Efforts to Rescue Mult-Links, MTS, Starcomms
It surfaced like a ray of shiny light from a cloudy sky, many jumped up in ecstatic hope that at last, CDMA would not die in Nigeria. That was over two years ago when IT & Telecom Digest broke the news that a group of core investors had planned to invest $200 million into a new arrangement that would see Multi-Links, Starcomms and Zoom merged to become one strong CDMA operator, the company to be named Capcom.
The deal information obtained by the magazine showed that the arrangement had 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 were said to have given their consent, thus giving the deal a smooth sail.
The deal document obtained in July 2012, when the plan was afoot, showed Starcomms, the only listed telco in Nigeria (now delisted from the Nigerian Stock Exchange) was 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 would be consolidated to become one.
Highlighting the strong competitive advantage of the new company to be formed, the investors had 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 were looking at the positioning of Starcomms (Capcom) as the first pure-play national data network with emphasis on Quality of Service. The company was also to 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.
As contained in 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.”
Unfortunately, the deal remains a paper deal until today. Despite having secured the approval of all regulatory bodies, the investors could not raise the required fund to seal the deal and that was how it hit the rock. Today, Multi-Links, Starcomms, MTS and Zoom are practically dead. However, unlike others who had operated as private liability companies, Starcomms’ death was pronounced to the public in November last year when the Nigerian Stock Exchange announced its delisting from the bourse’s list of quoted companies. This, the bourse authorities said became expedient because the company was no longer able to fulfil its obligations as public quoted company.
The Albatross of CDMA in Nigeria
Faced with the reality of a crumbling business, the CDMA operators were quick to blame government’s licensing policy, which initially gave the CDMA operators regional-based licences for their woes. This, they said, 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 a 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.
He argued further, “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 a former 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, which of course, comes at a cost.
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.
Pioneer CDMA Operators in Nigeria
Multi-Links
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.
VGC Communications
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
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
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.
MTS First Wireless
MTS FirstWireless as the name rightly connotes, is the first telephone company that was licensed to offer wireless service in the country. It began the process of initiating Nigeria into the wireless world in 1992 when the government issued it with a license to commence the provision of national cellular service in the country. It was then a joint venture between the government-owned NITEL and Digital Communications Ltd. of Atlanta Georgia, USA. But a disagreement between the two joint venture partners led to the abortion of this dream.
The issue was eventually resolved with a favourable settlement brokered by the Nigeria Communications Commission which gave multiple licenses to MTS First Wireless in 2002 as National Wireless Operator, National long Distance Communications carrier, International data Gateway Operator, and Internet Service Provider.
MTS First Wireless adopted a technology integration approach to its service delivery, making it possible to deliver different services to different markets using one integrated network of solutions. Its technology is based on the CDMA20001X platform which is capable of both fixed and portable toll-quality voice telephony, and high speed data (144kbps), non dial-up Internet Access and other value-added services like voice mail Fax, call conferencing and SMS amongst others. The technology ensures that all of MTS netwoks of Wireless Telephony, Long Distance Carrier, International Data Access and Internet Services provider operate seamlessly at optimum.
ITN
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.