The erstwhile Executive Vice-Chairman, Nigerian Communications Commission, Dr. Ernest Ndukwe, has predicted that the much talked about consolidation in the CDMA market will happen soon.
Ndukwe, who spoke to journalists at the Distinguished Electrical and Electronics Engineers Annual Lecture, said the solution to poor financial performance by the CDMA operators was to consolidate their operations.
There are currently four CDMA operators in the country namely; Starcomms, Multilinks, ZOOMmobile and Visafone.
Ndukwe said, ”I think the way forward and what I will recommend is the consolidation of those companies. I think some of them should merge and bake a bigger cake rather than the segmented way they are today.
“And I think, as an industry, there is a move towards that direction. Some call it consolidation in the industry. When that happens, I suspect you will see better days for CDMA in the country.”
According to Ndukwe, it is fallacious for anyone to assume that CDMA operators are not doing well because they are not adequately protected by the NCC.
He said, ”I think their biggest problem is that they all came in as smaller companies. In this business, you need to play big. Etisalat is a GSM operator, which came in after these companies and today, it has over six million lines. The only reason is that the company came in with adequate investment in the country.
“Remember, CDMA started before the GSM operators. Multilinks was the first to interconnect to NITEL and this was around 1998/99 before GSM operators started in 2001. So, they had a good head start, but the problem was that they had little money.
“They were small people, who got licences and started playing small and when the big players came with a lot of investment, things changed. You need to have adequate investment to play in the telecoms industry.”
The CDMA operators in Nigeria have lost about 1.08 million active subscribers between January and July 2010, according to official data.
According to the NCC subscriber data covering December 2009 to July 2010, active mobile CDMA lines, which stood at 7.7 million in January 2010, dropped to 6.6 million by July. This means that 1.08 million active lines have become inactive.
The number of CDMA lines increased from 7.77 million in January to 7.79 million in February, but dropped to 7.66 million in March. It, however, increased to 7.74 million in April.
However, the active subscriber base recorded a sharp drop from 7.49 million in May to 6.83 million in June, and rose again to 6.69 million in July.
The highest drop was experienced in June when the figure dropped from 7.49 million in May to 6.83 million.
Although, the total connected CDMA lines stood at 11.5 million as at July, the GSM subscriber base has recorded exponential growth from total connected 83.4 million lines in March 2009, and an active subscriber figure of 68.7 million, to 91.6 million and 72.2 million respectively, as at July, 2010.
Poor financial performance has been widely considered as the bane of growth in the CDMA telecoms market.
Investigation revealed that Multilinks, Starcomms, ZOOMmobile and Visafone lost about N1.95bn in the first six months of 2010.
According to the subscriber data provided by NCC, the CDMA operators lost about 1.08 million active subscribers between January and July, 2010.
The National Bureau of Statistics put the Average Revenue Per User of telecoms services in Nigeria, including that of the CDMAs, at N1,800.
Based on N1, 800 per user, an average of N1.95bn must have been lost on the 1.08 million subscribers by the CDMA operators in the first half of the year.
Telkom SA, the owner of MultilinksTelkom, had put up its mobile operations in Nigeria for sale due to poor fiscal standing.
As the fortune of the CDMA operators is hanging, experts have recommended consolidation by the ailing telecoms players.
The former Acting EVC of NCC, Dr. Bashir Gwandu, in an interview with our correspondent, had encouraged the CDMAs to consider consolidation as an option.
The Chief Executive Officer, Starcomms, Mr. Maher Qubain, had said the current financial losses being experienced by CDMA operators made consolidation an option that must be considered.
He said, ”We must consolidate in the telecoms sector because there are too many players and people are marginalising business. However, it will take about 26 months for consolidation to happen because of the ego of the players.”
Qubain said that the company was open to consolidation and was ready to talk with any interested operator in the industry. He also agreed that consolidation was essential in the telecoms industry.
”There is still scope for consolidation in the telecoms sector and the level of interest in mergers and acquisitions is now on the rise,” he said.
Responding to questions that lower spectrum was responsible for the CDMAs‘ woes in the country, Ndukwe said, ”Lower spectrum is supposed to be an advantage because the lower the frequency, the less base stations you require and the higher the reach of each base stations. So, it is an advantage.
”I think what you should be asking is making provision for spectrum for new services that will be coming out of the country. When the consolidation happens in the CDMA space, that will also lead to further improvement in the operating environment in the country.”
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