New report predicts more doom for Nigerian CDMA's by year ending

MD/CEO, Visafone, Sailesh Iyer

There are strong convictions that the current dwindling fortunes of the Code Division Multiple Division Access (CDMA) will get worse by the end of the year 2012.

MD/CEO, Starcomms Plc, Logan Pather

The report, which is the property of Business Monitor International Limited(BMI) but made available to the ICT & Biz Africa by a privileged source, noted that the CDMA operators would continue to record subscriber net losses due to their inability to contend with the GSM operators in the current strong competition for customers loyalty in the industry.

According to the report, before the arrival of the GSM operators in 2001, the CDMAs then notably Multi-Links, Intercellular and Starcomms as well as NITEL had a free day adding that even as far as 2008 when the GSM operators were fully settled in the industry, the CDMA had a share increase of up to 10.9 per cent of the mobile market.

However, by 2009 the CDMA operators began to experience much slower growth, with the total number of CDMA customers growing by 25 per cent during the year while mobile customers numbered 7.565mn.

 BMI stated that the segment has been declining since early 2010 saying that during the financial year of 2010, the CDMA operators recorded total net losses of 1.463 million subscribers to reach 6.102 million subscribers.

The report further said that in 2011, they made another net loss of 1.501 million subscribers to bring the total subscribers base to 4.601 million at the end of December 2011 adding that the loss was equivalent to a 4.8 per cent share of the mobile market, the lowest level since mid-2008.

The report observed that the trend confirms the view of BMI that there is likelihood for consolidation in the CDMA market in the face of strong competition from their GSM mobile market rival.

BMI however said that the regulator has not provided explanation for the negative growth trend affecting the CDMA mobile sector.

"In the assessment of the BMI, the current situation of the  CDMA Operators suggest that even before they began experiencing negative customer growth in the second quarter of 2010, they were struggling to compete for customers with their GSM rival"

For instance, in 2011, only Visafone had a growth by recording a net addition of 45,000 subscribers bringing its subscriber base to 2.604 million, also in the first and third quarter it reported higher subscriber figures.

However, for Multi-Links and Zoom Mobile it was a very sad story as both experienced steeper customers losses in 2011 instead of a having additions. Multi-Links mobile customer base shrunk by a massive 51.8 per cent in 2001 to reach 701,304 subscribers at the end of 2011 compared to 1.44 million a year earlier.

A similar sad story was told by BMI of Zoom mobile, which recorded even steeper subscriber losses as its subscribers base contracted by 66.4 per cent during the same period to reach 315,619 subscribers.

For Starcomms, it began the year on a brightly with 8.2 per cent growth in the first quarter of 2011 but successive subscriber losses in the last three quarter of the year took its subscriber base to 980,109 at the end of 2011, down from 1.149 million a year earlier.

The report disclosed that sensing that their fortunes and stake in the industry wa a sharp decline, the CDMA began to adopt a network infrastructure sale and leaseback strategy to cut cost.

In August 2011 Visafone agreed to sell and lease back 459 telecoms towers to infrastructure company IHS Nigeria to whooping sum estimated at $67 million while Starcomms in December 2010 concluded a sale and lease back agreement with Swap Technologies and Telecoms for 407 of its 557 base station towers.

BMI noted that the terms of the agreement stated that the $81.4 million transaction means that Swap will take over the maintenance of the 407 towers, including the physical structures and power components.

However, the core network and radio components will remain under Starcomms ownership and control. The lease agreement is for an initial duration of 15 years and allows the CDMA operators full access to operate its network.

Though it was not clear what the money will be use for, it was however gathered that $67 million of the sale proceeds is meant to clear off a large chunk of bank debts while the rest will be for growth purpose.

A key aspect of Starcomms surviving strategy, Nigerian Compass gathered was the sack of top expatriate from the company in 2011.

Top on the list were its managing director of Mr. Maher Qubain, chief commercial officer, Mr. Tushar Maheshwari, head, brand management, Mr. Manish Singh and marketing director, Mr. Richard Gill.

In their place, a South African, Logan Pather was employed as managing director and chief executive officer to turn around the fortunes of the company, although the situation seems to have defiled all solutions resulting to the huge subscriber base loss recorded in 2011.

The only quoted CDMA operator on the Nigerian Stock Exchange, an annual general meeting slated for last month was put off without explanations after press invitation had gone out.

For Multi-Links its condition got worse in June last year when South Africa’s fixed-line incumbent Telkom said that it was stopping funding for loss making after it had spent $1.44 billion on the operator since 2007.

This was followed by a failed attempt to sell Multi-Links for $52 million to Visafone but the deal, which was agreed to in April 2011 was cancelled in June after a Lagos High Court ruled in favour of Helios Towers Nigeria regarding a $252 million suit against Multi-Links over a contract breach for infrastructures services.

Just like the other CDMA operators, BMI attributed their crisis to the harsh operating environment in the country saying that it expects Helios Towers to sell Multi- Links in the future and when that happens, the CDMA operators would be among the front-runners.