For long death stared the Code Division Multiple Access (CDMA) segment of the Nigerian telecom sector in the face and one by one, it began to take the players until it remained only one standing against all the odds. But with its strength getting drained day by day, the last standing CDMA operator, Visafone Communications succumbed. It fell, though not into total oblivion like others, but into the waiting arms of a giant telecommunications company, MTN. SAMSON AKINTARO reports.
For those conversant with developments in the Nigerian telecom sector, the announcement of Visafone’s acquisition by MTN Nigeria would definitely not come as news but an official confirmation of an exclusive story published by IT & Telecom Digest since April 2015. And that official announcement from MTN marked the end of an era and the close of CDMA chapter in Nigeria’s telecom book.
Of course, many had seen it coming; it was a death long foretold, but the time and the mode it would take was what no one could say. Incidentally, the Visafone acquisition, which was sealed last year, came at a time the hope of a revival for Starcomms, Zoom and Multilinks were dashed as their merger plans hit the rock due to paucity of fund.
Announcing the acquisition, MTN said it was in line with the company’s determination to improve the quality of broadband services for its subscribers. According to MTN Executive, Amina Oyagbola, the acquisition, which seeks to leverage resources for service enhancement, is also reflective of MTN’s concerted efforts to deepen the growth and rollout of broadband services across the country, in support of the National Broadband Plan for the benefit of Nigerians. Visafone is one of the leading CDMA/ICT companies in Nigeria offering a number of services including voice, high speed data (3G), internet and other Value Added Services (VAS). Visafone also provides business solutions to small and medium sized companies and corporate organisations in Nigeria.
“We are committed to exploring avenues for meeting our customers’ increasing data needs in line with our vision to lead the delivery of a bold new digital world to our customers. As we work to maximise our data capabilities towards achieving broadband of international quality, our objective is to ensure that Nigerians experience a boost in the quality of broadband internet services translating to the much needed enhanced data speeds and value to enhance personal and business productivity” Oyagbola said.
While some might see the acquisition as a possible lifeline for the CDMA operator, indications emerged that MTN might not be towing that line. Specifically, MTN’s acquisition was driven by its plan to launch 4GLTE service and the Visafone’s 700 MHz spectrum comes in handy for that. Technically, MTN did not acquire Visafone to continue running its CDMA business and that incidentally saw the end of CDMA business in Nigeria.
The glorious past
With the CDMA technology, Nigeria began the telecom revolution on a strong footing with the likes of of Multi-links, VGC Communications, Intercellular giving Nigerians improved telecommunication access as against what the monopolistic NITEL was offering. Even with the arrival of the GSM operators in 2001, the CDMA operators 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.
Credit for the first private telephone call in Nigeria goes of course, to Multilinks, which began the 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.
Stifled by GSM competition
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 September 2015 shows that while the GSM technology controlled about 98 per cent of the Nigerian market, the CDMA, on the other hand, controlled 1.58 per cent market share. Similarly, while CDMA technology, through the only surviving operator-Visafone Communications, which has now been acquired by MTN, could only boast of about two million customers, the quartet of MTN Nigeria, Globacom, Airtel and Etisalat, had on their networks about 150 million connected subscribers.
The Albatross of CDMA in Nigeria
Ever since the dwindling fortune sets in, the CDMA have had to look back and traced their predicament to the licensing policy in Nigeria, which initially gave the CDMA operators regional-based licences. 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.
There is Still Hope of Revival, Says NCC
If the words of the Executive Vice Chairman of the Nigerian Communications Commission, the industry regulator, Prof. Umar Danbatta were anything to go by, then hope might not be totally lost on CDMA operation in the country. According to the EVC, the MTN’s acquisition of Visafone was approved by the Commission because it hoped that apart from using the spectrum to deploy LTE, MTN would revive CDMA operation of Visafone.
Danbatta, who posited that it is not the ideal thing for the country to have operators only on one technology, that is, the GSM technology, noted that even in the developed countries, CDMA technology is still in operation. To drive CDMA revival in the country, Danbatta said the Commission would be willing to encourage any service provider that shows interest in reviving CDMA in the country and would be ready to support such.