The acquisition of Visafone, the only Coded Multiple Division Access (CMDA), network in the country by MTN Nigeria is expected to bridge the digital divide in the area of internet access, reports Ibrahim Apekhade Yusuf
IT is no longer news that MTN Nigeria acquired Visafone, hitherto owned by renowned banker and ICT philanthropist, Jim Ovia. Visafone, if you may, was the only Coded Multiple Division Access (CMDA), network in the country, offered a number of services including voice, high speed data internet and other value added services including providing business solutions to small and medium sized companies and corporate organisations in Nigeria.
Road to acquisition
It could be recalled that in 2013, the Nigerian Communications Commission (NCC), the industry regulator declared MTN dominant in both the retail mobile voice and wholesale leased line markets, following the 2013 Dominance Determination Report (DDR), to impose specific obligations meant to ensure it balances competitive behaviour and to ensure the sustenance of long term competition in the telecommunications industry.
The NCC, however, failed to declare any operator dominant in the mobile data market, where MTN’s operation of Visafone network, should fall. Yet market watchers feel that the acquisition and possible access to valuable sub-1GHz spectrum to provide 4G services would be to the exclusion of other leading operators and may clearly give it an unfair advantage, which will be impossible to replicate in the short term by any operator.
There had been speculations for months that MTN Nigeria, which controls 43 per cent of market share, with 61 million subscribers wanted to buyout Visafone but the telecoms company was not sure that the NCC, the industry regulator would make available Digital Dividend Spectrum for mobile operators in line with the recommendation of the International Telecommunications Union (ITU) by June 17, 2015.
But MTN Nigeria finally got the nod of the NCC in late December 2015 to utilise Visafone’s 800MHz spectrum to launch fourth generation long term evolution (4GLTE) services.
A best buy for MTN
Market analysts had observed that one of the factors that informed MTN acquisition of Visafone was the planned launched of LTE by Globacom, which already acquired the 700 MHz from the NCC. That gives it the capability to do LTE. Globacom is the only other operator that has the licence on the 700 MHz spectrum; hence, it plans to launch LTE services.
Many observers, therefore hold the view and very strongly too that MTN’s acquisitions of Visafone will give it access to 800 MHz spectrum band, which will enable it provide 4G LTE services and apparently place it in enviable position of being the only GSM operator with access to this spectrum.
Under the plan, over two million existing Visafone subscribers will be migrated onto the MTN Nigeria network, a development that will now enable them use their voice and data services, anywhere where the latter has network coverage.
Short and long term benefits of Visafone acquisition
In the view of stakeholders in the telecoms industry, the acquisition is expected to provide MTN the robust voice and data platform of Visafone and cater for the booming internet population in Nigeria.
In a statement made available to our correspondent by the management of MTN Nigeria, the telecoms giant said the acquisition of Visafone will bode well for the telecommunications sub sector both in the short, medium and long-term.
According to MTN Executive, Amina Oyagbola, the acquisition which seeks to leverage resources for service enhancement is also reflective of our concerted efforts to deepen the growth and roll out of broadband services across the country in support of the National Broadband Plan for the benefit of Nigerians.
Oyagbola said “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.”
Speaking further, she said, “The acquisition of Visafone highlights MTN’s commitment to Nigeria. More capacity will facilitate enhanced product/service offerings and experience in the data space to the delight of our valued customers. Voice is still King. However, data is becoming increasingly important in our everyday lives and our energies are focused on enhancing data and internet services to the benefit of our customers and the country at large.”
Echoing similar sentiments, Casmir Okeke, a telecoms expert, “The acquisition is expected to ensure high quality data services and improve mobile broadband experience for subscribers of Visafone and MTN.”
He said: “The merger is also expected to provide the much-needed relief to the booming internet economy by making available quality mobile broadband services adopting the state of the art 4G LTE technologies during the year.”
With about 150 million mobile subscribers and about 97 million internet users, Nigeria ranks among the fastest growing countries in terms of mobile subscribers and data penetration.
However, the vast majority of the 97 million internet users today are limited to narrow band internet at 2G/3G speed.
Presently, majority of data users use 2G/3G technologies but it is estimated that LTE users will constitute 80 per cent of all data users by 2019.
Availability of 4G LTE mobile broadband services on a national scale starting in 2016 is expected to act as a catalyst to many sectors of the economy like the booming e-Commerce sector, banking, insurance and financial services, software and IT enabled services, among others, and is likely to widen the revenue base of the federal government into non-oil sectors.
Based on the national broadband plan of the federal government, the industry source explained that the aggressive launch of 4G LTE services by the merged entity of MTN and Visafone is also expected to drive the broadband penetration in the country from under 10 per cent to the targeted 30 per cent by 2018, and help meet the national broadband plan targets.
The market consolidation with the acquisition of Visafone by MTN is the first its kind in the telecoms industry in Nigeria and has been given the thumbs up in the larger interest of the country and the economy.
Is MTN on acquisition spree?
It may be recalled that MTN Nigeria had reportedly acquired MTN Nigeria bought VGC Communications Limited (VGCCL) at $70 million (N9.3 billion). VGCCL was licensed by the NCC to provide cabling and radio, telephone services nationwide and had laid extensive fibre optic cables, and Internet service provision.
VGC Communications was established in April 1995 with the primary objective of providing all the communications related services required by the resident of Victoria Garden City and Ikota Shopping Complex.
This was seen as a proactive move by MTN to prepare itself for landline telephony services, especially as Glo has the licence and apparent capability to offer landline telephone service.
Fear of monopoly
While the statistics makes Visafone acquisition less surprising, the concern of industry observers seems not to be what the future holds for CDMA operation in the country, but what would become of the telecommunications sector when more power is added to the operators, who already had huge control of the market.
Industry watchers believe that much as MTN buyout by Visafone is a welcomed development, it may lead to monopolistic hold by the telco.
Specifically, they argued that 800 MHz spectrum band is characterised by the presence of sub-optimal licensees who have largely been inactive over the last 8 years. For the few who have remained active, their performance has been sub-optimal and most lack the financial capacity to deploy services and thus can hardly compete effectively.
Besides, they said the regulator may want to re-farm the 800MHz spectrum to make it available for other operators to deploy services, considering that the current licence holders in the spectrum band have been unable to meet their roll-out obligations. Another reason is that the 700MHz band which is due for re-farming, in line with International Trade Union’s digital dividend objectives, is currently being held by the Broadcasting industry and may not be available for release before 2017.
Sharing this sentiment, an industry player, Oscar Dubem, said while the deal may be healthy to salvage a dying CDMA sector, there could be reason to apply every caution in finally consummating it.
According to Dubem, “while I will always give kudos to MTN for its giant strides in this economy in general, I am however concerned that should this acquisition give it access to sub 1GHz spectrum to the exclusion of other leading operators, it will therefore provide it with an unfair competitive advantage in the data market where it can easily deploy its size and profitability to further entrench dominance in the market.
“This may stifle other late entrants and their ability to compete. Again, given that it has already been declared dominant in the transmission market, its ability to control both spectrum and access at prices they dictate to industry and consumers makes this an unhealthy state of affairs, and poses a grave threat to the viability of the industry.”
This scenario, Dubem stressed, will potentially leave the sector with one dominant player in both the retail voice and data markets. “The Nigerian subscriber may ultimately pay for this in the form of higher tariffs, poor quality of service levels and little or no incentive for innovation due to the lack of competition in this market segment.”
Babajide Henry, a consumer right advocate is also convinced that the acquisition deal poses a real threat to the viability of Nigeria’s telecommunication industry because of the possible emergence of a single dominant player in both the retail voice and data markets.
According to him, on the long term, the Nigerian subscriber will pay for this in the form of higher tariffs, poor quality of service. He said incentive for innovation will be no more, while a bully service provider will emerge, due to lack of competition in the market.
Divergent views
Speaking to a cross-section of analysts on the propriety of the MTN deal, they said the motive was clearly for profit maximisation.
“MTN Nigeria bought Visafone because they wanted to utilise Visafone NCC band allocation for most likely FDD/TDD 4G LTE services,” said Frank Onyewuna, an ICT vendor in Ikeja.
Ms. Uju Stellamaris is also on the same page with Onyewuna.
According to her, “Of course, MTN is in the GSM business, why buy a CDMA operator? It looks like they bought them like the earlier purchase of VGC com so as to ensure they remain dominant in telecoms, the workers should have known that the technologies are not compatible and so they will not be absorbed into MTN who had asked some of their staff to go earlier?”
Timeline for operations
The acquisition of Visafone by MTN Nigeria has not been without controversy. Among other things, there are fears that the former staff of Visafone were laid off following the completion of the deal for obvious reasons just as there is no word as to when it would commence operations of the 4G LTE services.
Although there was no official statement by MTN management as regards the status of the former staff of Visafone, an inside source who asked not to be named because he was not authorised to speak for the company confided in The Nation that the company wants to reduce its risk exposure to a large extent.
The management was however noncommittal when The Nation broached the subject about the proposed date for the commencement of the operations.
