26 November 2012

Nigeria: CDMA Merger Will Enhance Starcomms' Competitive Edge

The recent merger in the Code Division Multiple Access (CDMA) sector, among Starcomms, Multi-Links and MTS, will enhance Starcomms' position in competing strongly with operators like MTN and Globacom that operate on the platform of Global System for Mobile (GSM) Communication.

The GSM operators had over the years, become dominant players in the industry, intimidating CDMA operators with their huge market share.

According to Bloomberg, which quoted the Association of Licensed Telecoms Operators of Nigeria (ALTON), the merger would resuscitate the financial strength of Starcomms that was hitherto a leading player in the CDMA market, and provide it with a better platform to compete favourably with GSM operators in the Nigerian telecoms space.

Following the weak financial status of Starcomms, the CDMA operator, had on October this year, reached an agreement with Capcom Limited for investment of cash and assets worth $210 million in return for a 90.5 percent stake.

Capcom had initially bought over Multi-Links and MTS, before approaching Starcomms for a possible merger of the three CDMA operating companies.

With the merger plan, Starcomms will get assets including a licence operated by MTS First Communications and the mobile-phone business of Multi-Links Telecommunications, giving it the biggest spectrum allocation for any mobile operator in Nigeria and making it the first able to run the faster 4G data services, according to a statement from Capcom.

Chairman of ALTON, Mr. Genga Adebayo who spoke with Bloomberg, said "There is a huge opportunity in providing broadband from greater funding and the combination of spectrum licenses of Starcomms and Multi-links."

A breakdown of the telecoms market share among operating companies, show that out of about 107 million telephone subscribers as of September this year, CDMA networks have about 4.8 million customers, which is about 3.02 per cent share of the country's phone subscribers, with fixed lines at 0.44 percent while the GSM operators have over a million subscribers, which is about 96.54 per cent market share. It is believed that the merger will position the CDMA operations for a better deal to gain more market share in the Nigerian telecoms industry.

Capcom is a Lagos-based holding company, with investors including Nairobi, Kenya-based Oldonyo Laro Estate Ltd. and London-based Helios Investment Partners LLP, a private equity company backed by George Soros.

According to Communications Consultant representing Capcom, Funmi Abiola-Odutola, "Capcom will buy Multi-Links from Helios and pay with Starcomms' shares, which will make Helios a 10.5 per cent shareholder of Starcomms."

Starcomms was unchanged at 50 kobo a share, and it has no imminent plans to pay dividend and plans to invest profits to expand its business, according to a statement on the company's website.

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