‘Nigerians Will Soon Enjoy High Quality Voice Services From Smile Communications’
Smile Telecoms is a pan-African telecommunications provider that owns and operates mobile wireless 4G LTE broadband networks in the 800 MHz band in Nigeria, Tanzania and Uganda. Smile’s shareholders now comprise: Al Nahla Group, a Saudi Arabia-based company, which is the majority shareholder; Renven Investment Holdings, a pan-African investment vehicle, in which Nigerian investors, including the Obijackson Group, are the majority; Verene, representing Smile senior management and social entrepreneurs from South Africa; Telecom Investments, a Saudi Arabian-based investment company; Capitalworks, an active alternative management company, specialising in investment in the African mid-market; the PIC; and Smile employees.
This is how Smile is composed. But Nigeria is the biggest market for telecoms business in Africa. And because of that, Smile’s business in Nigeria accounts for almost 80 per cent of the whole Smile’s businesses.
Recently, Smile Telecoms raised USD365 million of debt and equity financing to accelerate its 4G LTE network expansion into Africa. This is one of the largest capital raises ever for a telecommunications operator in Africa. We are very happy about it. For the management staff and for the business, this is a very great feat.
Some of the institutions that participated in the capital raise include the Africa Export-Import Bank, Development Bank of Southern Africa, Diamond Bank of Nigeria Plc, ECOBANK of Nigeria, the PIC of South Africa, the Industrial Development Corporation of South Africa Limited and Standard Chartered Bank. So, it is a consortium of financial institutions that put this money together. The equity side is where we put in our own money as shareholders.
Having raised this money, what will it be used for? The funding will be used to expand Smile’s existing 4G LTE mobile broadband networks and services. By the end of 2015, Smile will offer clear voice services and have national coverage comparable to the largest 3G networks in each of its current countries of operation. Smile will also launch its broadband network in Democratic Republic of Congo (DRC) early in 2016.
People always ask the question about where Smile is headed. Are we doing an IPO? Are we going public? I think this fund we have raised answers that question completely because with this kind of fund, we believe we have all the monies we need for the expansion of our network. The aim of an IPO is primarily to raise capital. With our current funding we would not require any additional funds for the foreseeable future. I believe that before we complete the deployment of these funds, the returns on the business would be able to create enough funds to enable us to embark on any other future investments that we would want to do. So, the issue of IPO is ruled out.
But I would also want to mention that one of the reasons for having a business like this is to support expansion in the economy, improve the lives of people and also create jobs. The telecoms business all over the world has proven to be a very good catalyst in affecting the way people do things; the way people grow and ultimately the GDP of a country. So, it is a business we believe that by the kind of speed that this broadband has and the deployment of this kind of resources, it will create quite a lot of jobs for Nigerians. With Nigeria being, if not the first, may be, the second largest growing economy in Africa, it is very clear that this type of network will help Nigeria in actually growing faster and also consolidating in the gains that had already been made in the economy. So, I think this is a very good move. It requires quite a lot of support to make sure that Smile is a success story in Nigeria and Africa. I am sure that will happen within the next two years.
What percentage of the funds the company has raised will be invested in Nigeria?
Smile as a company is a pan-African organisation but the majority of the business is in Nigeria because Nigeria is the biggest market. I had earlier mentioned that about 75-80 per cent of the business is in Nigeria. So, it is also expected that about 80 per cent of that fund would be spent in Nigeria.
Nigeria is where Smile will make most of its money. This is where we have the population; this is where we have the growth; this is where we have the businesses; this is also where you have the oil. That tells you that the money that is in Nigeria is more and you have to go there. So, 80 per cent of this fund in terms of network spread and infrastructure will be used in Nigeria. You can’t compare Nigeria with countries like Tanzania, DRC and Uganda. Those are very small countries and Smile’s businesses there are small. So, they will be sharing about 20 per cent of the fund.
What strategy does Smile Telecoms have in place to break even in the Voice Over market?
The answer is very clear. The network as you know is a very superior network and it penetrates. So, the idea of clear voice services we are coming up with is to also give Nigerians the opportunity of enjoying very high quality voice services. We all know what we experience today with other telecoms companies in terms of services. So, the whole idea is to give something that is quite better in terms of quality and service delivery. That is why this fund is very key because once you can expand the service to cover the entire country, the voice network is going to be something different.
And you know that the 4G LTE we use here is better than even the ones in use in the U. S. and London. People that have used it in London will tell you. It is something that is being used overseas now as new technology and we have it here already. That is one of the things I always say about Nigeria. Nigeria is at the forefront of world development. We want to be there with every other person; we don’t want to stay behind. When you go to other countries of Africa, you will be very proud to be a Nigerian because you will see that we are quite far ahead of most of these countries.
So, it is something we are very proud of and the whole idea is to deliver this service at this broadband. I’m sure that by the time Nigerians start using it, it is going to make a whole lot of difference. And we are deploying it from this October. It will start working before the end of this year.
Let me quickly say that we are not going into clear voice services to fight MTN, Glo, Airtel and Etisalat. People should remember that we do wholesale as well. So, some of these big boys can take some of the spaces we have that are not being utilised. What we are trying to do is that within the broadband, we want to make sure that we take some of our free network and use it for Voice Over. When you are using Smile’s data and you can also make and receive calls anywhere in the world, it gives you a whole package. We have already created a niche for ourselves but we now want to add voice to it to give our customers a complete package. Apart from doing that, we are not going to be able to use all the space we have in the band. So, it is not a question of going to take part of the market of the big players in the industry. NO!
With respect to raising of funds, why did Smile go through the option raising funds from both local and international banks and other investors? Why didn’t Smile go to the market and raise funds via an IPO?
The straight thing that we decided to do in the Board is that this is a young company that we as shareholders have invested money already. We would not want to go to the public and start listing a company because we just have a broadband licence. What are you selling? What are you going to be giving to the public? You are bringing a product that is not known to them and you are trying to tell them that this is better than anything they have ever seen; and you want people to start investing. It is going to be a hard sell.
So, we felt that the option to raise debt through banks plus our own equity would be enough to get this company on ground. You think about selling the company to the public when actually you have proven yourself and have a name because what you are selling is a brand. You cannot just come and start selling a brand that is not known.
So, we want to make sure that this company is well grounded and makes its mark in the industry before we talk about an IPO. But we are now saying that with $365 million in the pocket of the company, we are not looking at an IPO now. We might look at it later but for now, we have all the funds we need to deploy this network throughout Nigeria and go to Uganda, Tanzania and Democratic Republic of Congo.