MTN, Visafone Acquisition: Between Monopoly And Service Delivery

Telecom InfrastructureMOODY investor services, a New York based international research firm had predicted, in its recent study, merger and acquisition among players in the Africa’s Telecommunication sector.

It said countries with four or more telecommunication companies that have a market share of less than 15 per cent may consolidate.

The prediction is almost becoming a reality in Nigeria, where MTN, which controls 43 per cent of market share, with 61 million subscribers, is believed to have concluded deal on the acquisition of Visafone, the only surviving CDMA player in the country.

Although, both parties are still keeping the acquisition deal close to their chest, authoritative sources that were privy to the agreement said the deal had been ‘‘signed, sealed and delivered.”

Executive Director, Corporate Services, MTN Nigeria, Akinwale Goodluck said recently that he was not sure of any of such deal.

“There is nothing like that. I just read in national dailies that MTN is acquiring visafone. I don’t think there is anything of such for now,” he said.

But other officials of the company, who preferred anonymity, had told Bloomberg that they will respond to its enquiry on the purported acquisition at the right time. ‘‘We will send a holding statement at the appropriate time,” said the General Manager, Corporate Affairs, Funmilayo Onajide.

However, a top management staff of the company told The Guardian that the acquisition deal is real, adding that it had been concluded.

Another authoritative source said until the grey areas in the acquisition deal are sorted out, the parties involved would not be willing to speak out.

“Somebody want to have a retaining stake in one of the companies to be merged. His proposal is not going down well with the other party in the merger and acquisition deal, which is why they are keeping sealed lips. But as soon as they agree on the terms of acquisition and merger, they will let the public know what has happened. I think you people should bear with them to conclude the deal before you speculate,” said authoritative source that was privy to the acquisition arrangement.

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.

Market observers are of the view 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.It will therefore, increase its chances to monopolise the industry.

The Guardian learnt that MTN is acquiring all those spectrum held by Visafone in preparation to launch and play big on Long Term Evolution, the all Internet Protocol.

It could be recalled that in 2013, the NCC 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 behavior and to ensure the sustenance of long term competition in th telecommunications industry.

But the NCC failed to, however, 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.

A telecoms expert, Kehinde Aluko told The Guardian that there will be three issues around the acquisition. He said the 800 MHz spectrum band is characterized by the presence of sub-optimal licensees, who have largely been inactive over the last eight years, stressing that the few, who have remained active, their performance has been sub-optimal and lack the financial capacity to deploy services for effective competition.

He also said the regulator might re-farm the 800MHz spectrum to make it available for other operators, as the current license holders have been unable to meet their roll-out obligations.

According to him, 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.
He however, praised the efforts of MTN for moving to salvage the sub-sector from total collapse.

A consumer right advocate, Moses Kwambe, said 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.

Kwambe predicted that 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.

It will be recalled that MTN bought a Lagos-based private telephone operator, VGC Communications, few years ago. Reports said it acquired the company because of its spectrum and the fibre ring all over Lagos. 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.

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.

The company 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.

Besides, market analysts have also observed that one of the factors that could have triggered 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. Sensing this scenario, MTN, not wanting to be beaten to the second place in the LTE offering, wanted the Visafone that has the 800 MHz spectrum band.

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