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MTN, Visafone deal: Concerns over an emerging monopoly

Telecoms operators cry out over multiple environmental taxes

Visafone, the only Coded Multiple Division Access (CMDA), network in the country and hitherto owned by renowned banker and ICT philanthropist, Jim Ovia was acquired by MTN Nigeria recently.

But the truth is that 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 Nigerian Communications Commission (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.

MTN Nigeria, however, got the go ahead of the NCC in late December 2015 to utilise Visafone’s 800MHz spectrum to launch fourth generation long term evolution (4GLTE) services.

Why MTN took up the deal

To market analysts a number of factors did inform MTN acquisition of Visafone, chief among which 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.

Perhaps, MTN decided to acquire Visafone in order to get access to 800 MHz spectrum band, which it believes, will enable it provide 4G LTE services and apparently place it in an 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 the latter has network coverage.

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.

According to MTN Executive, Amina Oyagbola, the acquisition which seeks to leverage resources for service enhancement is also reflective of 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.”

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.

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 have 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.

Read also: MTN swallows up Visafone, kicks out 2,000 workers

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.

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.

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 its NCC band allocation for most likely FDD/TDD 4G LTE services,” said Frank Onyewuna, an ICT vendor in Ikeja.

“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?”

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.

 

…….. By Ali Smart

 

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We are an online newspaper, very passionate about Nigerian politics, business and their leaders. We dig deeper, without borders and without fears.
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