MTN’s Visafone acquisition bid reflects changing market dynamics

MTN’s reported acquisition of CDMA operator Visafone is the first smoke sign that telecommunications operators are responding to changing market dynamics by bolstering their presence in the data and converged service markets, according to analysts at Business Monitor International (BMI).

MTN, the nation’s largest operator with 60 million subscribers already has a small stake in the fixed-line market, through its acquisition of VGC in 2007, however, VGC has fared poorly in the face of growing competition and its subscriber base was nearly halved to 9,718 over the year to December 2014.

By contrast, Visafone has been the fastest growing operator in Nigeria’s CDMA and fixed-line markets. In December 2014 Visafone accounted for more than 99 percent of all CDMA subscriptions, at 2.171 million , and had nearly 54,000 fixed wireless subscribers, up by 41.4 percent year-on-year (y-o-y)and equal to a fixed-line market share of 29.5 percent.

Perhaps more importantly, Visafone has a large share of the operator-held 800MHz spectrum in Nigeria, which is ideal for extending mobile data services into less densely populated areas.

Overall, analysts at BMI expects MTN is most interested in Visafone to boost its presence in the fixed-line market and to access additional spectrum rather than for its CDMA customer base, given its negligible size compared to MTN’s nearly 60 million subscribers, and that despite Visafone’s recent success, CDMA is a dying technology.

The Nigerian Communications Commission (NCC) has taken several steps to help improve broadband networks and bring down access costs, in order to deliver the wider economic benefits of more developed communications networks. This includes allocating a wholesale 2.3GHz wireless broadband licence in early 2014, as well as the first two regional infrastructure licences for Lagos and the North Central Zone in early 2015.

Meanwhile, in 2014 three of Nigeria’s four leading mobile operators, South Africa’s MTN, India’s Bharti Airtel and United Arab Emirates’ (UAE) Etisalat, all finalised agreements to sell their towers to independent tower companies, generating operational efficiencies and reducing the cost of expansion to underserved areas.

The sale of towers is a trend that had been witnessed in Europe and was continuing in Africa due to the mutual benefits of such arrangements. “The process aims at reducing operating costs while at the same time operators can focus on delivering services, customer services, and marketing rather than managing infrastructure”, said Thelca Mbongue, telecoms analysts at Ovum.

BMI expects the allocation of wholesale licences and maturing of the tower industry to accelerate deployment of broadband networks, in turn supporting rapidly rising demand for data intensive services such as video-on-demand, online gaming and enterprise solutions.

Market observers are of the view that MTN’s move to acquire Visafone as part of its strategy to maintain its dominance of the telecoms market as data services become ever more important to consumers and enterprises. The move also suggests the beginning of a transition to greater convergence in Nigeria’s telecoms market.

The acquisition is also in line with BMI’s view that mobile operators would redirect returns and operational savings from tower sales toward development of new content and services. In the fixed-line space, privately held 21st Century Technologies, which claims a 54.3 percent market share, is the most attractive acquisition prospect.

However, there are several smaller players in the fixed and wireless broadband markets, including IPNX (which also entered the fixed-line market in 2014), Spectranet and Swift Networks, which could prove attractive acquisition prospects for telcos.

Ben Uzor