Cash Injection in CDMA Rings Resurgence, Fears

The multi-million dollars cash injection into the Code Division Multiple Access (CDMA) operations by CAPCOM, the new operator from the merger of Starcomms, Multilinks and MTS First Communications is spreading panics in the telecom space as the industry sense the emergence of a dominant player in the fixed wired/wireless segment.

With the huge financial war-chest and an avalanche of contiguous spectrum to be held by the consolidated operations, a new powerful company may be in the making if it also gets its business model right.

Nigeria CommunicationsWeek investigations showed that CAPCOM is planning to form a single national Long Term Evolution (LTE) broadband operator that will reap from 20 MHz of contiguous 1900MHz spectrum, the largest spectrum allocation for any mobile operator in Nigeria.

Already, Starcomms Plc has reached an agreement with CAPCOM Limited to provide it with a capital investment of cash and assets independently valued at $210 million.

The fear is that this collaborative effort is capable of giving the CDMA Operators a competitive advantage over the GSM operators who are unable to launch LTE services in Nigeria, owing to the dearth of spectrum.

The spectrum according to the Nigerian Communications Commission (NCC) would be released after Nigeria must have achieved the digital migration from analogue.

LTE has several advantages over the existing 3G network as it has reduction in traffic communications while sending data.

LTE also allows more users to use the same frequency in a cell, which results in increment of mobile broadband users and offers faster data rate transfer which is in higher download and upload rate.

As subscribers consume more data than voice, GSM operators fear that their subscribers would be lost to the CDMA as there would be reduction in internet connection lagging.

In time past, the CDMA segment was faced with severe operational and financial challenges caused by unfavourable policies, uneven playing field, scarce government support, preference for GSM telephony in the country, corporate governance issues, among others.

At the moment, the CDMA industry which started with about 12 operators in 2001 is left with just Visafone as the dominant player.

 
To facilitate the CDMA consolidation, CAPCOM will provide $98 million in cash to finance the post-acquisition integration of assets to meet on-going short-term losses in the business and to deliver the combined company’s new business plan.

CAPCOM was founded by MBC, a trust of 20 years standing whose portfolio companies manage over $1.25 billion in the asset management and commercial banking sectors focused on emerging markets.

With this investment, CAPCOM  aims to create a national broadband Internet champion capable of significantly contributing to the government’s ambition to overcome the digital divide between Nigeria as an emerging market and other developed markets internationally.