Nigeria telcos seek drug to battle death

Faced with huge debts and with liquidation staring at their faces, Nigeria’s motley crowd of Private Telecom Operators (PTOs) are considering merging with other players to improve their chances of survival. Yet, others could be completely bought over by outside investors in what would mark a new era in Nigeria’s young but boisterous telecom industry.

More than N15 billion (about $ 130 million) debts, including interconnectivity fees, hang over industry players particularly private telecom operators (PTOs). With the GSM sub-sector attracting much attention in terms of offshore capital inflow and PTOs losing grip to the dominance of mobile operators [Related Story: Haunted by Debts], analysts say it’s a matter of time before many PTOs become extinct.

Lagos based VSAT service provider Virgin Network was recently bought over by Victoria Garden City Communications (VGCC) Limited in what industry analysts see as the first of buy-over likely to dominate the sector in the next few months. “There is distress and many of these players would either die or be bought over,” said telecom analyst and Lagos based ICT instructor Titi Omo-Ettu.

The ebullient German trained telecom engineer Gbenga Adebayo heads VGCC. Since the company flagged off service in Lagos over four years ago as a landline operator, it has foraged into oil rich Port Harcourt in south-east Nigeria and has since announced plans to deploy service in Abuja and Ibadan.

VGCC is regarded as one of the few beefy players in an industry where most players are forced to go on diet.

One of the oldest PTOs Mobitel could be bought over completely by Virgin Mobile, the UK based operator owned by billionaire Sir Richard Branson. Virgin already has its hands in Vee Mobile, Nigeria’s second biggest mobile operator, through a buy-into arrangement with Vodacom SA which allows the two operators to have 51% control ownership of Vee. The deal is yet to be concluded.

But Mobitel is only one of the various investment options Branson is considering in Nigeria after he was able to secure a juicy deal with Nigeria authorities to revive the country’s moribund airline Nigeria Airways through the incorporation of a new carrier Virgin Nigeria.

Virgin Nigeria is the country’s official airline and would enjoy all the peps that go with being a national carrier. If the deal with Mobitel pulls through, Virgin would be reviving a network considered dead by many industry watchers. Mobitel has had its happy days as a PTO and was the leading interconnect operator after Nitel before the advent of GSM operators.

Plagued by management crises and dwindling subscribers revenue as well as inability to secure fresh funding for expansion, Mobitel’s good fortune had a downtime from which it is unlikely to recover.

Other PTOs are in talks. They include GTE, Discom, Reltel, Cellcom and some others. They are all keeping mom on the issue. “The problem is whether they can find a common ground to agree to work together,” said Lagos based telecom analysts and technology consultant to IT Edge. Business pacts with potential significance of eroding a company’s known identity is rare in Nigeria and if experience in other older sectors is to be considered, analysts say it is unlikely for local telecom players to form a single strong company.

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