Sunday, April 20, 2014

MTN, Glo, CDMA operators lose market share in telecoms industry- report

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Etisalat and Airtel had increased market share.

Nigeria’s Code Division Multiple Access (CDMA) arm of the telecommunication sector has continued to lose market share to the GSM networks, a report analysing the sector has revealed.

The report by Renaissance Capital, an investment bank, stated that Airtel and Etisalat recorded market share gains in the last six months ended September 2012, while MTN and Glo lost part of their market share.

As at the first quarter of 2012, according to the report, CDMA had 4 per cent of the market share. Etisalat had 12 per cent, Airtel had 18.8 per cent, Glo Mobile had 21 per cent, MTN had 43.3 per cent, while ‘other’ had 0.9 per cent.

As at the third quarter of 2012, however, CDMA’s market share had fallen to 3 per cent. Etisalat had risen to 13.4 per cent, Airtel 19.7 per cent, Glo had fallen to 20.7 per cent, MTN had fallen to 42.5 per cent, and other, 0.7 per cent.

The growth of the mobile operators in Nigeria which has seen them dominate the telecoms industry has taken its toll on the CDMA operators, hitting them really hard in the face of a thriving mobile telecoms market.

This difficulty, earlier in the year, pushed three major CDMA’s, Starcomms, Multilinks and MTS to consider seeking approval from the Nigerian Stock Exchange to merge.

The CDMA however appear not to be the only ones hit this year. MTN Nigeria and Glo Mobile also lost part of their market share. This is on account of stiff competition, and a deteriorating network quality, especially for MTN, the report stated.

The CEO of MTN Nigeria, Brett Goschen, accompanied by MTN IR, hosted a meeting with sell-side analysts recently, to provide an update of the business.

“Our key take-away is that 2012 has been another challenging year for MTN in Nigeria, no different from 2011″ the RenCap report quoted Mr. Goschen as saying.

According to RenCap, the mobile landscape started to change in October 2010 and MTN was caught off-guard in terms of network capacity.

“It was unable to match competitor activity in voice pricing and as a result lost market share, unable to meaningfully adjust lower its premium voice pricing. The matter was made worse by deteriorating network quality.

“The company, in our view, underestimated the increase in traffic following the price declines since late 2010, due partly to the elasticity effect. Network quality deteriorated while the company (from a capex point of view) remained in a catch-up phase. Airtime revenue as a result of premium pricing suffered with subscribers switching to other MNOs and 1H12 airtime revenues were down 4.4 per cent Year on Year,” the report stated.

The management of the telecoms company, according to RenCap, said the decline in the third quarter was between 3 per cent and 5 per cent, with September flat Month on Month (MoM) and a small improvement in October MoM.

As a way forward, RenCap says MTN’s management is planning a change in the network build model from internal to outsourced / turnkey and increasing OEM involvement.

The investment bank says this introduces an element of risk and given the high level of network investment by the industry. As such, “MTN in our view has to be a price- taker and no longer a price-maker as in the days when it did the bulk of the network build in Nigeria (and could pick and choose the contractor with the most attractive pricing)”.

“Whichever way we look at it, 2013 is likely to be another year of significant network investment and perhaps a step-change from the annual run-rate of between $800mn and $1bn of the past three years or so. We also believe any recovery in voice revenue growth will be towards the latter part of 2013″ the firm said, adding that 2013 will be another tough year and any meaningful recovery in airtime revenue to be back-end loaded.

The battle between Nigeria’s mobile telecoms sector has been fierce, to say the least. Ranging from outrageous promos to ambassadorial campaign, the journey has not been for the faint at heart.

These moves have made subscribers migrate from one network to the other, with some having the SIM cards of almost all the operators, each performing one promo function or the other.

Only recently, the Nigerian Communications Commission placed an indefinite embargo on promos asking the telecom operators to focus on rendering quality service instead.

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