CDMA, going going gone?

The last few days have seen some rumblings in the telecoms sector in Nigeria. News (234Next | Thisday | Business Day) had it that Telkom is thinking of pulling out of Multilinks, a CDMA operator, or has even left (depends on who you ask) because its investment has gone down the flush bowl.

That wasn’t news to me because they started a loser’s game right from the word go. Defensive or “me too” investment is always a tragedy for any organization because it shows an obvious lack of strategic direction.

But that is for Multilinks.

Starcomms, the largest CDMA operator also pawned about 80% of its base stations to Swap Tech to offset the giganormous debt on their balance sheet.

These two stories don’t really mean much, businesses always run into trouble everywhere in the world, until everyone started saying CDMA business is bad in Nigeria. CDMA operators in Nigeria are having a tough time but the technology is not to blame. In North America, some of the largest operators use CDMA and are pretty successful. That GSM is the global dominant mobile standard points more to the strategy behind its introduction and less to the technology itself.

From my own experience there are some major faults with the CDMA operators in Nigeria that is hastily dragging them to their death.

  • One, they lack strategic directions. Considering that CDMA operators came before the GSM telcos, is their current debacle not surprising? Prior to the advent of GSM, the CDMA operators preferred to sell to the “elites”. Few had more than 30,000 lines on their switches. It was the age of mobile for the “big man”. Then GSM came, the flood gate was opened and CDMA has been playing catch up ever since
  • Two, the CDMA operators restricts customers only to the phones that they provide. And usually these are very dumb ugly phones sold for exorbitant prices. So nobody wants to use them and those who do don’t use them as their main contact phones.
  • Three, phones aside, CDMA operators lacked features and service offerings. No blackberry, you can hardly browse on your phone, etc. But then the phones were basic so even if you could, the phone wouldn’t help matters anyway. Check out their websites and see the very lame products and service offerings
  • Four, when the GSM pulled right beyond them, they went into overdrive and started competing on cost. That was the last nail. After that everything just spiraled out of control.

Telecom is a volume business and unless you have a pretty good idea of what to draw in the crowd, you can’t compete. When Visafone was launched, it was a collection of different networks and with innovative marketing, leapfrogged to the fore quickly.

Vodacom (50% owned by Telkom then) had a chance to play in the GSM space in Nigeria but curiously, their boards played it away and the opportunity passed. But to show how crazy things could be, 8 years later they paid $280M to acquire Multilinks in Nigeria. Of course, the owners were ready to bail out of a losing market then and were more than happy to sell. Even despite paying top dollars, their strategy for turnaround was at best, facing the wrong direction. Today, the rest is history.

Consolidation of the telecoms market is a reality in every country. Maybe this is our time to shed the losers.

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