CDMA Operators Make Waves in the Nigerian Mobile Market

March 24, 2009

While incumbent Nitel suffers from fixed-infrastructure woes, there’s been a boomlet among CDMA-based fixed-wireless operators in Nigeria — Starcomms, Multi-Links, Reliance Telecommunications (ZOOMmobile) and more recently Visafone. These players had their regionally based licenses upgraded to unified access service licenses (UASLs) in 2006, allowing them to extend their reach beyond traditional geographical limits and compete in both the fixed and mobile markets. It’s therefore not surprising that these operators have gladly extended their services into mobile markets and now pose a threat to the three established GSM-based operators, MTN, Zain and Globacom, both in terms of chipping into their revenues and snatching GSM subscribers.

The number of mobile CDMA subscriptions in Nigeria grew from just 380,000 in 2007 to more than 6m at year-end 2008 — that’s from 1% to 9.6% of all mobile lines in just one year. The top three GSM mobile operators are expected to keep their grip on the mobile market because the total number of GSM subscribers also increased by about 56% in the same period, but they will face increasing competition from CDMA operators. This means the trio will generate 64% of Nigeria’s telecom revenue in 2014, down from their 74% share in 2008.

The advantage that the CDMA operators have in Nigeria is that they are able to charge lower on-net and off-net call charges than GSM operators. Also, CDMA operators have fewer subscribers and less strain on their networks, which means they can provide better service quality. They also provide very cheap and partly subsidized mobile handsets that will appeal to the low-end market, especially those who have never been able to afford a handset. For instance, Visafone launched services in March 2008 and started selling handsets at ridiculously low prices, starting at just N2000 ($13.80). The operator’s customer base jumped from just 60,000 subscribers in March to 2.25m at the end of 2008, with the majority purchasing handsets for the first time.

I believe the key to success for CDMA operators and the reason why they are becoming more popular in Nigeria is their strategy to penetrate into rural, underserved communities and to provide affordable, effective services that appeal to the less fortunate among Nigeria’s 146m inhabitants.

In 2008, mobile CDMA service accounted for an estimated 6.3% of the market’s $8.6bn in total revenue, and we expect this share to grow to 11% by 2013. We also expect that, barring major changes in market conditions, CDMA operators will grab 20% of mobile subscriptions by 2014. Our Country Intelligence Report on Nigeria provides more comprehensive insight into the country’s communications market.

— Yejide Onabule, Analyst

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