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Multilinks acquisition: Subscribers want

By on April 5, 2011

Following the acquisition of MultilinksTelkom by Visafone, subscribers on Multilinks networks have asked Visafone to maintain the former’s good quality of service at affordable tariffs.

Visafone had, on Friday in Johannesburg, South Africa, acquired the mobile asset of MultilinksTelkom in a $52m deal.

The Chairman, Visafone, Mr. Jim Ovia, who signed the agreement with the Chief Executive Officer, Telkom, Mr. Feffrey Hedberg, was quoted as saying, “Visafone recognises that this deal will solidify its position in the Nigerian marketplace and is committed to offering world-class voice and data solutions to existing Multilinks customers. This transaction brings us closer to achieving our target of 10 million subscribers within three years.

“We believe that the superior technology offered by CDMA, combined with a subscriber base of 4.2 million active subscribers, will enable Visafone to continue as a game-changing innovator in the Nigerian marketplace. Multilinks customers will be afforded the same high quality of network and customer service as existing Visafone subscribers enjoy.”

Telkom said Visafone would pay an enterprise value of $52m for the mobile unit of Multilinks through a number of transaction steps.

Commenting on the final sale of the Multilinks’ mobile business in Nigeria, the Telkom CEO said, “The Telkom management is of the opinion that the sale of the Multilinks’ CDMA business to Visafone represents the best option available to our shareholders and Multilinks’ customers.”

However, subscribers on the Multilinks network are worried that tariffs may be adjusted following the acquisition as the investor would want to recover invested funds.

The Principal Partner, Mobile Money Africa, Mr. Emmanuel Okoegwale, said tariff balancing might follow an acquisition to enable the buyer to adjust tariff across the two firms.

He said, “Tariff hike may be influenced by the number of subscribers that the acquirer will get from the acquired firm, existing revenue profile per user .and what the acquirer intends to achieve with the acquisition.

“If the purpose is to position to gain market share rapidly and go ahead with dominant players, then price hike may not be an immediate feature. If the acquisition cost must be recovered quickly, then tariff hike may be the short-term way out. Cut over price for end user may also influence a price hike. Some end user devices may change as a result of the acquisition. The acquirer may hide the cost in tariffs or charge end user device updates cost directly.”

A subscriber, Mr. Adeola Saliu, who also expressed fear about the effect of the acquisition on subscribers, wondered why Multilinks had to sell its mobile CDMA operations in the first place.

Though, he noted that it was a good thing that Visafone acquired the troubled telecoms firm, he however, cautioned the new owner against “increasing call charges and tarrifs.”

“I hope this will improve the speed of the Internet connection because I have since abandoned my Multilinks modem,” he said.

Speaking in the same vein, a legal practitioner, Ms. Tumininu Mmajiyagbe, said that MultilinksTelkom offered a more reliable data service than Visafone and, therefore, urged the former to maintain a high standard of service quality.

She wondered whether Multilinks data consumers would have to acquire new Visafone modems or simply swap old ones with new ones.

“What is going to happen to our Multilinks modems? Are we going to get another one from Visafone?” she asked.

The President, Association of Licensed Telecommunications Operators of Nigeria, Mr. Gbenga Adebayo, had told our correspondent in an interview before the sale of Multilinks that all parties to the transaction must maintain network integrity, adding that subscribers’ interests must be prioritised over other indices.

He said that the planned divestment was part of the telecoms industry and that it should not infringe on subscribers’ right.

He said, “Our interest is that whichever way it goes, the interest of the subscribers is protected. Whoever is buying and selling should maintain the integrity of the network. We don’t wish that there would be a change in ownership and it will affect the industry. We are saying that whichever way it goes, it is good to maintain the integrity of the network and protect the interest of the subscribers.”

Multilinks is arguably the oldest mobile phone company in Nigeria, having been operating in the country for over 15 years. However, the company had over the years continued to incur huge losses for Telkom and was, therefore, regarded as the “sick baby” of the group.

In view of that, Telkom in November 2010, took the decision to halt the mobile operations of Multilinks.

The Acting Chief Executive Officer, Multilinks Telkom, Mr. Vincent Reseroka, said that the decision was made in the wake of the company’s continued poor financial performance.

Reseroka promised that the Multilinks’ mobile operations would be sold within six months and four months into the window period, a sale deal was signed.

Hedberg had said that the exit plan was essential to stabilise Telkom’s business by allocating its resources more efficiently.

“We are doing this through exiting the CDMA business and focusing our international activities primarily on corporate customers,” he said.

He said the path would allow the company to allocate capital more efficiently to those areas of the business that delivered a customer solution and drove revenue growth and margin.

Highlighting the underperformance of Multilinks, Herdberg, who was in 2009 seconded to Nigeria to turn around the ailing company before being recalled to become acting CEO in South Africa, said revenue from Multilinks dropped by nine per cent to R744m in the period under review.

He said CDMA subscribers decreased by 8.4 per cent to 1,865,767 and capital expenditure also decreased by 77.7 per cent to R158m.

Herdberg said the total CDMA market share of the company also continued to decrease, explaining that it had a negative profit from operations of R262m.

The Telkom boss said that the company’s board had mandated the management to review options to exit the Multilinks CDMA business and it had then received expressions of interest which it was evaluating.

source : Punch