Telkom SA quits Multilinks, its Nigerian CDMA operation
Telkom SA is quitting its CDMA operations in Nigeria, Multilinks, due to continued operating losses, despite cost reducing measures taken by the management of the firm to shore up profitability. This is a move that must also place in doubt the future viability of other CDMA operators in the country.
The Acting CEO of the firm, Vincent Raseroka at a briefing held to announce the decision to exit Nigerian CDMA operations, disclosed that it has become financially difficult for the firm to continue doing business in that segment, because the Nigerian operating environment is too competitive.
He stated that the firm's subscriptions and connections revenue decreased 18.2% due to the termination of access fees as a result of increased competition. Raseroka added that the management of Telkom had received expressions of interest from within and outside the country which will be evaluated in the next three to four months, though he declined naming the companies that had expressed interest.
He disclosed that due to the decision to exit CDMA operations, eleven expatriate staff will leave the company within the month, while potential impact on the rest of staff numbering about 750 will be in the first quarter following the successful conclusion of any potential transaction.
He stated that despite comprehensive turn around programmes embarked upon by Telkom, Multi-links Nigeria has continued to operate at a loss and the Telkom Group in March this year had to write down $1.2 billion in losses for Multi-links Nigeria, eroding confidence of shareholders in the capacity of the firm to make a headway in the Nigeria market which is highly dominated by GSM operators.
Raseroka lamented that Multi-links made a lot of strategic efforts to turn around the fortunes of the firm including substantially lowering its tariffs, yet was unable to break even. It was still saddled with an underutilized network of just 2.6 million subscribers, when it had a capacity for 10 million subscribers.
He said that a number of factors including the global economic meltdown contributed to the woes of the firm. He said that fact that GSM operators were getting more aggressive, in addition to increasing competition within the CDMA market also negatively affected Multi-links. The firm's operating revenue decreased by 1.7% in 2009.
It also recorded a 39% decrease in Earnings Before Interest, Taxes, Depreciation, and Amortization EBITDA from -3,214 million to -4,456 same year. Traffic revenue also decreased by 24.6% due to decrease in traffic volumes and higher churn rates.