Skannet Shareholders Endorse Merger in Nigeria

Mergers, Acquisitions and Financial Results

Shareholders of Skannet, one of Nigeria’s service providers in the country have approved the proposed merger of the company with smaller organisations in its bid to stay afloat in the wireless communications market.

The chairman of the company, Dr. Lani Sogbetun,said that the merger became imperative because of the huge financial investment costs in the telecommunications industry, which Skannet would not be able to shoulder alone. He told the board members that the company cannot achieve the desired level of growth, if it concentrates only on organic growth and expansion.

He added that the company has weighed all options and believes that the Skannet is ripe enough to acquire smaller companies or even merge with a company of the same structure to create a more formidable entity.

Sogbetun added that in the proposed restructuring of the company, the board has commissioned a management consulting firm to examine the structure and operations of the company to assist in determining the areas that need specific and urgent intervention for the continued survival of the company.

He said that the company has witnessed increased competition from the activities of the CDMA providers who also offer Internet services. He hinted that the low cost of acquisition of the CDMA devices puts the company at an advantage initially when it was able to respond with the Access for All {AXS4ALL}, which has performed well in the market.

The introduction of the product, Sogbetun maintained, raised the demand for the services of the company. "But due to the financial requirements to maintain the needed inventory, we could not get the needed financial assistance from the banks leading to a slow down to our market penetration", he said.

He admitted that telecommunications is a field that requires a huge capital outlay hence the need for consistent evaluation of opportunities and technology if a company is to remain relevant.

The Skannet boss expressed misgivings at the degeneration of power supply, which he noted has stretched the services of the company. He noted that electricity, which hitherto was a small input into the business creped from a mere 1 per cent of costs to almost 8 per cent over just one year.

Commenting on the company's financial performance, Sogbetun noted that turnover increased by just 1.7 per cent from N148 million in 2005 to N150.5 million in the year 2006, while profit after tax increased by 315 per cent from N2.9 million to N12.1 million. Earnings per share according to him, increased by 275 per cent from N0.04 to N0.15.

He pointed out that it was noteworthy that Internet service prices were adjusted such that Average Revenue Per User (ARPU) dropped by 23 per cent from N14,754 per customer per month in April 2006 to N11,405 per customer per month in December 2006. He therefore, said the small revenue increase is from the growth in the company's customer base. He also hinted that the company plans to expand to places like Lagos and Abuja but that paucity of funds did not really allow this.

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