MainOne Cable Company Nigeria Limited recently celebrated 10 years in the business of bridging the digital divide in West Africa.
As the provider of the first privately owned, open access 7,000-kilometer undersea high capacity cable submarine connection in West Africa, MainOne continues to attract the interest of individuals, corporate bodies and government institutions across the continent.
However, MainOne was among six telecom operators recently mandated by the Nigerian Communications Commission (NCC) to submit their yearly financial statements, within 7 months after the end of their financial year.
The company, though celebrated, is not without its challenges, which its financial statements would make clearer. However as we await the submission of the statement, Nairametrics looks into MainOne in this week’s Company Profile to understand what makes it tick.
How it started
Funke Opeke returned to Nigeria in 2008, where she was faced with ridiculously poor internet connectivity, so she decided to do something about it.
She started Mainstreet Technologies, the developers of MainOne Cable in the same year, to serve as a service and network solutions provider, not only in Nigeria but in West Africa.
What is now recognized as one of Africa’s biggest cable companies started with all of Opeke’s savings as start-up capital. She encountered stiff challenges related to raising more capital to take care of the foundational works, feasibility studies, business plans, and technical plans. However, the company was able to pull through.
On April 28, 2008, Main Street Technologies awarded a turnkey supply contract for the MainOne Cable System to Tyco Telecommunications. After completing and commissioning the project, MainOne went live on July 22, 2010.
The company has since grown in leaps and bounds from its little beginnings. Its connections extend from Portugal to West Africa, with Cable Landings Stations along the route in Accra (Ghana) and later to other countries in Africa like Dakar (Senegal), Abidjan (Côte d’Ivoire), and Lagos (Nigeria).
The Phase1 cable system spans 6,900 kilometres. Additional connectivity extending to Angola and South Africa occurred in the Phase2 of the project.
In 2015, the company started operations of MDXi, said to be Nigeria’s largest Tier III Data Center, and extended a submarine cable from Lagos to Cameroon.
Operations and unprecedented glitch
MainOne is in the business of providing telecommunication services and offers wholesale broadband services through a system of cable networks and fiber optic infrastructures.
With its services acclaimed to come at fair charges, MainOne Cable has in its clientele, telecommunication operators and providers, governments, large enterprises, and schools across 10 West African countries.
The company claims that its decision to provide its services at rates that are less than the current international bandwidth prices in the region is to encourage local content development via skills transfer of critical networking technologies and job creation, with the location of the network operational center (NOC) in Nigeria.
Main Street Technologies is also backed by influential investors such as the Africa Finance Corporation, the Pan-African Infrastructure Development Fund (PAIDF), and a couple of Nigerian banks.
In 2018, the company recorded a 74-minute glitch during a network upgrade that caused some Google global traffic to be misrouted through China. This temporary disruption attracted immediate reactions from critics, but the company assured that stringent processes had been put in place to prevent a repeat of such outage in the future. To its credit, there has been no other record of such.
In an interview with Nairametrics in 2017, Opeke stated that the company was yet to attain profitability, but was making strategic investments that would pay off in the future. However, with the last publicly available statement being that of 2014, there is no way to ascertain what level of progress has been made in the last 6 years.
The 2014 financial statement was audited by KPMG Professional Services at the time when Babatunde Dada was still CFO. The report showed progressive growth in the company’s fortunes from 2011 to 2014. However, all of the company’s expenses went up, despite the various cost optimization programs implemented.
Profit before tax grew from N146.8 million in 2013 to N189.6 million in 2014, while total revenue grew from N1.1 billion in 2013 to N1.7 billion in 2014.
In 2020, the COVID-19 pandemic and other incidents also took their toll on the company’s finances. During the company’s 10 years celebration recently, Opeke pointed out that the cost of the company’s services had become slightly expensive due to power challenges and the currency volatility in the country.
However, she said that the company was working towards deploying smarter policies to further realise its vision. She also noted that the company was in the process of winding down its foreign debt obligations and increasing exposure to Naira loans, to shield itself from the impact of the fluctuating exchange rates, since its customers paid for services in naira.
A decade after its establishment, Opeke still runs MainOne Cable as the Chief Executive Officer, while Anil Verma serves as the Chief Technical Officer.
Solanke Abimbola, Chief Finance Officer; Tinuola Ipadeola, Head of Corporate Services and Development; Gbenga Adegbiji, Chief Operations Officer MDXi; Abayomi Adebanjo, General Counsel; and Olawale Fayose, Company Secretary.
Heading the Board of Directors is Fola Adeola as Chairman, while Dapo Oshinusi, Taiwo Okeowo, Bennedikter Molokwu, Innocent Ike, Souleymane Keita, Banji Fehintola, Sipho Makhubela, George Olaka, Sandeep Fakun, and Praveen Beeharry, are all Directors.
With this calibre of talents and seasoned professionals on its management team, the mystery shrouding its financials becomes worrisome.
The over $400 million infrastructural investments in West Africa have made noticeable impacts across the economy and earned MainOne a number of recognitions and awards.
In 2019, MainOne was awarded the Datacloud Africa Award for Excellence in Data Center (Africa) and Africa Cloud Service Provider of the Year, Nigeria Business Leadership Award for Connectivity and Data Centre Service Provider of the Year, and BoICT Award for Best Tier III Data Centre in Nigeria – MDXi.
Others are NTITA Telecoms Wholesale Provider of the Year (2017), Lagos Chamber of Commerce and Industry Award for Excellence in Broadband Infrastructure (2016), Frost & Sullivan Best Practices winner for the Nigerian Data Center Customer Value Leaderships Award (2014), Ghana Telecoms Awards: Telecom Wholesale Carrier of the Year (2013), and Nigerian Telecoms Awards: Broadband Company of the Year (2011), African Telecom Hall of fame – Best Telecoms project of the year (2010), amongst others.
Besides acting in line with the new NCC policy, the Management of MainOne will have to do something about making the financial reports available to the public. Not only will this satisfy stakeholders’ curiosity, but it will also keep interested and potential investors abreast with the progress made so far and help them determine where assistance is required.
Cloud services are your safest bet against data and intellectual breaches – Adejumo, Cloudflex founder
The rule of keeping data within the country of origin allows Cloudflex to collaborate rather than compete with international players.
The Twitter community went up in flames last year when the official accounts of notable personalities like Donald Trump, Elon Musk, Jeff Bezos, Bill Gates, and Barack Obama were hacked by individuals who managed to rip some followers of their cryptocurrency. Those accounts were suspended for some days pending investigations but what this did was to alert the world to the need for heightened cybersecurity in countries.
In Nigeria, particularly, where cybercrime has been on the increase in the last couple of years, cybersecurity is a touchy topic; especially since global laws expect that customer data should not be stored outside the company of origin and most of the cloud services companies are international. There is, however, a local cloud company providing cloud services for Nigerians in Nigeria.
Cloudflex was founded in 2016 and has focused on providing cloud support infrastructure and services for companies away from the company premises. Founder and CEO of Cloudflex, Remi Adejumo was a guest on Nairametrics Business Half Hour recently, where he explained that the company was created to provide tailored solutions for clients in the Nigerian space.
Having worked almost three decades in several institutions, the last of which was EcoBank Nigeria Plc where he was in charge of IT Infrastructure, Adejumo saw the opportunity to create a Nigerian-built cyber-security solution, “that is fully Nigerian and run by Nigerians.”
“This is not a service where one size fits all. We have our peculiarities as a market and we are designed to serve the Nigerian market. If you want to get a foreign cloud service, you could wait 6 to 8 weeks, but if you want to get one from Cloudflex, you could have it in 24 hours.” Adejumo explained.
When companies were making several adjustments to fully activate the remote-working policy at the peak of the coronavirus pandemic lockdown, the importance of cloud services became more obvious. Companies needed a round-the-clock server from where the staff could access data from their homes and still work seamlessly.
The rule of keeping data within the country of origin allows Cloudflex to collaborate rather than compete with international players like Microsoft Azure and Amazon’s AWS, and use one another’s platforms.
There are a lot of security concerns about cloud services which some people think is not safe enough, but cloud-service providers would still insist that they are the safest option.
“The cloud platform is far safer than your own private server because your private server is on your premises and everyone knows where it is. From experience, 70% of breaches are done by the staff of your own organisation, and having a third party manage your own platform, means that you and your staff don’t know where it is. There is a protocol in giving access from the service provider, so security is higher. The data breach is not just financial, it is also intellectual. You can secure a building as much as you want, but as long as there is a door, somebody can still go in. That is the limit to your physical server in your office premises,” Adejumo explained.
There are also advancements in predictive learning, analysis, and reactive security, that allows the cloud systems to detect and flag activities outside the patterns until it is confirmed and validated.
Like most other startups in the tech space, funding remains a challenge. Adejumo recounts that the company started off solely on his savings and proceeds from the sales of some assets. Nigerian investors appear to still be sceptical of the tech startups and the result of this is that a lot of investment in the tech space comes from outside the country.
Cloud services will play a major role in the future of cybersecurity and Cloudflex is poised to take a space in that scene. According to Adejumo, the company is in the process of securing funds for expansion, although crowdfunding is not one of the options being considered.
Interswitch: The story of one of Africa’s earliest unicorn companies
Interswitch has come a long way, pioneering the Nigerian digital payments system.
One can hardly switch from the years of carrying large volumes of cash around to the years of using a card for financial transactions in Nigeria, without mentioning Interswitch.
Like the name suggests, the company uses a ‘switching’ infrastructure to connect the different banks in Nigeria and provides the technology now used for ATM cards. From a time when the company had only 3 banks on its network, Interswitch has grown in the last 19 years and now has 11,000 ATMs across different banks on its network.
How the journey started
A young graduate working in Telnet, Mitchell Elegbe was worried by the several inconveniences Nigerians had to go through to carry out financial transactions. From making long and stressful journeys to the banks, waiting in long queues, missing transaction deadlines, and increased loss of cash to criminals, that was certainly not the easiest of times to be an adult. Some opted for bank drafts to avoid carrying cash to travel, and I remember accompanying my mother to the bank a couple of time to buy a bank draft to pay my school fees.
Many people had to join long queues at the banks on Friday evening to withdraw enough cash for the weekend, and this naturally meant that weekends became work hours for criminals. The most frustrating part of it was that the bank branches did not have any software connecting them, so customers had to continue withdrawing money from the exact branch they opened the account, even when they needed to make long business trips. Even the highway became a playfield for robbers.
The young Elegbe who had only worked two years after his National Youth Service Corps, came up with the Switch idea, but the plans did not materialise as many traditional players were not interested in buying the switch software.
Not deterred by this little glitch, Elegbe went ahead to establish Interswitch, an organisation which would use the Switch software to address the problem. This time, he got the support of Accenture, and also got buy-in from some banks to raise a part of the start-up capital. Getting a Chief Executive to head the company was the next hurdle to be crossed, as Elegbe recalls that most of the capable hands then available were expatriates “who expected to earn more than the company’s capital”.
In search of cheap labour, he had to take up the task even though he had very little experience thus resigning his job at Telnet. The shareholders and the sponsoring company (TELNET) had their concerns at first, but they gave Insterswitch a shot and under Elegbe’s leadership, the company pushed through the uncertain years to become what it is now. Eight years later after starting Interswitch, the company was valued to be worth N26 billion (over $170 million), giving massive returns to early private equity holders. The company’s network grew steadily from 7 banks to 13, and then an ATM consortium and Globacom, a mobile telecommunications provider, up till this point when it has almost all Nigerian banks and 11,000 ATMs on its network.
Though Elegbe had no shares at the outset, his impressive performance earned him and his team some equity in the company in the coming years.
“So you have somebody who invested N10 million in this business going away with N2.6 billion after eight years. That to me was real value,” Elegbe said. When you help solve big problems, Mitchell says, you’re bound to be well rewarded.
Mitchell Elegbe is now the Group MD & CEO, Akeem Lawal is Divisional CEO, Switching & Processing Group while Mike Ogbalu is CEO, Verve International.
In 2019, Visa bought a fifth of Interswitch at a valuation of $1billion, making Interswtich Africa’s first fintech unicorn.
Interswitch is the owner of Verve, an international debit card and Nigeria’s most used payment card which is said to account for over 70% of the 25 million cards in circulation in the country. The company also owns Quickteller, an online payments platform; Retailpay, a mobile business management platform; Interswitch S&P, the first Nigerian in-country interbank transaction switching and third party processing for all card brands; and Smartgov, an identity management and e-payment infrastructure for state governments. Interswitch now serves almost all the state government of Nigeria, and is present in several other African countries including Kenya and Uganda.
Just last month, the group announced the launch of Quickteller Business – a new comprehensive corporate solution focused on empowering businesses of all sizes, to facilitate payments and manage transactions from anywhere in the world– through one, simple integrated platform. The platform added to its launch offer, a three-month zero transaction fee incentive for SMEs that sign up immediately.
Buy-ins, acquisitions and buy-outs
Interswitch has had several achievements over the years, and some more distinct than others. Two-third of the company was sold to a consortium led by Helios Investment Partners in 2010, and barely a year after, Interswitch took a 60% stake in Bankom in Uganda.
In 2013 the payment processing company entered into an agreement with Discover Financial Services, and in September 2014, Interswitch acquired a majority shareholding in Paynet Group, an East-African payments provider.
In 2015 Interswitch launched a $10m investment fund for African start-ups in the payments sector, and has since then, strategically invested in other African startups in the payments services.
Interswitch has also acquired VANSO, a mobile-focused technology provider to banks. This new acquisition has VANSO’s mobile banking, SMS and security business lines being fully integrated into Interswitch’s digital commerce and technology operations in Nigeria, and across Africa.
The IPO that never was
It was in 2016 the Interswitch first hinted at an Initial Public Offering (IPO) on the London Stock Exchange and /or the Nigerian Stock Exchange as part of options to create possible exits for its backers, but that listing never happened due to “unfavourable economic situation”.
By July 2019, it was reported that Interswitch had resumed its IPO plans and enlisted JPMorgan Chase & Co and Standard Bank Group to work on the potential IPO that was expected to value the company between $1.3 billion to $1.5 billion. This listing was expected to come through by 2020, but it is believed that the COVID-19 pandemic and other economic issues which plagued 2020 may have altered the company’s plans.
A recent statement from the CEO says that Interswitch will continue with alliances in line with its growth plans, but an IPO might not be in immediate view. According to him an IPO may be considered when private equity investors want an exit out of the business.
In place of the earlier expected IPO, the company announced the listing of N23 million bond on the Nigerian Stock Exchange (NSE) in February 2020. The bond is to run at a fixed interest rate of 15% for a tenure of 7 years.
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