Rumoured Globacom acquisition of Etisalat could be the new norm for telcos
Unconfirmed reports suggest Globacom Chairman Mike Adenuga may be interested in acquiring Etisalat Nigeria. Etisalat is currently in negotiations with a consortium of banks over payment of a $1 billion loan, but the talks have yielded no fruit. The banks recently just rejected a 5% equity stake offered by Etisalat in lieu of the loan.
So why Globacom?
Globacom may be interested in acquiring Etisalat for several reasons. Doing so will enable it cement its number two position in terms of number of subscribers. Data from the Nigerian Communications Commission (NCC) for the period ended March 2017 show MTN Nigeria is currently the largest network in the country, with 60.3 million subscribers. Globacom is the second largest with 37.3 million subscribers and Airtel 34.6 million. Etisalat currently has about 18 million subscribers and as such combining both entities would close the gap between MTN and Globacom.
Trends in the telecoms industry have shown that revenue from data is slowly beginning to outweigh voice. More Nigerians are beginning to view content on their mobile devices than traditional media. Discussions with industry analysts also suggest Etisalat has a competitive advantage in its data services and a possible merger with Globacom, would enable the company to offer cheaper data services. Globacom currently offers some of the cheapest data plans in the country as it owns a dedicated fibre cable and also subsidizes its voice services.
Also, some analysts believe that the era of multiple GSM service providers is ending as improved technological offerings dent margins. GSM companies could go the way of CDMA businesses if they do not act fast by consolidating operational efficiencies and seeking synergies that can help retain market share and optimize productivity. It’s a threat most see and one that could provide opportunities for cash rich telcos like MTN and Globacaom. MTN has already paved the way with the recent acquisition of Visafone and the planned acquisition of Multichoice assets in Nigeria. Globacom will not want to miss out on these deals.
Competitors, especially tier two operators, may kick against the deal as it could lead to price fixing between the three major GSM operators in the country. A merger of the two firms could give undue advantage to Globacom, which got a 2nd national operator licence from the NCC. The merger would also lead to job losses in Etisalat, since it is the smaller firm.
While Etisalat has denied knowledge of any such deal, Globacom is yet to issue an official statement.