US embassy cable - 03LAGOS2462

UNCLAS LAGOS 002462 
 
SIPDIS 
 
 
STATE PASS FCC 
 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, EINV, NI 
SUBJECT: SECOND FIDDLE NO LONGER 
 
REF: LAGOS 1705 
 
 
1. (U) Summary: Two major players, MTN Nigeria 
Communications Limited and Econet Wireless Nigeria 
Limited, dominate Nigeria's mobile communications 
industry.  The latter has long played second fiddle to 
its much larger competitor, but Econet executives 
insist that with Vodacom Group's purchase of a 51 
percent stake in the company, its rival will soon be 
singing a different tune.  End summary. 
 
 
2. (U) Bolaji Balogun, Econet's Chief Marketing 
Officer, exudes enthusiasm.  Having been with Econet 
since the beginning (and having raised much of its 
financing), he is particularly attached to the company. 
He knows it inside and out, takes its successes and 
failures personally, and believes passionately in its 
potential to become Nigeria's leading mobile service 
provider.  The firm's subscriber base is still smaller 
than its competitor's (Econet has some 860,000 
customers compared to MTN's 1.5 million), but the 
company has been building network capacity non-stop for 
the last six months, and its services now cover 45 
(compared to MTN's 50) major cities.  If coverage 
expands and subscriptions increase, MTN's dominance may 
soon be a thing of the past. 
 
 
3. (U) Balogun has every reason to be optimistic. 
South Africa's Vodacom Group has just agreed in 
principle to a $230 million purchase of 51 percent of 
Econet's shares, and Balogun expects Vodacom to provide 
access to $200 million of additional financing.  With a 
steady supply of funds (perhaps supplemented by an 
International Finance Corporation line of credit), 
Econet's chronic money problems will be much less 
pressing.  And with sufficient financing, the firm will 
be able to pursue its expansion plans with 
unprecedented energy.  Balogun expects the two 
companies to sign the deal (and Econet to change its 
name to Vodacom) in mid-December.  After that, he says, 
MTN's days as Nigeria's leading mobile service provider 
will be limited.  With characteristic enthusiasm, 
Balogun predicts his firm's subscriber base will exceed 
MTN's by December 2004. 
 
 
4. (U) Balogun's optimism is further fueled by his and 
industry observers' belief that Econet's network 
quality surpasses that of its major competitor.  Its 
backbone is capable of carrying more traffic with 
relatively fewer dropped calls, and Balogun expects its 
edge over MTN to increase significantly as the firm 
expands its network.  That edge will be enhanced by 
Econet's flexibility and responsiveness to consumer 
demands.  The firm has beaten its major competitor on 
more than one occasion: it was the first to introduce 
global system for mobile communications (GSM) services, 
and it was the first to introduce per-second billing 
and lower tariffs, something Nigerian consumers have 
long demanded. 
 
 
5. (U) Comment: If Vodacom's entry into the Nigerian 
telecommunications market creates the waves Balogun 
expects it to, his firm could very well surpass MTN to 
become the country's largest mobile service provider. 
The market is huge (Balogun expects the industry to 
have 10 million customers by 2010), and serious 
competitors are few and far between.  The highly 
anticipated September 29 entry of Globacom, the 
country's second national operator, was disappointing 
(the firm has only 100,000 customers, is reportedly 
losing them, and failed to offer the low prices and 
better than average service consumers expected), and 
industry observers say it is having trouble raising the 
financing it needs to continue building its network. 
The national carrier's mobile subsidiary, M-TEL, is no 
more a threat to the industry's major players than it 
ever was, and neither it nor any of Nigeria's private 
telephone operators show signs of capturing significant 
market share.  If Balogun's expectations prove 
accurate, Econet/Vodacom may not be playing second 
fiddle much longer.  End comment. 
 
 
HINSON-JONES