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14.03.2009 Business & Finance

Starcomms sees Nigerian telecoms consolidation

By Reuters

Nigeria's telecoms sector, one of the fastest growing markets in the world, is overcrowded and consolidation in its second-tier mobile services segment is inevitable, a senior industry executive said on Friday.

Maher Qubain, chief executive of Starcomms Plc (STCP.LG), one of Nigeria's biggest mobile telecoms operators, told Reuters a number of foreign investors were scouting for potential partners or acquisitions in Nigeria, but declined to say who.

"There will be consolidation in this market because you have five GSM providers ... then you have at least four providers in the CDMA sector, with five others with licences that are alive and well," he said in his office in Lagos.

"A market like Nigeria cannot accommodate (that many CDMA) operators, so consolidation is likely to happen and we want to make sure we lead that consolidation," he said.

Starcomms, which operates on the CDMA platform and offers mobile, fixed wireless voice and wireless broadband services, has seen its gross subscriber base rise to more than 2.5 million from just 300,000 two years ago, Qubain said.

He said the company, which listed on the Nigerian Stock Exchange last July, aimed to double its subscriber base to 5 million in the next 12-24 months and go on to reach 10 million.

Nigeria has overtaken South Africa as the continent's biggest mobile market with more than 62 million subscribers, according to the Nigerian Communications Commission.

The Nigerian telecoms market as a whole generated $8.4 billion in service revenue by the end of 2008, up 23 percent year-on-year, industry research group Pyramid Research said in a report published this month.

It forecast that with a mobile penetration rate of 42 percent and a population of 150 million people, the strong growth was likely to continue.

Such figures have attracted the attention of international telecoms firms seeking to bolster their African presence.

South Africa's Telkom (TKGJ.J) is selling its 50 percent stake in mobile phone operator Vodacom, which will provide it with a war chest of more than 10 billion rand ($1 billion) which it wants to use to become Africa's leading fixed, mobile and data service provider.

Britain's Vodafone (VOD.L), which last year bought 70 percent of Ghana Telecom, has also been looking for opportunities in neighbouring Nigeria, industry sources say.

"Where are the next opportunities? Maybe some portions of the top three markets in east Africa, maybe Kenya, maybe Angola, maybe Ghana. But population-wise we continue to represent the most attractive and interesting opportunity," Qubain said.

He said the size of Nigeria's four main GSM operators -- which include South Africa's MTN (MTNJ.J) and Kuwait's Mobile Telecommunications Co (ZAIN.KW) (Zain) -- meant buying opportunities at that level were limited.

"Since the opportunities in the tier one segment are somewhat limited and it is price prohibitive due to their size, the only space to look is the tier two segment, which is the CDMA segment," he said.