Falling ARPU Forces Telcos to Think M&A

The country’s telecom space looks set for massive change if recent mergers and acquisitions rumours are anything to go by but it will not be one jacket fit all as many merging operations may still have tough time extracting a decent profit, Nigeria CommunicationsWeek can now reveal.
With Bharti Airtel Limited’s acquisition of Zain Group’s mobile operations in 15 countries across Africa sealed, some telcos are weighing either or outright acquisition to surmount the rapidly declining Average Revenue per User (ARPU).
ARPU measures the average monthly revenue generated for each customer unit, such as a cellular phone.
Also, Telkom, South African telephone operator and owner of Multi-Links-Telkom is considering selling the struggling Nigerian unit after it was battered by high operating costs at home and hefty losses from the Nigerian business.
This leaves Multi-Links-Telkom up for grabs by either Nigerians or any group from outside.
Nigeria CommunicationsWeek gathered elsewhere there are talks between Starcomms Plc, Nigeria’s leading triple play operator and MTS First Wireless for the acquisition of the latter by Starcomms.
Interestingly also, “home and away”, a rather revolutionary merging synergy may crystallize between a leading GSM operator and struggling Code Division Multiple Access (CDMA) operator which may see both leveraging on each other’s strength.
“I cannot disclose details yet, but we are working to make sure that if you walk to any shop to buy either GSM phone, you will get a CDMA line or vice versa at a discount” a source close to deal said.
It is uncertain if some of the merger and acquisition activities to be created may result in substantial and lasting value because in some cases the damages are too much to underpin with mergers and simply stupid to acquire.
Nigeria CommunicationsWeek gathered that bubble began to bust late 2008 and today some are dead, others on life support.
But Bekele Tadese, country manager of Ceragon Networks Limited said that there is every need for companies to search for economies of scale that will help them build complementary drive for critical mass.
“As ARPU keeps declining, getting lower and lower; it will definitely reach a stage where each company may find it difficult to make profit. By the time companies see their margin declining, they will start talking, they will start negotiating- let’s put resources together, let’s save cost and be more profitable,’ said Bekele.