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Cablegate: Second Fiddle No Longer

This record is a partial extract of the original cable. The full text of the original cable is not available.

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

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