NSE DG, Oscar Onyema
By Goddy Egene
The Nigerian Stock Exchange last Friday placed the shares of Starcomms on full suspension following the potential capital reconstructing exercise by the company as a result of its merger with Multilinks and MTS, two other Code Division Multiple Access(CDMA) operators.
With the suspension, the shares of Starcomms, which is the only telecoms firm listed on the Nigerian Stock Exchange (NSE), will not be traded until the conclusion of the deal.
A new company, resulting from the merger and known as CAPCOM, will enjoy a capital injection of $200 million by the core investors.
CDMA operators have been suffering from the stiff competition from GSM operators over the years. Subscribers’ preference for GSM telephony, low capitalisation, poor promotion of CDMA technology and corporate governance issues, among others, negatively affected the fortunes of these CDMA operators.
Investors in Starcomms Plc have not reaped dividends since it was listed on the Nigerian bourse in 2008, while its share price has dipped by over 96 per cent. However, it is believed that the proposed merger would revive its operations.
Generally, the CDMA operators in the country have been losing their subscribers, leading to a losses in their operations.
Statistics by the Nigerian Communications Commission (NCC) have shown that about 868,786 active lines were lost by Multilinks, Starcomms, Visafone and ZoomMobile between January and June 2012 alone.
Only Visafone, which is also a product of merger and acquisition involving Cellcom, ITN and Bourdex, is said to be providing services on a particularly competitive scale.
Telecoms experts said that with CAPCOM now in the offing, there is optimism that the CDMA sub-sector would bounce back with improved telecoms services.
The deal document showed that the strategy of the core investors is to invest $50 million in the equity of CAPCOM, transferable into the ordinary shares of Starcomms Plc alongside $150 million of equity derived from CAPCOM’s existing shareholders.
“The $200 million investment funds the acquisition of Multi-Links and MTS; recapitalises Starcomms and provides it with sufficient capital and liquidity to finance its existing creditors and working capital; and permits it to expand its existing network through the introduction of 4G/LTE technology to become a major provider of Broadband services to Nigeria’s burgeoning consumers,” the document said.