Sustaining ICT Industry through M&As

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The recent acquisition of Konga, an e-commerce company, by Zinox Group, will no doubt help in growing the ICT industry in Nigeria, writes Emma Okonji

 

Although mergers and acquisitions have been a global development in the Information and Communications Technology (ICT) sector, industry regulators in Nigeria have always advised small and big companies on the need for merger and acquisition, which in their views, would make companies stronger, commercially viable, more visible and competitive, to become relevant in the industry they operate. 

The Nigerian Communications Commission (NCC), the telecoms industry regulator for instance, has always advised telecoms companies to consider merger and acquisition, especially those companies whose activities are beginning to wobble and dwindle. NCC had always insisted that there would be no bailout option for telecoms companies whose operations are going down and that the best option is to either merge or be subsumed into a bigger organisation through acquisition. In the same vein, the Computer Professional Registration Council of Nigeria (CPN), the umbrella body and regulator of all those practicing computational technology, has always advised member companies on merger and acquisition, as the best way forward. 

It is therefore not surprising why industry stakeholders are commending Zinox Group for the recent acquisition of Konga, one of the giants of e-commerce business in Nigeria. They believe that the acquisition is a major landmark industry deal that will not only sustain development in the e-commerce business, but will also revolutionise e-commerce in Nigeria, given the technology vision and focus of the Chairman of Zinox Group, Leo Stan Ekeh.  

 

 

Merger and acquisition in telecoms 

 

In the Nigerian telecoms space, merger and acquisition has been ongoing since the inception of Global System for Mobile Communication (GSM) in 2001. It all started with Econet Wireless, the first GSM company to roll out its commercial services in August 2001. Few years down the line, it had issues with its principal owner and founder, Mr. Strive Masiyiwa, a Zimbabwean businessman. The problem, later degenerated into separation of ownership and acquisition of brand identity by several core investors, until Bharti Airtel of India finally acquired it, and the brand name was eventually changed to Bharti Airtel. Today Bharti Airtel has survived its past storms and challenges and it is doing pretty well, and competing very well with other telecoms operators in the country. 

In the Code Division Multiple Access (CDMA) aspect of telecoms business, where the likes of Mobitel, Independent Telephone Network (ITN), Bourdex, MTS First Wireless, Reltel, Intercellular, Cellcom, Starcomms and Visafone, featured prominently, the operators however faced stiff market competition from GSM operators and virtually all of them, except few, went under for lack the vision to embrace merger and acquisition. 

Visafone for instance, saw the challenges in the competitive market early enough and quickly acquired ITN, Cellcom and Bourdex Telecoms, in order to expand its business and remain competitive. However, in 2015, Visafone entered into acquisition talk with MTN Nigeria, and in January 2016, MTN Nigeria finally acquired Visafone 

 

 

Merger and acquisition in IT

 

Merger and acquisition in the Information Technology (IT) space has also been ongoing. Most Internet Service Providers (ISPs) went down for lack of vision to either merge or be acquired. Although some merged their operations, but could not sustain market competition for lack of right policy framework and business development plan. Some were pushed out of the market by the big GSM operators who at a point in time, started offering the same data service that the ISPs were offering, in addition to their core voice operation. 

Last year, Business ConneXion, an IT solution company operating in Nigeria, was acquired by BCX of South Africa and today the Nigerian company has become a global brand through the acquisition, which retained the Nigerian company as an arm of BCX, providing the same IT services in Nigeria with increased customer base and with several awards won within one year period of acquisition. 

 

 

The Zinox landmark industry deal 

 

Last week, Zinox Group, an integrated Information and Communications Technology solutions conglomerate and Original Equipment Manufacturer (OEM), announced the acquisition of e-commerce giant, Konga in a move that is expected to raise the profile of e-commerce in the country.

Zinox Group concluded the acquisition of the e-commerce powerhouse, after successfully rounding off months of long-drawn negotiations with major investors, Naspers and AB Kinnevik in a landmark development that will expectedly reposition Konga for a greater share of the e-commerce market in Nigeria and beyond.

Based in South Africa, Naspers is a broad-based multinational internet and media group, offering services in more than 130 countries, while AB Kinnevik, founded in 1936, is a Swedish investment company investing primarily in digital consumer brands.

The unprecedented development is coming at a time when global e-commerce spend is expected to top previously unheralded levels. 

In 2017, retail e-commerce sales worldwide amounted to $2.829 trillion, while e-retail revenues are projected to grow to $4.48 trillion in 2021.

Speaking on the decision to invest in Konga, Head of Corporate Communications, Zinox Group, Mr. Gideon Ayogu said it was an easy one for the organisation.

“We have always had an interest in Konga and another big one you know very well but our priority was Konga first because of her integrated nature of four quality companies in one,” he disclosed. “Konga is a world-class, professionally-run company whose landmark strides in the sector have gone a long way in ushering millions of Nigerians into the ease and convenience of online shopping while boosting the conduct of e-commerce in the country. Konga’s integrity is their pride.

“Today, many Nigerians can attribute their first experience of e-commerce to Konga.com and we are excited to be a part of this remarkable story. Many shoppers can also attest to the speed and efficiency in delivery that characterizes KOS-Express, the company’s logistics arm, which is arguably the best in the sector at the moment,” Ayogu said.

 

 

Zinox’s motive 

 

When asked if the motive of acquiring Konga was to expand the Yudala e-commerce business that is founded by Zinox Group, Ayogu explained that the motive was not meant to use Konga to boost Yudala e-commerce business, but to use Konga to expand its operations in e-commerce, an industry it pioneered in Nigeria with the launch of BuyRight Africa.com which was challenged by the absence of credit card and e-payment infrastructure when it was launched over 12 years ago. According to him, Yudala as an e-commerce company, is doing well and will not be merged with the newly acquired Konga. 

He said the acquisition would create additional employment opportunities for over 5000 Nigerians, both at home and in the diaspora within a short period.

“Our ambition is to up the tempo by revolutionising e-commerce on the African continent, with Konga at the fore-front of this initiative. In addition to positioning the business on a path of profitability in the short term, our long term plans are focused around seeing Konga well established in other African capitals. Furthermore, we will be unveiling a lot of new initiatives soon and we advise shoppers and merchants alike to look out for these innovations, which will radically reshape the average customer experience of e-commerce in Nigeria and on the continent and put more money in their pockets,” Ayogu disclosed.

 

 

Economic value 

 

Optimistic that the acquisition of Konga by Zinox Group will bring a lot of economic value to the Nigeria e-commerce industry, which is an emerging industry, industry stakeholders said the acquisition would further strengthen technology convergence in the Nigerian ICT space.

President, Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, who commended the courage of Ekeh and the Zinox Group, which he founded years back, said it would boost the rollout of broadband infrastructure by NCC’s licensed Infrastructure Companies (InfraCos), since so much contents would be generated from the Konga acquisition, that will drive e-commerce in Nigeria. 

“The acquisition of Konga by Zinox Group is one good thing that has happened to the ICT industry this year, because it will help the e-commerce industry to become more vibrant, competitive and it will enhance service quality. It will bring about more deployment of broadband infrastructure by InfraCos for last-mile service delivery, since e-commerce business, which used to be an emerging market, is beginning to witness rapid growth and development.

“The e-commerce business is becoming attractive, addressing several issues faced with physical market and offline market space. With the acquisition of Kongo, it simply means market expansion that will bring a lot of economic value such as affordability, accessibility and innovation,” Teniola said. 

Widely expected to place Konga on a sound footing for increased market share, the landmark acquisition by the Zinox Group is seen by industry watchers as one that could see e-commerce in Nigeria finally unlock the massive revenue potential in the global multi-billion-dollar industry.

 

 

About Konga 

 

Konga.com is a Nigerian electronic commerce company founded in July 2012 with headquarter in Lagos. It offers a third-party online marketplace, as well as first-party direct retail, spanning various categories including consumer.

Founded by Mr. Sim Shagaya, Konga is said to have one of the best e-commerce technology platform in Nigeria that allows for easy online shopping and online delivery of goods from the e-commerce mall to any location in Nigeria. The best in technology tools displayed by Konga, is one of the things that attracted Zinox, a technology company, to Konga, according to a source close to Zinox Group. Before the acquisition, Konga was perceived as one of the strongest e-commerce brand in Nigeria and operated in various categories as Konga.com, Nigeria’s largest online mall; KongaPay, a CBN-licensed mobile money platform with over 100,000 subscribers and rated as one of the best mobile money channels in the country as well as KOS-Express, a digitally-driven and world class logistics company with advanced delivery capabilities for Konga and other structured companies nationwide.

 

 

About Zinox Group 

 

The Zinox Group, is arguably Africa’s most integrated technology group, with strong interest in Original Equipment Manufacturing (OEM). Under the group, it operates as Zinox technology, the first Nigerian OEM that assembles local computer, known as the Zinox computer with naira sign. It equally operates as Technology Distribution (TD), the number one IT distribution company of all kind of computers and its accessories in Africa.

Now that Zinox Group has acquired Konga, stakeholders are expecting a new wave of revolution in the Nigerian e-commerce market.