What a Tigo/Airtel Merger Means to the Industry

What a Tigo/Airtel Merger Means to the Industry

In late 2010, Bharti Airtel assumed the reins of Zain Ghana, which had been operating in the country a little less than two years. The merger between the two telecommunications was supposed to catapult Airtel Ghana into the second-most used mobile telecom network in the country. That was not to be.

Almost seven years later, Airtel was back in the news again – this time round it was in talks with Millicom Ghana, operator of Tigo, to merge their operations and create a much bigger entity that would rival MTN Ghana, the leading mobile telecom operator.

Late Monday evening, the National Communications Authority (NCA) finally gave its seal of approval for the two companies to proceed on their marriage…subject to some conditions. The implications of the merger will automatically change the dynamics of the telecoms landscape – with the new entity becoming the second-biggest operator after MTN, which controls almost half of the voice market (47.54 percent).

According to the July 2017 industry data released by the telecoms regulator, Tigo has voice subscribers of 5,360,443 – which is about 14.8 percent of the market share, whereas Airtel’s 4,236,788 makes up 11.4 percent of the market share.

Together, the new entity – based on the July figures – should have a little over 9.7 million voice subscribers (26.2 percent), leaving Vodafone’s 8,773,444 (24 percent) at a near-distance third in the ranking of market shares.

Although the new entity leapfrogs Vodafone to become the second-biggest telco in Ghana, it is worth noting that Vodafone has a tremendous growth rate and still possesses the potential to reclaim the number-two spot.

Between June and July this year, Vodafone recorded more than 140,000 new subscribers, representing a more than 1.46 percent increase in its market share. And for Vodafone, it will be interesting to see the latest market share data following the launch of its popular ‘Ekiki mi” promo, which allows more than one Vodafone user to load from a recharge card.

On the mobile data market share, however, the new entity clearly trumps Vodafone. The merger will see Airtel and Tigo have a combined market share of more than 5.76 million data subscribers as compared to the 3.64 million users of Vodafone, if figures from the NCA are anything to go by.

Matters arising

Before the approval was given there were concerns that government had insisted on owning a stake in the new entity due to its stake in Westel, the founding company of Airtel Ghana. The demands made by government had threatened to scupper the negotiations, as it was a prerequisite before approval could be given.

Although the statement issued by the NCA on Monday evening approving the deal stated little on the stake demanded by government, sources have said there was no way the deal could have gone ahead without the two entities not compromising on their tough stance – especially Airtel.

Airtel had insisted that government’s demands of about twenty percent share in the new entity was out of place, as government – though owning a 20 percent share in Airtel Ghana – did not put up any equity when the call was made for shareholders to bring equity.

While it continued to argue that the government share had dwindled, it could not however hold off government’s demands lest the deal fell through…which could have further ramifications for the company, some industry insiders explained.

According to the press statement by the NCA last Monday, the merger of the two entities would mean that they have to relinquish some portions of their spectrum allocation: and this, the regulator said, would be done in phases on a geographical area basis and over a period not exceeding eighteen months to avoid disruptions on the network.

Another issue that has arisen was whether the new entity will be issued a new numbering resource. What this means is that subscribers would continue to use their 026, 027, 057 etc., just as they were using before on their respective networks. The only difference here, however, will be that these numbers will now belong to a single company.

New leadership

The merged entity is expected to dominated by Tigo, with Roshi Motman expected to be named new Chief Executive Officer. CEO of Airtel, Lucy Quist, is expected to move on from her position. Already, there have been some major exits at Airtel – with Head of Corporate Affairs Richard Ahiagble, one of the notable faces, moving on last month.

Of the two entities Tigo clearly brings more to the table in terms of subscriber base, whether data or mobile. Also, Tigo is said to bring to the table its towers as compared to Airtel, which was renting towers from tower company ATC.

Thus, it is not surprising that Tigo will have a little edge over Airtel regarding how the various leadership roles of the new company are filled. With Ms. Motman in charge, many insiders are predicting that she will have a lot to say in how strategic positions are filled – signalling that some of her trusted lieutenants from Tigo will be given key roles.

There’s no denying that with the companies’ merger there will be a number of duplicated roles, which has justifiably prompted fears among staff of the two companies. The extent to what job losses there will be is still not much known.

When this whole merger conversation started, it was rumoured that Orange, the French multinational telco, was in line to annex the two entities. Insiders believe that that possibility still exists, and the merger would only make the new entity easier to acquire and give MTN the needed run for money.

Source : B&FT

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