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CDMA trials in Africa show strong potential for cost reduction without compromising on quality

The first technical trials for Code Division Multiple Access(CDMA) in South Africa in 2009, organised by Qualcomm and Ericsson and in association with MTN and Transtel, show that the 3G CDMA technology has the potential to bring cost-effective, high-quality voice communications and high-speed data connectivity to both the urban and rural populations of Africa. In Africa, the challenge for CDMA however remain with the GSM which is the de-facto global standard as it is also dominant in the rest of the world. GSM is by far the most widespread cellular technology in Africa offering voice communication facilities to millions of people who are not able to receive a reliable landline service.

Entry of CDMA technology to the Nigerian market recorded good success

In Nigeria, CDMA based system of telecommunication entered the industry on the fixed wireless platform. Their boom rode on the failure of NITEL on its fixed telecom infrastructure. The subsector was characterised by about 13 CDMA operators including the likes of Multilinks Telkom, Starcomms, Reliance Telecom, and had a combined subscriber base of 8.6 million users. Multilinks and Starcomms were leading industry players with renowned performance excellence in data services alongside the fixed wireless services. They operated on regional licenses that allowed them to sell data services in addition to fixed wireless telecommunication services. The introduction of the unified access services licenses (UASL) in 2006 removed their geographical barriers in addition to permitting them to compete both in the fixed and mobile telecom market.

The CDMA mobile made an impressive entry into the Nigerian market and with the entry of Visafone, the subscriber base grew astronomically from just 380,000 in 2007 to more than 6m by the end of 2008 - and from a mere 1% to 9.6% of all mobile lines in just one year. Throughout 2008 and the first half of 2009, the CDMA operators continued to grow in importance, led by Starcomms , with the total CDMA market share growing to more than 10% by the end of 2008. 2009 saw much slower growth for the CDMA operators and by June 2009 their share of the market had only risen to 10.9%.

Increased investment in GSM operation in the second half of 2009 reversed the influence of CDMA

By the third quarter of 2009, Nigeria’s CDMA operators as a group actually lost around 229,000 subscribers. Active subscriber base began to decline while the prominence of the GSM operators strengthened as network roll out expanded further inland into the country. Unfortunately, the CDMA operators were unable to match the level of investment in network expansion that their GSM counterparts embarked upon.

According to Pyramid Research Country Intelligence Report on Nigeria in 2008, mobile CDMA service accounted for an estimated 6.3% of the market’s US$8.6 billion in total revenue, and was expected to grow to 11% by 2013. It was also expected that barring major changes in market conditions, CDMA operators will grab 20% of mobile subscriptions by 2014. However, the current performance trend of the industry does not support this projection. Of course there were major changes in market conditions which further depressed the ability of the operators in the CDMA segment to grow.

In term of cost to users, CDMA operators are very competitive

A major advantage that Nigeria’s CDMA operators have is that they are able to offer lower on-net and off-net call rates than GSM operators. In addition, the fact that they have considerably fewer subscribers reduces the strain on their networks; resulting in better service quality than the average GSM operator. The CDMA market segment also benefitted from the introduction of cheap and partly subsidised mobile handsets that appealed to the low end of the market. Visafone for instance, launched its operation with handsets that were selling for prices as low as N2,000.00 in 2008; handsets that ended up in the hands of many first time users of mobile phones. Given the relatively low on-net and off-net call charges and cheap handsets, a number of existing GSM users also adopted CDMA lines as alternative mobile phones. Visaphone’s subscriber base grew from 60,000 at inception in March, 2008 to 2.25m at the end of 2008. 

  • Written by The Analyst
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