Accounting information system Essay

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Battling for Nigeria’s telecommunications
South African mobile giants Vodacom and MTN wrestle for control over a developing market

ean Hoff’s article, ‘‘South African cellular wars in Nigeria’’, examines one of the fastest growing markets in wireless telecommunications in the world. At present,
Nigeria offers players in the mobile technology industry an impressive opportunity to benefit from a developing infrastructure and socio-economic conditions that are encouraging competition in the telecommunications market.

D

At this moment in time, the dominant player in Nigeria’s mobile telecommunications industry is the South African company, MTN, with 43 percent market share, followed by Vee
Networks. This dominance was made possible by the withdrawal from Nigeria of MTN’s main
South African competition, Vodacom. The purpose of Hoff’s article is to examine the reasons for, and wisdom of, Vodacom’s decision to withdraw from Nigeria, by outlining the improving conditions that exist for ambitious telecommunication companies willing to take the risk on investment in an unstable economic and political environment.

South African competition
In the South African market, MTN plays second fiddle to Vodacom, who lead the market with
56 percent market share. Vodacom has international operations in Tanzania, the Democratic
Republic of Congo, Lesotho and Mozambique, all of which are proving successful ventures.
As Hoff states:
Vocacom sees its construction of cellular networks across Africa as a means of helping achieve the African renaissance.

MTN has a similarly impressive international portfolio, with operations in Cameroon, Rwanda,
Swaziland, Uganda, and now in Nigeria. MTN is the leading operator in Nigeria, partly due to
Vodacom’s withdrawal from this market. Both companies clearly targeted the whole of the
African continent as the main platform of competition, and initially, Vodacom included
Nigeria as a primary target. In March 2004, Vodacom’s head of treasury Debbie Millar identified Nigeria as the ‘‘biggest opportunity in Africa’’, and outlined the company’s resolve in obtaining a ‘‘significant chunk of the market’’.
So what are the conditions that make Nigeria such an attractive proposition for the telecommunications industry? How have MTN established themselves in this market, and, more pertinently, why did Vodacom withdraw from the competition? These are questions that
Hoff addresses, with the following explanations.

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STRATEGIC DIRECTION

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VOL. 22 NO. 7 2006, pp. 8-10, Q Emerald Group Publishing Limited, ISSN 0258-0543

DOI 10.1108/02580540610669017

Nigerian infrastructure
At present, Nigeria has an inadequate telecommunications network, which is further hindered by poor maintenance. The country has traditionally been characterized by political instability, corruption and poor economic management, particularly under the rule of its former military leaders who failed to diversify the national economy away from the oil sector.
In addition, the agricultural sector has failed to keep pace with the huge growth in population. The current government, however, has initiated change in Nigeria’s economy by implementing market reforms urged by the IMF. For example, during 2003, fuel prices were deregulated, the oil refineries were privatized and the banking system was modernized. As a result, by 2004 Nigeria’s GDP had strongly increased, a welcome change given the still-high levels of corruption.
Despite the inherent problems which face investors, however, Nigeria is one of Africa’s fastest developing telecommunication markets. Hoff quotes a massive increase in telecommunication subscriptions in 2004 of 155 percent, while the number of telephone lines is expected to double to 20 million according to the regulator. The number of mobile subscribers in Nigeria is expected to reach 23 million by 2007, from the 8.6 million that exist at present.

MTN’s Nigerian
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