Monday, 10 December 2012 00:00
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Will we end snail speed internet with our combined 20MHZ spectrum says, Elesho

With all now set for the new core investor for Starcomms Plc, CAPCOM to take over the company fully in the next few weeks, there is the challenge of what specific impact that the company intends to create in the industry considering the massive market share, which the likes of MTN Nigeria has garner for itself.

However, that needs not bother the shareholders of the new Starcomms, going by the assurance, given by the chief executive officer of the new Starcomms Plc., Mr. Ademola Elesho.

He told Nigerian Compass  that Starcomms will be leveraging on the data challenge currently bedeviling the industry saying that present operators have not been able to give subscribers the kind of fast and available broadband internet speed that they want.

He explained that since the transaction includes shares of Multi-Links Telecommunications Limited and MTS Wireless, the spectrum facility would be at the disposal of the new Starcomms stressing that after the deal have been closed by December 28, a new Starcomms will emerge and a new network based on the 4G technology will be rollout.

He added that the new Starcomms data and voice services will come to subscribers at a very competitive price saying that although only the GSM operators seems to have done well due to the competitive nature of the industry, data still remains the most internationally accepted revolution that the world looks up to.

Elesho explained that more young people and executive are using more data service than ever imagined before now stating that there is an increasing use of the social media today despite the lack of data reliable data services.

He added that the current disruptions in online transactions is due to the failure network that financial institutions suffer from in the hands of mobile operators, and that is why we are investing in reliable and fast data network.

He however did not the big players in the GSM sector as a major opposition, the reason according him is that they are currently faced with huge congestions in their network besides other challenges.

He said that MTS represents a vital piece of the overall transaction as its spectrum links the spectrum of Starcomms with that of Multi-Links to provide 20MHZ of the spectrum adding that with a combination of its high speed broadband4G/LTE technology it planned to introduce between 2013 and 2014, Starcomms will give the best internet Nigerians have never experience.

He disclosed that 20MHZ of the spectrum is a whole spectrum that none of the current operators have stating that the current problem of poor data speed that they are facing is because they have exceeded their capacity due to large numbers of users and the fact that there is no room for expansion.

According to him, CAPCOM has a strategic reason for investing in Starcomms noting that Nigeria having overtaken South Africa as the continent’s largest telecom market economic drivers there is a strong desire and need to build a leading Nigerian data player where there is clearly a gap in the market that can be successfully exploited.

He noted that all the principal entities involved with CAPCOM have experience of investing in Africa economy saying that they fundamentally believe in too in Nigeria.

While expressing confidence that the planned December 28th,2012 shareholders meeting will mark the beginning of a new Starcomms, he said prior to the meetings the company will arrange for shareholders to meet management saying that at these meetings will be outlined and there will be opportunities for shareholders to ask questions.

As for the creditors, he said, “agreements have been reached on the restructuring of the company’s current facilities adding that negotiations with trade creditors will continue and will lead to a better outcome for all creditors than Starcomms would be able to offer in a standalone.”

According to him, the transaction scheme will involve the cancellation of N3,448,646,872 in the Company’s share capital, comprising 6,897,293,744 ordinary shares of 50 kobo each, and the subsequent issuing of 662,550,000 new, fully paid up ordinary shares to CAPCOM, constituting 90.5 per cent of the post scheme-reorganised, issued share capital.

He added that CAPCOM will inject US$98 million of cash and US$112million of independently valued assets into the Company with the proposed rights issue subsequently raising further cash for use as working capital.

As for the interim chief executive officer of Starcomms Plc., Mr. Olushola Oladokun the transaction has a lot of benefit for existing shareholders since they will retain their value in the new Starcomms.

According to him, “CAPCOM is investing at the current Starcomms share price and exiting shareholders will be offered the opportunity to purchase new shares in Starcomms on the same terms as CAPCOM in a $20 million Rights Issue after this transaction has been completed and received all necessary regulatory approvals.”

He said that shareholder equity been eroded because competition within the Nigerian telecoms market has been significant within the voice market adding that owing spectrum assets of MTS into Starcomms and Multi-link’s CDMA business, will help meet and deliver the company’s new business plan.

While describing the moribund state of the company, Oladokun said that documented evidence of all Nigerian CDMA players have experienced a difficult trading environment in recent years saying that the p level of interconnect charges has benefitted companies with large number of customers.

He stated that Starcomms is a small and under sourced player in a market dominated by multi-national companies noting that “although it does have very successful and profitable data products, currently Starcomms does not have sufficient spectrum to expand this profitable niche. The combination of all these difficulties has led to the current situation of Starcomms shareholders.”

He went on further to state that there is so much dilution as a result of the Capcom investment because Starcomms financial position is very perilous with a negative operating performance noting “Starcomms is currently in default on within their rights to take over the company and liquidate it to try and recover as much value as possible.

“This would leave current shareholders with nothing. Starcomms needs a significant amount of money, which will result in significant dilution due to the current value of the shares.

“There are compelling reasons to consolidate the CDMA assets of Starcomms and MTS in order to drive the new business plan. When compared to other similar rescue transactions involving over-leveraged companies, the remaining equity for Starcomms shareholders is insignificantly above average.”

According to him, “this is a win-win situation. The alternative is zero value for existing shareholders as Starcomms is likely to go bankrupt as a standalone company and cease to exist. The protection of minority shareholders remains a priority for CAPCOM and the transaction is designed to enhance shareholder returns for all Starcomms shareholders over the medium to long term given the market share growth and technical innovation opportunities available.”