Can CDMA Operators REALLY Compete? Here’s What the Big Four GSM Operators Think

In a 2010 report about Nigeria, The Oxford Business Group asked the top executives of the four biggest GSM operators in Nigeria if they see Code Division Multiple Access (CDMA) operators in Nigeria as competition for GSM operators.

Here were their responses:

Mohammed Jameel, Group COO of Globacom believes that “any operator will be competition, whether it is CDMA or GSM”, although Nigeria is predominantly a GSM market. He further said that in the bigger markets such as India, people are increasingly switching from CDMA to GSM, citing the example of the two big operators there, Reliance and Tata. For him, he doesn’t “feel that there could be any technical advantage of CDMA operators to fight with GSM operators”, although the least they could do is take some of the market share.

For Ahmad Farroukh, CEO, MTN Nigeria, he believes that both technologies have their own advantages and disadvantages, but “GSM has a definite advantage in terms of market reach”. He further said that although some people think that CDMA has an advantage in data services, he personally has not seen any evidence in other markets such as India and North America where major CDMA operators are switching to GSM technology.

Pointing to the poor 2009 results for CDMA operators, he thinks that “there may be something wrong with the business model being followed by some CDMA operators”. According to him, “it appears that the significant pricing competition between CDMA operators is not sustainable over the medium term”.

[Review the State of Nigeria’s Mobile Telecoms Market (Q4 2010)]

Etisalat Nigeria’s CEO, Stephen E. Evans brought an entirely different perspective to this topic. He feels that CDMA operators are ripe for consolidation, though this has to be based on some synergies between those operators. He further points to the fact that since most of the large CDMA operators have built their infrastructure in the same place, it therefore becomes a challenge for them to achieve synergies from a network perspective.

On the issue of competition, he didn’t mince words when he said: “We do see them as competition, because some of the CDMA operators have a large customer base of 1 million – 2 million subscribers and have a strong position in the data card area.” But, he didn’t also fail to stress that CDMA operators have perhaps “struggled to some extent in the area of voice customers, because the limited footprint of their coverage puts them at a slight disadvantage”.

By and large, he feels that the CDMA technology needs to evolve dramatically in the near future in order to remain competitive.

In Khaled Khorshid’s (ex-COO, Zain Nigeria – now Airtel Nigeria) opinion, CDMA is a technology that is definitely working and many of their (Airtel’s) customers have CDMA as a second line. However, he believes that the technology behind CDMA is no match to the GSM; as the former, by default, is degraded in quality as greater numbers of customers join the network.

According to Khorshid, “I am yet to be convinced that our CDMA competition will be able to sustain and grow their market share”. He noted that we will see consolidation between providers as one measure of survival.

[Review the State of Nigeria’s Mobile Telecoms Market (Q4 2010)]

My Thoughts

I really don’t see any competition from the CDMA operators. Never mind the seemingly aggressive campaigns, lower call rates being offered and (oh yeah) the recent acquisition of Multi-links Telkom’s CDMA business by Visafone.

Most importantly, numbers don’t lie.

In the April 2011 subscriber data released by the Nigerian Communications Commission, the total CDMA active lines stood at 5.9 million compared to GSM’s active lines of 83.6 million. As a matter of fact, the data shows a decrease of 1.7 million CDMA subscribers since April 2010, while GSM active lines have increased by 14 million since April 2010.

As the GSM industry marks its 10th anniversary of commercial rollout in August 2011, operators are neck deep into the price war for lower voice call rates as well as new and cheaper data plans.

Will GSM operators nail the coffin for CDMA operators in 2011? 2012? 2013? Or would data be CDMA operators last breath?

What are your thoughts?

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