Wednesday, 9 September 2015

How Multi-links Died – Ezekiel Fatoye | + Untold story of how GSM killed CDMA in Nigeria


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Chief Ezekiel Fatoye to Asabeafrika...'GSM companies must enlist on our stock exchange to boost our economy'
In this second part of our exclusive encounter with Nigerian born Telecommunications guru and former Executive Director of NITEL, Chief Ezekiel Olasunmoye Fatoye, he explained to Asabeafrika how one of Nigeria’s leading CDMAs, Multi-links which he co-founded with some Indian expatriates in 1996 collapsed at the entry of the Global System Mobile (GSM Technology) in year 2001.
Chief Fatoye who is the Vice-Chairman of Multi-links a telecommunications concern which appealed to the elites in terms of service delivery gave a detailed history of how the CDMA technology which started in America collapsed at the entry of the GSM Technology in 2001. For the very first time, the Gbongan, Osun state born telecoms guru who has spent straight 50 years in the telecoms sector told your Africa’s number 1 celebrity encounter blog Asabeafrika why Multi-links alongside other CDMA like Zoom and Starcomms collapsed in the face of GSM Technology. It is a collector’s item of an interview. Find a seat with your favorite drink and enjoy the encounter. Enjoy! 
Chief Ezekiel Fatoye to Asabeafrika...'I saw the crash of the CDMA sector coming early and that was why we sold Multilinks early enough'
 As the Godfather of Private Telecommunications business in Nigeria and one of the Founders of the Famous Multi-links network, what can you say is the real cause of the sudden failure of the Code Division Multiple Access (CDMA) technology in Nigeria?
I wrote something recently in one of the I.T. magazines, examining what is happening in the private telecommunications market. Then, if you recall, the private telecommunications business started with so much difficulties in this country. These companies, Starcomms, Multi-links, Intercellular, and all the likes experienced the whole problems before the GSM people came. Now, if I look at the issue of the CDMA (Code Division Multiple Access), I can tell you that CDMA is a super technology. It is a very good technology super than GSM because CDMA was initially designed for the American military intelligence during the cold war era. Before the end of the cold war, it was not allowed to be used for public consumption. After the cold war ended, America gave an order that it can now be licensed out and let people use the technology for on a commercial base. Unfortunately, at that time, the European companies had spent so much money to develop the GSM technology. And they knew fully well that CDMA and GSM will be highly competitive. So, what happened? By the time we came into the business, we were looking at both networks—the advantage of CDMA to GSM, you don’t need as much frequency spectrum which is very scarce in any country in the world. The spectrum is very scarce. So, the CDMA frequency could be very small and yet it could expand. We could have as many customers with the technology.
Chief Ezekiel Olasunmoye Fatoye to Asabeafrika...'I never regretted letting Multi-Links go off our sleeves'
For GSM you need so much frequency band and each of that frequency bands is highly technical and complex. So, because of that, CDMA was a better technology, but then, what happened? I can liken it to an industrial war between the two technologies. From the manufacturer and developmental point of view, there was war. I remembered at a stage, that the likes of Ericson, Siemens and others were opposed to CDMA. Even Motorola in America was opposed to CDMA, but there was nothing anybody can do. The company that was really developing CDMA was a small company in USA- that is Qualcomm. They are the people who developed CDMA. What then happened was that the GSM, after some time…there was a time Qualcomm management was in financial crisis and Ericson bought Qualcomm over; and Ericson has spent so much money on GSM technology. So, by buying it over, it was a good opportunity for them to suppress the developmental rise of CDMA technology. So, because of that, there was a problem. The other problem they had was the problem of terminal. CDMA has no code terminals at all, and NOKIA was so busy preparing terminals. Because when you make terminals, you make it for the mass market. So, where is the mass market? The GSM people already had the mass market in the whole of Europe, even those in China and India had good market. I recall the first CDMA trial exchange we went to see in India was about a hundred and one thousand lines. It was I and former FCT Minister Nasir El-Rufai that went in there; we went to India in 1996 to see the first CDMA trial exchange. It was in New Delhi, but because of the problems I am telling you about, that are the terminal problems, the developmental problems and you can see that today, we have many terminals for GSMs. We have Blackberry; we have Nokia, Galaxy, Apple and all the rest. So, you can see that developmental stage of GSM has overtaken CDMA.  The simple cost of this is visibility. The beauty of a technology is visibility, what the customer can see. The facilities on the GSM are inevitable, so you now find that all over the world the GSM technology was growing and where they had CDMA as a mobile technology, it was coming down. That is one. 

“We have Blackberry; we have Nokia, Galaxy, Apple and all the rest. So, you can see that developmental stage of GSM has overtaken CDMA.  The simple cost of this is visibility. The beauty of a technology is visibility, what the customer can see. The facilities on the GSM are inevitable, so you now find that all over the world the GSM technology was growing and where they had CDMA as a mobile technology, it was coming down”

Chief Fatoye to Asabeafrika...'When Telkom bought over Multilinks, people who cannot afford to own a bicycle in their country started driving jeep and living in Banana Island'
Second, look at countries where CDMA has been very useful, it has been a problem too; countries like India and China. There have been problem all over those markets and this is where the CDMA has major problem. And the worst of it is this. For instance if I look at when I was in Multi-links, I know how much interconnectivity levy we were paying to GSM operators. It is so high that if you miss one month as a company, you can not cope the following month because you pay more than fifty percent of your earnings to GSM operators for interconnectivity rate.  We pay forty to fifty million Naira to MTN, We pay fifty million to Air Tel, fifty million to others and by the time you turn it over it comes to billions in a year. So, that makes it an economic problem and that is why the operators in the market are now in a very big problem. Thirdly, one of the major problem is the issue of corporate governance which has been the bane of our society in a long time; a situation where you are running a small business but you want to look big. You are spending money in a hard way just to look big. That makes it very, very difficult for these small-small companies to grow. Because if I invest in the stock of CDMA and that of GSM, you will discover that I will have more returns on my GSM stock than the CDMA. So, those are the big issues that has affected that industry and brought it to the all time fall.
Chief Fatoye to Asabeafrika...'Yes Telcoms of South Africa got our professional advice but i think they suffered an apatheid mentality'
How Starcomms crashed
Talking about cooperate governance the case of the fall of Starcomms’ equities in the stock market recently comes to mind. Being the only listed CDMA Company in the NSE, what was your observation as a player in that industry?
Starcomms was a little bit unfortunate at that time because the stock market was initially booming until there was a big crash and unfortunately, that was the time people were buying into Starcomms’ equity. And Starcomms was the only company that was quoted in the stock exchange; so you find out that a lot of people need money and there is no other telecommunications outfit that is quoted in the exchange. None of them are in the exchange even the GSM companies. So for a CDMA like Starcomms to have taken that bold step in the first place, I think it was good for the economic development of the country. But the mistake was that people invested at the wrong time. Both the fortunes of the technology and the economic atmosphere were dicey.
“Let me tell you what happened; in those days, we didn’t have enough money to grow. That was the basic problem because you now have to grow on returns on your tariff and other services”.
Chief Ezekiel Fatoye to Asabeafrika...'I saw the crash of the CDMA sector coming early and that was why we sold Multilinks early enough'
MTN, GLO, Airtel others should be listed.
Do you think the GSM Companies should enlist on the exchange and be quoted as well?
Yes, I think they should be because the wealth they are getting now should be shared accordingly. Nigerians should have a shareholding. They are taking a lot of money out of the country and it shouldn’t be that way. No economy will tolerate that kind of economic lapses. In fact without the Nigeria MTN, no any other country, even their mother country, South Africa, can give them that kind of return on investment. They are rich for it; the contribution of the Nigerian market is what is boosting the South African economy. That is one of the advantages of the Nigerian market, we have a very huge market because of our population and that makes the difference.
Why Multi-Links went down
Talking about market power and economic advantage, it occurred to me that when you guys were running Multi-links, it was not so liberalized and opened to everyone as the market share was just for the elites alone. Why was it like that?
Let me tell you what happened; in those days, we didn’t have enough money to grow. That was the basic problem because you now have to grow on returns on your tariff and other services. That is the only way you can grow. But if you pump money into the system, maybe you can grow fat and extend your services into the villages as the GSM did. We didn’t have that kind of money, you need foreign investment. We didn’t have foreign investment. And I remember, when we started, at that time, In fact we initially started with Starcomms, because I was in Starcomms before I left to join Multilinks. So, what happened was that we tried to see how we can get money to move fast. Many of the banks in those days will tell us, ‘oh, sorry, telecoms is a very risky market’ that they can not put their money there. But now, after the advent of GSM, every bank now wants to invest in telecommunications. They even have a Telecommunications desk now just like they have Oil and Gas desk in their branches. They even have General Managers and AGMs in charge of telecommunications. That is as a result of the GSM revolution. So, in our own time, we didn’t have that kind of economic luxury.
Chief Fatoye to Asabeafrika...'CDMA is the best technology in the world'
Why we sold off Multi-Links.
Your team also did something interesting at the beginning of the advent of the GSM technology into the Nigerian telecommunications market, Multi-Links was the first CDMA  to sell off majority share to Telkom of South Africa; because at that time, I had a privileged information that  an American company was offering Zoom, a CDMA competitor seventy million dollars but Senator Annie Okonkwo, the owner of the company refused.  In your own case, how were you able to see clearly that market forces would sweep you out of business if you don’t sell off?
I remember we had a telecoms forum in Abuja some years before we sold Multi-Links. I think I was sitting next to Chief Lambadi (Chairman of Starcomms) and Annie Okonkwo of Zoom was sitting next to Lambadi with a couple of other players. Then it was the Starcomms chairman who said, the way things are going, many companies are going to collapse. And if they are going to collapse, it will be massive. At the time, we were about thirteen to fourteen CDMA operators and Chief Lambadi said he can foresee what is going to happen in the near future and that we won’t have more than two operators left. Even at that time, Visafone has not come to play or anything like it. So, I look at the statement and I began to analyze it; later and I said the way GSM is going, things are going to be difficult for the CDMA operators eventually. So, the best thing is to ease out when the ovation is still loud. People who failed to do so are now regretting it today.
So, you were able to make a wise decision out of what Chief Lambadi said?
At least we look at the market, we looked at what is going on, we looked at investment profile and we looked at the business environment and customer reaction to innovation and we said ‘yes, the best thing was to check out before we are locked in’. 
“There were so many things they did wrong; everybody wanted to use jeep. In fact they nearly bought all the jeeps manufactured in Nigeria. When you look at those days, you discover that someone who can not afford more than a motor cycle in his country will come here and use jeep and live in the most expensive place in the country”.
Chief Ezekiel Olasunmoye Fatoye to Asabeafrika...'I never regretted letting Multi-Links go off our sleeves'
How new owners messed up Multi-Links
So, would you say your new buyer, Telkom bought a dead body?
No, Telkom did not make any wrong choice at all; and that is why I mentioned corporate governance at the initial stage of this interview. I don’t want to discuss that issue when it comes to telecoms business because I think they (Telkom) bite their own fingers and even bite than they could chew; it was poor management of resources that created the problem of Telkom/Multi-links.
 How do you mean, sir? Is it that you didn’t give them a good local insight report before the transaction or what really happened?
No, I think they came here (Nigeria) with a very wrong notion. They didn’t want to cut their cloth according to their size, imagine in a transiting  firm, every soul is now living in Banana Island, getting fat salary in dollars, paying for long time duration over an investment that has not taken off fully. In some places, they paid for ten years for services they won’t need in a year’s time; bad administrative judgment.  There were so many things they did wrong; everybody wanted to use jeep. In fact they nearly bought all the jeeps manufactured in Nigeria. When you look at those days, you discover that someone who can not afford more than a motor cycle in his country will come here and use jeep and live in the most expensive place in the country. I think it is a wrong business strategy; for a business man, it is wrong. If you want to be big, you must learn to grow gradually and see how tomorrow will be.  But you have not grown, you are already borrowing money to be comfortable with yourself, to be comfortable with your staff and besides, you know Telkom of South Africa is like our own NITEL. It is not a personal company, it is a government owned company. It belongs to nobody. So, the best you can make out of it, you make. I am not saying they didn’t do due diligence but they came with a wrong notion. They came with a very wrong notion to the extent that they even bought one million hand sets that they wouldn’t need and just kept it in their store. And most unfortunately, our engineers in those days had special machines to dig and lay fiber all over the country; they sold those machines out and started renting mast from other operators. They were even renting mast in areas they were not going to have service and even renting mast on spots that is co-located with their own mast; you have your own mast that is working and you see another person’s mast and you pay for that as well, and you are paying for five- to ten years lease; wrong investment drive; that was one of the things that collapsed Multi-Links.
Chief Ezekiel Fatoye in his hey days as Multilinks Director
Telkom Management was arrogant!
Didn’t Telkom management consult you guys on local insights after take-over processes in order not to burn their fingers in the deal?
Well, that is not their concern. Before I left I was able to give some members of the new management my own view about what I feel and on how to run things here. But I also discovered that they came with this apartheid orientation; and that is a problem. You know Nigerians are very arrogant, Nigerians are proud. Naturally, Nigerians will not accept to be a second fiddle in their own environment. So, I discovered that they came with that orientation at the time and that turned out to be a very fatal mistake on their part.
Being your baby, didn’t you feel sad that Multi-Links went aground?
I think I started with NITEL, NITEL died. And Multi-Links is also dying. In fact I think there is still hope if government is prepared to salvage the CDMA industry. The hope for them to live a bit longer, I am not saying it will be the final decision to make it stay. For instance, I was proposing that if they can adopt what is being done in some places now where you have the “Bill and Keep” method of inter-connect regime, which means you pay nobody and nobody pays you. If you have a bill & Keep for instance, it will help you to survive the financial burden of interconnectivity tax. Because you pay nobody and nobody pays you. All the money you pay to the GSM operators or any other operator, you keep it to develop yourself. And that will give you some leverage, at least some business space.
High Chief Ezekiel Olasunmoye Fatoye the Telecoms guru
Can you analyze the Bill & Keep Concept properly so that a lot of people can understand? 
It is not new to people in the industry. It is something we have been talking about for a long time. The idea is that if I collect hundred million naira today, and it happens that I made that hundred million because of my interaction with MTN, GLO and the rest, I will keep that hundred million naira, I don’t need to pay them anything. Whatever they make on my network, they keep it. If we do that for a period of five years, then we will see what we have made. So, you don’t need to pay interconnectivity bill, you can come into me, I can come into you.

(Watch out for Concluding Part of the Chief Ezekiel Fatoye’s Exclusive on “How Abacha killed NITEL over David Mark” on this blog after this time out)

Gbenga Dan Asabe

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