Multi-Links, MTS, Starcomms merger gives birth to CAPCOM

A wind of change is blowing in Nigeria’s telecommunications market which has rekindled the hopes of Code Division Multiple Access (CDMA) operators, as Multi Links, Starcomms and MTS conclude merger arrangements that would produce a strong network operator to be known as CAPCOM.

BusinessDay learnt that about $200 million has been injected by core investors into the new firm, CAPCOM, fueling expectations that the CDMA sector in Nigeria will be given a new lease of life. For sometime, CDMA operators – also known as Private Telephone Operators (PTOs) have found it difficult to survive the stiff competition in the nation’s vibrant telecoms market. Low capitalisation, poor promotion of CDMA technology, subscribers’ preference for GSM telephony, and corporate governance issues, has seen the fortunes of these CDMA operators dwindle over time. Industry analysts told Business Day yesterday that this new development in the CDMA landscape would enable the sub-sector compete favorably in a GSM dominated telecoms market. It will be recalled that stakeholders have been clamoring for the resurrection of the CDMA sector through a bail-out. CDMAs had earlier complained about the issue of funding which dwarfed their network expansion capabilities, even with the Unified License granted them by the Nigerian Communication Commission (NCC).

As at today, only Visafone, itself a product of merger and acquisition involving Cellcom, ITN and Bourdex, can be said to be providing services on a particularly competitive scale. Starcomms, which at one time was the bride of the industry later experienced a decline in fortunes. With CAPCOM now in the offing, there is optimism that the CDMA sub-sector would bounce back, offering best-in-class telecoms services to Nigerians.

The deal document published by industry practitioners’ website, IT & Telecom Digest, says the strategy of the investment is “to invest$50 million in the equity of CAPCOM, transferable into the ordinary shares of Starcomms PLC; a 10-year established Nigerian telecoms mobile CDMA operator, with spectrum in the 1900MHz range alongside $150 million of equity derived from CAPCOM’s existing shareholders.

“To simultaneously consolidate Starcomms with two other Nigeria CDMA- Multi-Links and Cyancom, formerly MTS, creating a single national Long Term Evolution (LTE) Broadband operator with 20Mhz of bandwidth in the 1900Mhz frequency range, to build from an existing combined 2012 base of 160,000 data consumers each paying $24-$32 per month to a base of 2, 500, 000 data customers by 2016.

Institute petitions SEC over CBN’s directives on NUBAN

The Institute of Capital Market Registrars (ICMR) has forwarded a petition to the Director-General of Securities and Exchange Commission (SEC), Ms Arunma Oteh, seeking her intervention in respect of a recent policy directive from the Central Bank of Nigeria (CBN) that all banks should comply with the Nigeria Uniform Bank Account Number (NUBAN) scheme. The Registrar/Chief Executive of ICMR, Dr David Ogoro, who confirmed the development in an interview with The Guardian yesterday, advised the SEC DG to initiate discussions with the CBN.

In the petition with ref: ICMR/11/012/181, the institute said: “We forward herein a letter from First Registrars Nigeria Limited dated 25th July, 2012 which captures the experience of many registrar outfits in connection with dividend warrants already in circulation”. Dated July 27, 2012, the petition added: “It will be highly appreciated, if you can use your good offices to prevail on the Central Bank of Nigeria to direct all banks to accept such warrants say until the end of October 2012, within which time all registrars will make sure dividend warrants are NUBAN compliant”.

Signed by Ogoro, the petition urged the SEC boss to “kindly give this matter the urgency and attention it deserves so that Investors will not be made to suffer unjustly”. Further investigation conducted by The Guardian yesterday revealed that investors who were yet to comply with the CBN directive have been unable to process their recent dividend warrants. Speaking on the development in an interview with The Guardian yesterday, chairman Proactive Shareholders Association of Nigeria (PROSAN), Taiwo Oderinde argued that the development is capable of dampening investors’ interest in Nigeria’s capital market.

The NUBAN account number is a 10-digit account number that complies with the CBN’s initiative on implementing a uniform bank account numbering scheme for all banks in Nigeria. Under the dispensation, every bank is required to create and maintain a NUBAN code for every customer account in its customer records database.

The CBN had recently explained that the transition period for compliance with the NUBAN will lapse on May 31, 2012. CBN via a circular said: “Please refer to our circular No. 02/033 dated June 13, 2011, which extended the transition period for compliance with the Nigeria Uniform Bank Account Number code standard by one year. During the transition period, the old account numbers were to run concurrently with the NUBAN codes. “This is to remind you that the transition period for compliance with the standard shall lapse on May 31, 2012. In view of this, all banks are hereby directed to fully comply with NUBAN standard by that date.” CBN explained that with effect from June 1, 2012, any payment instrument that is not NUBAN compliant would not be allowed to pass through the automated clearing system.

Customers raise alarm on widening rates gap

The current gap of 25 percent or 2,500 basis points between banks’ deposit and lending rates to customers is causing disquiet within the industry, as banks are being accused of fleecing their customers, BusinessDay investigations have revealed. Besides, the trend if allowed to continue, would lead to slower economic growth and expansion, as well as jeopardize the Central Bank of Nigeria’s (CBN) on-going campaign to reach the unbanked section of the society. Bank customers have been groaning over the said wide gap between  deposit and lending rates charged by Deposit Money Banks in the country.

Johnson Jaiyesola, a customer of three banks, says, “It is becoming unacceptable, the way our banks are reaping where they did not sow, or else how do you justify the continued widening gap between the rates, all in the name of meeting overhead expenses? “The annoying part is that the CBN is just looking at these banks, while they keep inflicting these pains on their customers.

If the banks are complaining of illiquidity, the way out for them is to encourage deposits, by increasing rates paid to customers, but in our own case here, the opposite is the case”. Tunde Jimoh, another bank customer said “My bank has so many branches that ordinarily, it should be able to make up with small deposits. But, what do we find? Less than one percent rate on deposit, but charging 27 percent on lending.

“The bank can survive without deposit mobilization as it has been enjoying flight to safety, particularly at the peak of the crisis, but unfortunately, this has not translated into the improvement of financial positions of some of its customers, particularly we the small savers. The staff keeps telling us that it is when we have some millions that they can negotiate the rate with us, but for now, it is just managing us the small savers. To the staff, the only way they can make up for all the inconveniences, is to charge high on lending and pay lower on deposit. After all they feel we don’t have anywhere to keep the money but to continue to patronize them, no matter the rate.”

Friday Ameh, an energy analyst, says “The current gap is unacceptable and it portrays that the CBN is helpless and has left customers at the mercy of banks which are charging high lending rates and paying peanuts on deposit.” Consequently, the CBN has been urged to adopt alternative monetary policy measures for encouraging growth, rather than targeting inflation, which is becoming a herculean task. Besides, the CBN has been urged to particularly protect the interests of small savers and entrepreneurs through creation of special risk to mitigate against initial loss.

UTC, Union Bank, others enhance market capitalisation by N11bn

Trading on the equities sector of the Nigerian Stock Exchange re-opened in an upbeat, following price gains recorded by major blue chip companies, especially UTC and Union Bank, as market capitalisation increased by N11 billion. Yesterday, the All-Share Index rose by 34.53 points or 0.1 per cent from 23,239.03 points recorded on Friday to 23,273.56 points, while market capitalisation rose by N11 billion from N7,396 trillion to N7,407 trillion. Specifically, 20 stocks appreciated in price, as UTC topped the day’s gainers’ chart with 5.00 per cent to close at N0.84 per share, followed by Union Bank with 4.92 per cent to close at N5.12 per share.

Evans Medical, Vitafoam, RedStar Express gained 4.76 per cent, 4.75 per cent and 4.53 per cent to close at N1.10, N3.09 and N2.77 per share respectively. Guaranty Trust Assurance added 4.24 per cent to close at N1.72 per share, while Dangote Sugar Refinery and Neimeth garnered 4.22 and 3.80 per cent to close at N4.69 and N0.82 per share each. Paint Company added 3.77 per cent to close at N2.20 per share, while ROYALEX gained 3.77 per cent to close at N0.55 per share. However, Eternaoil led others on the losers’ chart with 4.85 per cent to close at N2.55 per share.

Custodian & Allied Insurance followed with 4.65 per cent to close at N1.23 per share. International Breweries shed 4.41 per cent to close at N6.07 per share, while Livestock dropped 4.38 per cent to close at N1.31 per share. Dangote Flourmill shed 3.99 per cent to close at N6.25per share while TRANSCORP lost 3.81per cent to c lose at N1.01 per share. Diamond Bank, WAPIC, AG Leventis shed 3.69 per cent, 3.64 per cent and 3.51 per cent to close at N2.61, N0.53 and N1.10 per share respectively.

Further analysis of yesterday’s transactions showed that the banking sub-sector dominated with 142 million shares worth N1.2 billion in 1,847 deals, followed by the insurance sub-sector with 10 million units worth N6 million. The packaging/containers sub-sector ranked third with 8.4 million shares worth N13 million.

CBN orders banks, others to register with EFCC

The Central Bank of Nigeria has ordered banks and other financial institutions to register with the Special Control Unit against Money Laundering, a department of the Economic and Financial Crimes Commission. The measure, the bank said, was to ensure compliance with anti-money laundering regulations by Designated Non-Financial Institutions. This was contained in a directive issued by the Director of Financial Policy and Regulation Department, CBN, Mr. Chris Chukwu.

Under the new arrangement, all financial institutions must register with the SCUML in line with the know-your-customer requirement for opening accounts for the DNFIs. The directive entitled: ‘Additional know your customer requirement in respect of designated non-financial businesses and professions,’ with reference number: FPR/CIR/GEN/VOL.1.028 and dated August 2, 2012, was obtained by journalists in Abuja on Monday.

The directive mandates all financial institutions, prior to establishing business relationships with the DNFIs, to obtain evidence of registration with SCUML and takes effect from August 2. It also mandates all Designated Non-Financial Businesses and Professionals, who are existing financial institutions customers, to update their records within six months from the date of the circular.

In her reaction to the development, the Head, SCUML, EFCC, Ms Angela Nworgu, said the CBN directive would complement efforts to implement Nigeria’s Anti-Money Laundering and Combating the Financing of Terrorism Act as “it will automatically translate into more registrations and supervisory work to ensure compliance with the law.” She, therefore, called on all DNFIs and financial institutions nationwide to ensure strict compliance as non-compliance would attract appropriate sanctions.

Index Summary
BusinessDay Afrinvest-30 Index
	13-Aug-12	10-Aug-12	change
Index Points	1,169.94	1,167.25	0.23%
P/E	12.0x	12.0x
P/BV	1.6x	1.6x
Dividend Yield(%)	4.2	4.3
	BA-30	NSE ASI
YTD change	18.13%	12.27%