Dr. Ernest Azudialu Obiejesi is the chairman of Smile Communications in Nigeria and a major shareholder in the Smile Holdings Limited; comprising, Smile South Africa, Smile Dubai, Smile Tanzania, Smile Uganda and Smile DR Congo. In Nigeria, Smile, a broadband operator, is operating on the 800 GHZ spectrum with 4G LTE licence. Last week, Smile announced that it had raised US$ 365 million to fund expansion of its 4G LTE network in the country. In the conversation below, Obiejesi sheds more light on the expansion bid, the fund-raise, shareholding structure and more. Excerpts:
Why a USD $365million fund-raise, in these days of currency instability?
The aim of this financing is mainly to finance to our growth; to accelerate our expansion drives, so that we will be able to build a robust network smiling around Africa. Due to the speed of the 4G LTE network it becomes very practicable that we should be able to have other networks spread across Nigeria very fast, such that we get the spectrum operating efficiently in Nigeria before other competitors catch up with us. Secondly, we promised Nigerians a network that will enable the growth and expansion of businesses. That is already happening both in Nigeria and the rest of Africa. So, we are consolidating.
Tell us about Smile’s equity holders.
Smile’s shareholders now comprise Al Nahla Group, a Saudi Arabia-based company, which is the majority shareholder; Renven Investment Holdings, a pan-African investment vehicle, in which Nigerian investors, including the Obijackson Group, are the majority; Verene, representing Smile senior management and social entrepreneurs from South Africa; Telecom Investments, a Saudi Arabia-based investment company; Capitalworks, an active alternative management company, specializing in investment in the African mid-market”; the PIC; and Smile employees.
So, we came together to compose the company called Smile. Nigeria is the largest telecoms market in Africa and that entails why Smile’s business in the country accounts for about 80% of the total operations. That is what makes Smile Nigeria very big and our participation in the country. Smile in other African countries are getting it and will grow big too.
The fund we secured is one of the biggest funds ever raised in the telecoms industry in Africa, especially with regards to a business that is somewhat a startup. Therefore, the management staff are happy with the feat we could achieve.
Is Smile adding voice to its business operations?
I have already mentioned we intend to expand the existing 4G LTE (mobile) broadband network in Nigeria and Sub-Saharan Africa. With the funds, we intend to complete our expansions to other countries. The more critical is Nigeria which is huge and for you to nurture such business to maturity you must spread out; cover all parts of the country.
The essence is for subscribers do witness continuity in the network coverage as they move from one part of the country to another. Secondly, we are preparing for Smile’s clear voice network )CVN(. We believe that before the end of this year we would roll out out our CVN. Therefore, apart from data, we can use Smile’s spectrum voice-wise. Some of these are the reasons we had to go into the fund raising.
Why voice, and why now?
The answer is very clear. Our network runs on a superior spectrum. The idea is to give Nigerians clear voice network service. We know what the experience is today with other networks at the moment. The whole idea is to encourage good quality network service. That is why the funds are very key, because once you commence and cover the areas; the voice network is going to be very clear. There are testimonies that Smile’s 4G LTE in Nigeria is better than that used in London. It is the same technology, but the one here offers better quality. Such testimonies point to the saying that Nigeria is at the forefront of global development; we want to be there with every other country. We can’t be behind again. We are working with Ericsson in this area to make it happen. We will start deploying by October and hope to commence fully before the end of the year.
On Clear Voice Network, who will be Smile’s primary segment?
It is important we understand that Smile is not going there to starting “fighting” the likes of MTN, GLO, Etisalat or Airtel, rather our strategy will set us apart…
But you’re targeting a share of the voice market where they are established?
Yes, we do have market share, but we do wholesale as well. We expect that some of the big players can leverage some of the underutilized spaces we have. What we are trying to do is, within the broadband, we are trying to take some of our free network and use it for voice over. If Smile is there for data and you can make calls from any part of the world, then, it gives you a whole package. We have already created a niche for ourselves and work towards adding a voice service. Without that we might not be able to utilize all the space we have on the band. Therefore, it is not a question of going to wrestle power, cut out from the subscribers of MTN, Glo and others.
In these days of currency instability and uncertainty, especially the pressure on the Naira, will you be considering an IPO in the future?
This funds raised answers that question. This is a young company and we don’t want to go public pre-maturely. Listing on Stock Exchange goes beyond having the certificate; you must have something to sell.
At the moment we can’t take a product that is not known to the people to NSE which will be a hard sell. With this kind of funds raised we believe that we have all the financial strength to expand the network and unleash clear voice network. So, we don’t think we will need the help of an IPO or listing on the floor of the Nigeria Stock Exchange )NSE( in the nearest future, because, before we complete the deployment of the funds, I am sure that the returns on investment will create enough funds to enable us embark on any other future investments. I also want to mention that one of the reasons for having a business case here is to support the growth of the economy and improve on the lives of Nigerians through job creation.
The telecoms business has been proven, across the globe, as catalyst to improving the GDP of any economy. We believe that with the kind of speed this broadband has and the facilities, the tendencies are there to create jobs for a lot of Nigerians. It is going to impact on every sector, particularly, the entertainment industry as local content is key in the internet business. Nigeria being one of the fastest growing economies in Africa, we believe that this type of network will help Nigerians grow faster while consolidating the gains already made in the economy.
I think it is a very welcome development and requires a lot of support. However, we as the shareholders and as the Chairman in Nigeria, we are not resting on our oars until Nigerians smile as they should in the internet connectivity and voice network-wise. Smile within the next two years would have become a success story. At the moment an IPO is not going to be successful; not a good business strategy and we look at it as something that will come secondary.
It is not a matter of dining with the devil with a long spoon, rather be sure you are not on the menu. You may take the pain of going through the processes of NSE; even the compliance requirements of an IPO and at the end of the day you might not secure the funds. Even though is it more expensive the way we are doing it now, due to the interest on the money, but is a sure way to create a marketable brand before considering going public.
Since this is a multi-jurisdictional package, what percentage of the funds will Smile invest in Nigeria?
If you look at the analysis with regards to Smile as a pan-African company, the majority of the business is in Nigeria. This is market where about 80% of Smile business comes from. So, it is also expected that about 80% of that money will be invested in Nigeria. This is the economy the company hopes to invest and recoup its resources too.
This is where we have the population, growth tendencies, the businesses, and shows you that Nigeria is very large and sustainable for businesses too. Therefore, both in infrastructure deployment and the funds usage, it is expected that Nigeria will have a fair share. Other market will be sharing the remaining percentage. This simple analysis was part of the reasons the pan-African banks doled out the funds. They know Nigeria has the capacity to give back what is invested.