Two of Ghana’s players in the telecom industry are undergoing a merger to create another large force in the arena. Tigo and Airtel after a protracted effort to merge have now sealed their marriage. Information from Tigo’s website suggest a 50/50 joint equity. However it seems Tigo may have the stronger hand in the merger and might play the dominant role as mostly play out in mergers, as such the name ‘New Tigo’ would be used in this article to refer to the merged entity .
How would this merger shape the industry?
www.ghanatalksbusiness.com takes a post-merger look at the industry from the point of view of the people, market share position and consumers.
People are the most important ‘assets’ for every business. Though both companies are in the same industry, some roles may slightly differ. There would be ‘man-double’ for roles which would apply to some fundamental positions. Usually in such cases persons from the more dominant of the two entities would most likely be retained. One managing director Lucy Quist has already risen to that, a brilliant business brain who drove Airtel has to make way for Roshi Motman the MD of Tigo. This would happen to other roles at the different levels of the organisations. This development would free talents who could now join other players. Great for the industry but not so much for the individual as such events reduces the market power of the person. Howbeit such talents from both entities could end up with competitors like GLO, Expresso, Busy and who knows even the MTNs and a new entrant if someone ever shows up. In all, people with good industry knowledge would be available to hire.
Market Share Ranking
MTN remains the leader in both voice and mobile data while Vodafone leads in the fixed line data. The market share statistics as at July 2017 shows MTN leading voice subscriptions with 47.54% and mobile data subscription of 56.29%. Vodafone follows with 24.02% voice and 16.48% mobile data. Tigo is 3rd with 14.48% voice and 13.70% mobile data and Airtel holding 11.36% of voice and 12.37% of mobile data. Glo and Expresso together have less than 3% on both voice and mobile data respectively.
Data source: www.nca.org.gh
Would this merger change anything? The Tigo/Airtel entity (which refers here as New Tigo) immediately takes them to the No 2 spot in terms of voice and mobile data, albeit by slim margins between them and the current No 2 Vodafone. The race for voice subscriptions for the No 2 spot would be quite tight and both players (New Tigo and Vodafone) would push to take it and hold on to it. However, Tigo is probably the more aggressive of the two and if the merger does not dilute their urge they may cling on to the No 2 ahead of Vodafone. Glo and Expresso would still languish in their current positions if nothing drastic happens to them internally. Any change in their competitive position would not in any way depend on the external factor of this merger.
The question is whether the ‘New Tigo’ would attempt to go for the No 1 spot from MTN. What advice would business consultants give ‘New Tigo’ on the pursuit of the No 1 position? Is it even feasible, and if it is what should be the strategies? With over 20% difference in market share ranking for both voice and mobile data should New Tigo consider it a dead fight and keep battling with Vodafone for the No 2 spot, or they should commit resources to go for the No 1 spot? A lot should currently be going on in the board rooms of all these three players. It will be a shame for New Tigo to remain in No 3 position even after the merger, and so would it be for Vodafone considering their size, global influence and infrastructure. Vodafone would however be expected to hold on tight to their market leadership in fixed-line data services.
A few tips for New Tigo; It is possible for once giant formidable companies to become complacent and flounder (Read How the Mighty Fall by Jim Collins). Though MTN has the leadership, they are perceived to be expensive and haven’t got a very high ‘liked’ rating. They however do better on reception reach and quality. New Tigo should take on the fight, and even though attaining the No 1 position (in all services) may not be possible unless MTN fatally flounders, they could still target some aspects of the market and aim grabbing the No 1 spot from MTN. With innovation and bigger size, New Tigo could get themselves much further near the 30% mark on voice subscription with MTN coming to the edge of 40%. The market for 4G data and digital money also provides opportunities for New Tigo to make good inroads with great innovations. With the merger they are still behind MTN in mobile data (56.3%) even with the combined market shares of Tigo and Airtel’s which make up a total of 26%. The 4G service of MTN and the market dominance of 72% as against Surfline’s 20% is a clear advantage for MTN and New Tigo would have to run fast in that terrain. 4G is the new thing and they have to go for it. The truth is the gap between MTN in No 1, and the New Tigo in No 2, is just too wide and Tigo would have to work harder to close the gap.
Customers are now one choice short of their options. A well-known strategic concept, Porter’s Five Forces posits that the more choices the customer has the more powerful they are. Does this therefore mean the customer has become less powerful? In our opinion, not at all. The ‘New’ Tigo, if they come with the aim to become No 1, is expected to come through with a number of competitive and radical innovations that would give consumers real good options.
If customers find nothing new with ‘New’ Tigo they would lose out in public perception and new customer recruitment may lack lustre. Naturally all of Airtel’s customers becomes part of ‘New’ Tigo and these customers would expect to receive at least the same level of service or something better than they were receiving from Airtel. It is not automatic that they would continue to remain New Tigo’s customers. ‘New’ Tigo has to push to retain them at all cost as their yellow and their red competitors are breathing fire on the sidelines. This still makes options available to customers.
Would this competitive phenomenon drive down how much customers spend? It is very likely especially if New Tigo seeks to chase MTN for the No 1 Spot, and Vodafone also gasps to hold on to their No 2 position.
In all we see the Tigo-Airtel merger bring something progressive to the industry.