How not to run a telco: An Autopsy of the ZoomMobile Brand

It’s no longer news that one of the most innovative telecommunications services operators in the late 90s, albeit on the CDMA platform, ZoomMobile has officially wound up. Neither is it still news that of all the CDMA operators that held sway in Nigeria in the same period, only Starcomms (even if barely) is still in operations.

Coming on the heels of such other crashed telcos like Mobitel, Intercellular and Multilinks, the demise of ZoomMobile, formerly known as Reliance Telecommunications or RelTel, didn’t come to the industry as a huge surprise. Exactly in 1999, the then young and vibrant telco came into the market that was then dominated by the likes of Intercellular, Multilinks, Mobitel and EMIS, with eye-catching services hitherto unknown in the high-cost and high-end telecom market of that era.

With the able and dynamic leadership of Mr. Bekele Tadesse (the Ethiopian telecoms expert that is now the country manager of back-haul solution provider – Ceragon), and a smattering of other sales egg-heads from Starcomms including the sales genius called Rakesh Kaul, Reltel practically took the market by storm in the limited mobility and fixed wireless scene. Some the innovations brought into the market by the company included value-added services like voicemail, sms and call barring, even automated IVR and recharge platform…all of which were unheard of in the industry then.

With the coming of the GSM platform in 2001, stakeholders in the sector already knew that the business practice of majority of the players in the sector at that time, coupled with the restrictions and advantages given to the newly licensed GSM operators, that the fate of the private telecom operators - PTOs (as they were then known) were all but sealed. Relying more on huge margins and limited penetration, the PTOs of yore were no match for the aggressive GSM operators. One by one the death knell began to sound for most of them. Though most watchers had attributed the collapse of the PTOs to all manner of reasons, there are also some reasons beyond what is commonly touted by most people.

A certain commentator listed the reasons below:

1. CDMA Operators were mostly small players with limited reach

2. Initial business model was small reach and high margins, resulting in expensive products and services

3. Infrastructure problems – lack of power supply, high taxes, etc

4. The latest mobile phones and devices are mostly available on GSM networks, while CDMA operators largely sold outdated gear

5. The flexibility that being able to swap SIMs between GSM devices offered was largely unavailable to CDMA users

6. CDMA devices often were more expensive than equivalent GSM devices

Generally these reasons are acceptable as the major reasons why early PTOs that used CDMA took the dive. But the other reasons which most people are silent about actually separates the dead PTOs from the living ones at the moment. This is an account of what made ZoomMobile aka Reltel bite the dust.

In 2007, after a protracted leadership tussle with the unceremonious exit of Bekele Tadesse, the news around town was that Reltel was shopping for core investors to help bring the glory days back to the Iganmu-based telco. After appointing Mr Kenneth Aigbinode to head the company, the chairman and owner of the company a former Senator of the Federal Republic of Nigeria, Annie Okonkwo was also quoted as saying that Reltel will list on the Nigerian Stock Exchange after going through a private placement the following year.

According to media reports attributed to Okonkwo and Aigbinode, the company would not go the way of other CDMA operators that have been acquired by some core investors. “It is not time yet to sell out to core investors. We want Nigerians first to be part of the good things happening in the telecom sector. Later, core investors can come in”, he said. He promised that the private placement this time round would not be like the previous experience as 100 per cent of the funds realized through it would be invested in the network. Sure enough there was a private placement and funding was realized, though the identity of the investors was always shrouded in secrecy.

After promising the investors that RelTel will become publicly quoted by the end of 2008, so that they can trade their shares on the floor of the exchange, Senator Okonkwo was said to have diverted the proceeds from the private placement to his personal account and for his Senatorial bid in 2007. After squandering the funds in the elections of 2007 together with his brother Donatus Okonkwo (which he eventually won and his brother failed in his bid), the chairman fell out with his management on issues bothering on financial impropriety which also included his siblings who were directors in the company.

Enter Edwin Momife, a veteran telecoms man to head the company after the exit of Aigbinode. The first signal that Reltel would not survive actually came with the change of marketing/services direction of the company. By changing its name to ZoomMobile in 2009, Mr. Momife claimed that “in the telecommunications business, the voice business had become saturated, affecting revenue of operators and making data services next growth opportunity for Telcos”.

According to him, “with network coverage in over 17 states in the country and over 124 base stations in Lagos alone, Zoom Mobile had been off the telecoms scene for some time because “they did not pay attention to the fundamentals when it succeeded at first. So when problems came in the CDMA space, it hit Zoom the hardest. “We have, nevertheless, fixed the company and in six or seven months, we’ll start playing aggressively in the telecoms space. A lot of people expected that by now, there’ll be no Zoom Mobile. But we are up and ready for quality data services provisioning”. By procuring the unified license from NCC that allowed them unlimited mobility, ZoomMobile went on the offensive shipping handsets and modems in the thousands and selling at under-cutting prices.

Without regard to network capacity, the company which was now fully running on the ideology of the renowned rice merchant Annie Okonkwo’s logic that all that is needed in the sector is massive importation of phones, the network suffered massive crashes between 2009 and 2010. This resulted in several missed settlements of interconnect fees to most of the GSM companies, leading to termination of connection between ZoomMobile and GLO as well as MTN in 2010. With the 2011 elections due, Senator Okonkwo still desirous of returning to the senate even if it was to stall the collapse of ZoomMobile, threw caution to the winds again and decimated the finances of the telco. After a disastrous outing in the elections, it was all a matter of time before the dirge would start.

But with some privileged (though unverified) information filtering in, it has been suggested that a preferred investor from China may be interested in entering the Nigerian telecom market through the acquisition of the spectrum licenses in the hands of the dead and dying PTOs in the country. These unconfirmed sources claim to know that Intercellular, Multilinks and now ZoomMobile may likely be bought in a clean sweep that will take the existing GSM operators by surprise. It was also speculated that the near frenzy with which NCC is trying to commence the number portability regime is meant to clear the way for this investor to make an impact in the Nigerian market.

With a population in excess of 150 million, with majority in the rural areas still lacking basic telecom services, a telco with deep pockets and long-term interest will still surely make it in Nigeria. But for the dead ZoomMobile, closing shop last week was said to be a strategic move to halt overhead in a business that is more or less insolvent. So the real reason for the death of ZoomMobile is more about lack of financial discipline and transparency as well as poor corporate governance and outright deceit. As weird as that may sound, this same practice of using private placement to hoodwink investors and diverting the proceeds to personal usage is now playing out in another company where the Okonkwo’s have controlling interest. The case of Tetrazzini Foods Plc is still a case reminiscence of what happened to ZoomMobile.