For nearly a decade now the impact of rapid developments in technology has blurred the lines separating otherwise independent industries and none so much as the media and telecommunications industry. This trend has created and is still creating several opportunities for entrepreneurs and investors alike. To this extent, it’s now almost impossible to answer the question about whether Facebook, Apple, Amazon, Netflix and Google (FAANG as they are now referred to) are media or technology companies. What about their Asian counterparts, Baidu, Alibaba and Tencent (BAT as they are also now called), are they technology or payment system companies?
Not even the old world has been spared from the disruption of technologically enabled media convergence. Why else would AT&T want to purchase Time Warner or Verizon purchase both AOL and Yahoo? Ultimately, perhaps the greatest technological agent of change and opportunity in equal measure in our time is the mobile Smart Phone and mobile technology. They jointly represent the medium through which technology has broken through the dividing line between media and telecommunications. Taking advantage of the opportunities that this disruption of business as usual presents requires capital, huge amounts of it.
Perhaps it is against this backdrop that the partners at Lagos based law firm Duale, Ovia & Alex-Adedipe felt it was time to intermediate in the Nigerian media technology environment by bringing together, in one room, the industry’s opportunists and the fund providers to begin this engagement process. The venue for the conference was the luxury Wheatbaker Hotel located in the highbrow Ikoyi area in Lagos with its theme as Investment in Nigeria’s Telecommunication, Media and Technology (TMT) market. In attendance where four categories of people. The first group consists some of the earliest stewards of Nigeria’s telecommunication landscape represented by the distinguished person of Mr. Gbenga Oyebode, MFR. The second category of people in attendance was the investor group and it was easy enough to recognise Dr. Akintoye Akindele of Synergy Capital among them. The third group could be described as beneficiaries of private equity investments in their individual businesses of which Obinna Okezie of Wakanow was a known face. The fourth category in attendance were persons seeking funding as well as general participants. In all, it was a packed house to say the least.
From the opening address by Adeniyi Duale, Managing Partner, DOA, it was apparent that the conference audience was in for some serious stuff. The intent of the speech highlighted the challenges of the rapid rate of change going on presently in TMT, the investment challenge of keeping up with this rate of change, TMT’s infrastructure deficit, its opportunities and the challenge of both funding that deficit and the right opportunities simultaneously. In the light of these challenges, leadership needed to emerge to lead in the discussions in finding and defining an investment framework for Nigeria’s TMT space. By organizing this conference, it appears that DOA is a strong part of that required leadership. In his keynote address, Mr. Gbenga Oyebode, MFR reminded the audience about how Nigeria’s telecommunication industry was founded and its evolution since that time from simply providing voice services to the digital platforms (that now provide value-added services like payment systems and other data services) that telcos have now become. Many of these, he added were not envisaged in the pioneering days. He seemed in moments to challenge the conference to find the right funding framework for the opportunities that are emerging in Nigeria’s TMT industry and rightly so too given the industry’s capital guzzling capacity.
Starting off the panel discussions, Dr. Akintoye Akindele stated that with the way the industry is evolving, his firm Synergy Capital has added Payment Systems to TMT and urged that the discussions revolve around the broader TMTP base. From a fund provider perspective, he shed light on the pre-funding requirements of private equity investors and some of the failings of small business owners who have sought funds from private equity firms. His panelists which included Obinna Okezie of Wakanow, Adekunbi Ademiluyi of Netplus and Sadiq Abu of Barclays Nigeria shared their individual experiences on the fund-raising circuit. The second session which was chaired by Eghosa Omoigui, followed immediately after and its panelists included Mrs. Olayinka David-West of Lagos Business School and Dele Adeyinka of Wema Bank Plc.
A major difficulty with providing the TMTP industry with the investment it needs is how to best determine its financial indices such as capital expenditure requirements and projected revenue and profits in a fast-changing environment. While this is relatively straightforward for the telcos and payment system providers, it not the same for the media players whose revenues continue to experience segmentation across its various traditional and digital platforms. What is not in doubt though is the fact that the company’s playing in the TMTP sector absorb investment like no other.
According to estimates compiled by VWS, the telecom industry recorded operating expense of N466.9bn in 2016 and interest expense of N252bn. Within the same period, long-term assets had a value of N1.2tr and interest-bearing liabilities closed at N1.48tr. Financial data made available by MTN, the largest player in the sector show that capital expenditure in 2016 was N196bn (an under investment due to unavailability of FCY) up from N130bn in 2015. By 2017 this figure had increased to N225bn. For comparison, even Google spooked the financial markets with its $6bn capital expenditure in the quarter ended March 2018.
Through whichever lens you choose to look at them, these are huge numbers and a capital structure supported by debt funding alone would put the industry in reasonable financial difficulty. And as Mr. Oyebode pointed out in his address, the behemoths of today didn’t know it would evolve to this level when they started business back in the day. It is therefore important to get funding right, from the start. If only for this reason, the DOA conference was timely and there should be more of its kind.
Of course, all the investment challenges around the TMT space cannot be resolved in one day or even at one conference. But, if what DOA has done with this Inaugural Business Series is anything to go by, the industry is positioning its self perfectly to reap the benefits of a well-developed investment framework to harvest its opportunities and provide returns to its investors. It is fair to assume that the audience awaits the next calling from DOA.