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S.Africa’s Telkom lost $1 billion in Nigeria: minister

South African parastatal phone company Telkom’s Nigerian unit has lost more than $1 billion as it struggles to establish itself in the highly competitive market, the communications minister said on Monday.

Telkom has lost 7.4 billion rand ($1.1 billion, 760 million euros) on Nigerian unit Multi-Links since taking it over in January 2009, Minister Roy Padayachie said in a written reply to South African lawmakers questioning Telkom’s “failed efforts to gain ground” in Nigeria.

“Telkom underestimated the highly competitive nature of the Nigerian telecommunications market and also failed to build and manage appropriate distribution channels,” Padayachie said.

He said Multi-Links had an operating loss of 522 million rand for the 2009 financial year and one billion rand for the 2010 financial year. Telkom was also forced to cut the Nigerian unit’s estimated value by 5.8 billion rand, he said.

The South African government owns a 38-percent stake in Telkom. Padayachie said the state had “raised its dismay” over the write-off at the company’s annual shareholders meeting in 2010.

Telkom bought a 75-percent stake in Multi-Links in 2007 and took over the remaining 25 percent of the cell phone operator two years later, paying $130 million.

At the time, it touted the buy as a landmark deal that would diversify its revenue stream — under pressure at home from private cell providers — and expand its footprint on the continent.

But Multi-Links has struggled using a technology that has little share in the Nigerian market, code-division multiple access (CDMA). Nigeria is dominated by global system for mobile communications (GSM).

CDMA phones won’t work on a GSM network and vice versa.