Brand unlikely to ‘drop any lower’
CELLULAR giant MTN’s brand reputation was unlikely to drop any lower because of its regulatory troubles in Nigeria, said Chris Moerdyk, a marketing analyst, yesterday.
Two weeks ago, MTN was named the most valuable and most admired African brand for the second consecutive year in the Annual Brand Africa 100 survey. But Moerdyk said the survey should be taken with a pinch of salt as it did not reflect the sentiment of consumers.
Most consumers believed cellular operators, including MTN, were expensive and charged exorbitant fees for airtime and data compared with other countries, he said.
“If you look at social media, MTN has come under pressure for various issues,” he said, referring to sites like HelloPeter.com, an online customer service site that gives consumers an opportunity to discuss the treatment they receive from suppliers.
“I’m not sure MTN’s brand leave MTN with little money to spend on its network in Nigeria because it would wipe out more than two years of annual profits.
Paying the fine this month and the licence fee before the end of December could also prove to be a liquidity headache, as the company’s cash was spread over more than 20 countries, Momentum SP Reid analyst Sibonginkosi Nyanga said. reputation among consumers can drop any lower because of this,” Moerdyk said.
Last Monday MTN was slapped with a hefty $5.2 billion (R71.6bn) fine by Nigerian authorities for failing to disconnect about 5 million unregistered subscribers from its network.
Too much hassle
Moerdyk said, though, that despite the negative consumer sentiment towards MTN, it was unlikely there would be defections to competitors.
“I doubt a single MTN subscriber in South Africa will move to another network because it’s too much of a hassle. South African consumers hold cellular networks in low regard,” he said.
Joanita Roos, an ICT industry analyst at Frost & Sullivan, agreed, saying a decrease in the customer base seemed unlikely.
“Customers are typically more interested in price, quality and the type of services they have access to, as opposed to
– Additional reporting by Reuters regulatory issues,” she said.
Nigeria was the company’s biggest market, said Roos, and unfavourable perceptions could have damaging long-term effects on the company.
In terms of investor sentiment, it did not take a lot to damage reputation, Moerdyk said.
“This is clear from the stock market, where the MTN share price has declined,” he said. But he said he believed the price would recover.
Since the news of the $5.2bn fine broke, MTN’s share price has fallen by as much as 25 percent. Yesterday, MTN’s shares gained almost 5 percent to R155.54.
Brian Neilson, a director at BMI-Techknowledge, said yesterday that the Nigeria fine was unlikely to lead to the defection of customers.
“I don’t think customers will care much. Some may even feel sorry for MTN because they may feel the Nigerian government is treating the company harshly, based on reports that the government of that country may be pursuing this punitive sum of money as ‘an alternative source of tax’,” he said.
This is not the first time MTN has been in trouble with host countries.
In 2012, it was rocked by a bribery scandal involving Turkcell in Iran.
Turkcell wanted $4.2bn in damages after alleging MTN used corruption to get Iran’s second mobile licence.
It argued that MTN had violated the US Alien Tort Statute by bribing an Iranian and a South African government official in connection with MTN’s participation in the Irancell consortium.
It also alleged MTN encouraged the South African government to take a favourable position toward Iran’s civil nuclear power development programme at a meeting of the International Atomic Energy Agency in November 2005, and that MTN enlisted South African government support for the provision of military equipment to Iran.