Mo­bile phone gi­ant con­tin­ues to face a down­ward spi­ral in SA as in­vestors fo­cus on its other mar­kets 430 000 The num­ber of sub­scribers MTN has lost in the SA mar­ket in the first half of this year 31.9% MTN SA’s cur­rent mar­ket share. The com­pany’s first-ha

CityPress - - Business - MAMELLO MASOTE mamello.masote@city­

It may be a South African com­pany, but MTN con­tin­ues to lose its foothold in the South African mar­ket. Even most of the ques­tions asked at the com­pany’s in­terim re­sults pre­sen­ta­tion on Thurs­day were fo­cused on Nige­ria, the group’s big­gest mar­ket in terms of sub­scribers. In the first half of the year, MTN SA lost a net 430 000 sub­scribers. Lo­cal rev­enue dropped 7% and its mar­ket share dropped 2.7 per­cent­age points to 31.9%.

Group chief ex­ec­u­tive Si­fiso Dabengwa said in a mar­ket like South Africa where SIM card pen­e­tra­tion was 120%, it is bet­ter to fo­cus on value rather than the amount of SIM cards sold.

He said it mat­ters more how many of those sub­scribers will ac­tu­ally be us­ing the ser­vice a year or two down the line.

In­ter­ven­tion in South Africa

South Africa re­mains an im­por­tant mar­ket for the MTN group. De­spite Nige­ria hav­ing more sub­scribers, South Africans spend more. Af­ter be­ing hit by a mar­ketwide loss of 825 000 sub­scribers in the first quar­ter alone, MTN has made var­i­ous in­ter­ven­tions to stop the bleed­ing:

Man­age­ment changes

When Cell C threw the first punch in the price bat­tle for sub­scribers, Vo­da­com was quick to re­spond while MTN was slow off the start­ing blocks. At the same time, it also de­cided to limit Black­Berry cus­tomers who had pre­vi­ously en­joyed un­lim­ited in­ter­net ac­cess.

In May last year, MTN SA chief ex­ec­u­tive Karel Pien­aar was re­placed by Zu­naid Bul­bu­lia, who over­saw the mo­bile ter­mi­na­tion rates (MTR) de­ba­cle in which com­mu­ni­ca­tions reg­u­la­tor Icasa con­tro­ver­sially cut the fees mo­bile op­er­a­tors charged each other by half, thereby re­duc­ing rev­enue. Bul­bu­lia was quoted as say­ing a cut in MTRs would threaten net­work in­vest­ment and jobs. At the end of July, just be­fore MTN SA’s dis­mal re­sults were re­leased, Bul­bu­lia was re­placed by Ah­mad Farouk, the for­mer chief ex­ec­u­tive of MTN Nige­ria, who had served in a sim­i­lar role at MTN Ghana and was group chief op­er­at­ing of­fi­cer.

On the changes in lead­er­ship, Dabengwa said: “Re­view­ing our cost struc­ture is go­ing to be im­por­tant to what we do go­ing for­ward. We are also con­tin­u­ously look­ing at com­pe­ten­cies and ca­pa­bil­i­ties within the group to de­cide who is more suited to what role, and at this stage look­ing at where we are go­ing to ba­si­cally swap around the two ex­ec­u­tives [Bul­bu­lia is now group chief op­er­at­ing of­fi­cer] with the view that we can ad­dress the chal­lenges bet­ter.”

Dabengwa said these in­ter­ven­tions were al­ready yield­ing re­sults (MTN added 394 000 sub­scribers in the sec­ond quar­ter). Bring­ing in another person would en­able MTN to im­prove its fi­nan­cial per­for­mance and ad­dress cost struc­tures, ac­cord­ing to Dabengwa. MTN Steppa

To in­crease the num­ber of smart­phones on its net­work to drive data growth (lo­cal data traf­fic was up 117% in the first half ), MTN in­tro­duced its cheap smart­phone called the MTN Steppa.

“It has per­formed quite well and we’re sat­is­fied with it over­all. We sold in the hun­dreds of thou­sands and it’s a con­tin­u­ing ex­er­cise,” said Dabengwa.

“It’s not just go­ing to be the Steppa phone; there are other makes we are bring­ing into the mar­ket that are in the R500 to R600 range. I guess the key is­sue with that is we are sub­si­dis­ing it a lit­tle bit, and it’s some­thing we need to be con­tin­u­ously re­view­ing.” Telkom deal

MTN and Telkom struck a deal that is cur­rently be­ing as­sessed by the com­pe­ti­tion com­mis­sion. The deal will help both com­pa­nies cut costs and give MTN ac­cess to in­fra­struc­ture that will help ease net­work con­ges­tion.

“The Telkom deal is re­ally a roam­ing agree­ment and a man­aged ser­vices agree­ment. What that does is en­able their cus­tomers to roam on our net­work and our cus­tomers to roam on their net­work. We also pro­vide man­aged ser­vices to their net­work, and it also means there is more scale, hence re­duc­tion of costs for both of us,” Dabengwa said.

“For us it will mean we gain ac­cess to their tow­ers and other pas­sive as­sets we can use to grow our net­work.”

The other big deal be­ing as­sessed by com­pe­ti­tion au­thor­i­ties is Vo­da­com’s R7 bil­lion ac­qui­si­tion of Neo­tel, some­thing Dabengwa said MTN prob­a­bly won’t op­pose.

“Con­sol­i­da­tion in our mar­ket is nec­es­sary, and any steps that are head­ing in that di­rec­tion are prob­a­bly in the long-term in­ter­est of the mar­ket.”


MTN has al­ready re­duced its num­ber of con­trac­tors by 1 200, and chief fi­nan­cial of­fi­cer Brett Goschen said with the drop in re­tail tar­iffs, re­trench­ments would have to be looked at more closely.

But the com­pany is also up against the in­tro­duc­tion of mo­bile vir­tual net­work op­er­a­tors (MVNOs). This is when a ser­vice provider leases parts of an al­ready es­tab­lished net­work from an op­er­a­tor and sells it to cus­tomers.

Re­cently, Mr Price teamed up with Cell C and there is spec­u­la­tion that FNB is do­ing the same.

While Dabengwa said he was al­ways con­cerned about com­peti­tors, the MVNOs worry him to the ex­tent of the agree­ments on whether they are sim­ply pro­vid­ing SIM cards and us­ing another op­er­a­tor’s net­work.

He said MTN had looked at sim­i­lar types of agree­ments but will en­ter into one if it is fail­ing to cap­ture seg­ments an MVNO could do bet­ter at cap­tur­ing.


OP­TI­MISTIC MTN Group chief ex­ec­u­tive Si­fiso Dabengwa said the com­pany’s data sales were boosted by an ex­panded 3G net­work and an in­crease in smart­phone use across the 22 coun­tries in which it op­er­ates

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