MTN looks to digital and corporates for growth
MTN SA was eyeing its digital and enterprises businesses for growth and was looking to acquisitions to add to organic growth in these areas, CEO Mteto Nyati said this week.
On the other hand, MTN’s local unit was looking to grow its traditional telecommunications business organically, he said during an MTN media event.
Examples of recent acquisitions by MTN SA included Travelstart and Smart Village, Nyati said.
In late 2013, MTN bought a 33.3% stake in African Internet Holding (AIH). Prominent subsidiaries under AIH include Nigerian online retailer Jumia, South African e-retailer Zando and Hellofood.
In September last year, MTN concluded a deal with MultiChoice to acquire Smart Village, which supplies fibre to homes.
In February, MTN and Amadeus Capital invested $40 million (R650 million) in Travelstart, an online travel agency focused on Africa.
Nyati said that the MTN SA board and the MTN Group board had not placed any limitations on spending on acquisitions, but he declined to say how much MTN SA could spend on acquisitions in the future.
In an effort to boost its ailing local unit, MTN was betting big and outspending its biggest rivals by increasing its capital spend for this year by 50% to R12 billion, Nyati said.
“MTN SA’s market share has been declining in a local market that is growing. We want to return the local business to growth ... Other people are scaling back capital expenditure; MTN SA is doing the opposite,” he added.
The R12 billion investment will be used to improve MTN’s voice, data and fixed broadband infrastructure, and is an increase on the R10.9 billion MTN SA spent last year.
This is higher than Vodacom SA’s spend of R8.7 billion in the year to March, which was up from Vodacom SA’s spend of R8.6 billion in the year to March 2015.
The significant capital spending comes against the backdrop of a slowing local economy and a massive $3.9 billion fine that MTN faces in Nigeria, which has made the company review its spending plans.
Nyati said MTN SA had achieved 3% growth in revenue last year after two years of decline.
In 2015, Nyati said MTN SA saw its subscriber base increase by 9.3% due to attractive prepaid voice and data offerings.
However, in the first quarter of this year, MTN saw a 1.7% drop in its subscriber base to 30.1 million, he said.
Nyati said that MTN SA had recognised the Commercial Workers’ Union as a union following a strike last year at the company.
“An improved working relationship with organised labour is bearing fruit,” he said.
However, Nyati warned that given the state of the economy, strikes were going to be the order of the day.
Turning to spectrum allocations, Nyati said that the deadlock over spectrum in the country was detrimental to local telecoms companies, as well as the country as a whole.
“The lack of spectrum allocation is increasing the cost of telecommunications,” he said.
MTN SA acting chief technology officer Krishna Chetty said that the company had spent more than R20 billion on its radio network roll-out in 2014 and 2015.
The company had also spent R1.7 billion on its fibre roll-out over the past seven years, Chetty said.
Alpheus Mangale, MTN SA chief enterprise business officer, said a key area of growth for MTN SA was in IT services.
MTN SA’s cloud services was expected to experience strong growth off a low base, Mangale said.
“We are transforming MTN Business to be the information and communications technology partner of choice. We aim to fuel small and medium enterprise growth in South Africa,” he said.