MTN CEO lifts lid on future services

• Existing network of agents can dispense e-money and sell insurance

MTN, Africa’s biggest mobile operator, is positioning itself for a future in which its voice business will no longer be its bread and butter. The MTN of today and the one in five years could operate quite differently, group CEO Rob Shuter says. “That same agent who is receiving cash and dispensing airtime in future can also dispense e-money, can sell insurance products and provision you for digital services.”

MTN, Africa’s biggest mobile operator, is positioning itself for a future in which its voice business will no longer be its bread and butter.

The MTN of today and the one in five years could operate quite differently, group CEO Rob Shuter said in an interview with Business Day.

“That same agent who is receiving cash and dispensing airtime in future can also dispense e-money, can sell insurance products and provision you for digital services,” he said.

MTN makes about 59% of its revenue from voice, which is set to decline as people use internet services such as Skype, WhatsApp and Facetime to make voice calls. The group estimates that voice revenues will continue to drop by 2% each year.

Peter Takaendesa, portfolio manager at Mergence Investment Managers, said MTN’s non-voice revenue “contributes over 40% to group revenue and we expect that number to cross 50% over the next few years”.

What will MTN look like in two to five years?

“The core business is what we call the digital operator,” said Shuter. “The digital operator is competing in six different areas. Four of them relate to what we call the ‘evolving telco’, where you go from voice to data, mainly on the consumer side, and then you also compete in enterprise business services and in wholesale.”

Wholesale constitutes one telco selling excess capacity to another telco.

“The remaining two areas of the digital operator are fintech and digital services. So these now become the core business of the group,” Shuter said.

“We don’t really think of old business or new business. It’s just ‘the business’,” he said.

Shuter said the six areas all use the network that MTN has built across Africa and they leverage the informal distribution system they have built for prepaid airtime.

He said the system can be used for the “Know Your Customer” or registration process usually needed for registering people with financial services.

“As we Rica a customer in SA, we can also register them for entry-level mobile financial services.”

He said MTN needs 90% of its revenue to come from financial, digital, wholesale and business-to-business services. MTN wants digital and fintech to make up at least 15% of revenues over the next few years.

Last week MTN announced a plan to offer life insurance products in partnership with Sanlam. The operator said it had identified an opportunity for R90bn in revenue each year for the next three years across their markets by selling insurance.

MTN has also embarked on an asset realisation programme to raise $1bn over three years.

“That’s mainly focused on rationalising our existing tower company investments and ecommerce investments. They’re not part of the core digital operator strategy anymore,” he said.

“In digital services, there are four ‘verticals’ where we want to build and operate our own services.” He said the first would be mobile money, followed by media with services such as Music Time streaming, Ayoba instant messaging and mobile advertising. These digital services are owned and operated by MTN.