Thankdeka Gqubule
MTN's business model is broken
MTN has a serious problem — an obsolete business model. The context that gave rise to MTN’s soaring fortunes in Africa and the Middle East no longer exists. That is why the assurances of MTN CEO Sifiso Dabengwa rang hollow last week in his article in this newspaper, saying that MTN respects human rights in countries in which it does business.
The current business model, strongly associated with Dabengwa’s predecessor Phuthuma Nhleko, now chairman of MTN, fails to construct an ethical decision-making framework. It is shipwrecked on the shores of the Arab Spring, the rising civic call for human rights and democracy in Africa and emergent ethical investment movements globally.
In the past, MTN’s mantra seemed to be “where angels fear to tread”.
The narrative of the current business model has been a preference for first-mover advantage in virgin markets with low teledensity and large, youthful and growing populations with increasing disposable income.
“But many of these countries were
Dabengwa says the telecoms revolution is a tide that lifts all ships
weak states, with poor regulation, presided over by autocrats.
MTN’s approach during its most significant growth spurt, between 2003 and 2009, mirrored the foreign policy stance of former President Thabo Mbeki, elevating strategic pragmatism over principle and human rights. But gone are the days when Mbeki would directly and personally intervene on MTN’s behalf.
The presidency of Jacob Zuma has been more domestically focused and limp-wristed when it comes to economic diplomacy. Zuma’s administration has left MTN to its own devices — even though its diplomats may argue that they do lend a hand on the ground, as was the case in Nigeria and Cote d’Ivoire recently.
Experts say that theoretically, a good business model is supposed to create virtuous cycles. However, when the assumptions on which a model was founded no longer hold, the benefits it once yielded expire.
As Dabengwa confessed last week, reality is a tough taskmaster. Things change, values evolve, social movements emerge, presidents are recalled, revolutions erupt, competition comes knocking and markets mature. Advantage is impermanent.
This is especially so for the cellular industry, which, in contrast to a decade ago, is now “mature”. Nearly all countries have an established cellphone environment, and there is no more low-hanging fruit of easy money and sky-high profit margins.
A business model serves as the architecture through which a company defines how it goes to market, where it goes and how it relates to the commercial opportunities that it wishes to pursue. Ideally, it also frames how the company will react to market conditions and defines key aspects of a company’s culture.
This is why it was significant when, in March, Dabengwa announced the roll-out of a new “culture” programme for MTN. This may well amount to painting over deep faults, if the edifice of the business model remains unchanged.
Dabengwa says: “The truth is that the cellular network industry is behind a revolution to bring high-speed internet access and next-generation telephony to millions of users who previously had little or no access to even the most basic telecoms services.”
As if, somehow, a contribution to development would undo violations of basic rights, he asks the public to spare a thought for the industry as it is caught between getting on with this technological revolution and pleasing pariah states that abuse the rights of their citizens.
He implies that MTN and other companies do respect human rights, but have somehow been coerced by such states into compliance, forced to facilitate the abuse of rights like spying on a country’s citizens, as was the claim in Syria and Iran. Failure to do so, he warns, could lead to a loss of an operating licence.
Harmful practices need justification. So Dabengwa argues that tough-minded profit-making, even at the expense of human rights, leaves society better off as a whole and is an engine of human progress. Profit first, rights later, if at all.
This is an old argument in economic history and it is associated with the work of Nobel Prize laureate Milton Friedman, who argued that the sole responsibility of companies is to maximise profit.
Dabengwa says the telecoms revolution is a tide that lifts all ships. The poor get access to health, education, capital and enterprise through the use of cellphones and allied products and services. Thus, he seems to have answered, ‘“no” to Nobel Prize-winning economist Amartya Sen’s question: “Do moral codes of corporate behaviour have anything to offer in achieving economic success?”
If this is his answer, how can he expect ethical behaviour from individual MTN employees at all levels?
The problem for Dabengwa and MTN is that the people of the countries in which they are invested have had enough of the tyrants who rule them, assisted indirectly by the companies who do business there.
So for example, the Syrian rebels organised a boycott of MTN Syria, for a period of time. In Liberia there was outrage at MTN’s partnership with cohorts of former president and warlord Charles Taylor.
When diamond giant De Beers was faced with similar circumstances to MTN, it responded very differently.
On the issue of blood diamonds, De Beers decided to lead a process that enabled it to integrate issues of conscience with their business model.
The Kimberley process defined conflict diamonds as stones “that originate from areas controlled by forces or factions opposed to legitimate and internationally recognised governments and are used to fund military action in opposition to those governments; or in contravention of the Security Council”.
Is it possible for MTN to initiate a similar dynamic process to govern the telecommunications industry?
Gqubule is a freelance writer