MTN: Major African Mobile Markets: Future Growth Prospects

Company Overview

MTN is a telecom services and business solutions provider, with mobile operations in nine African countries comprising South Africa, Nigeria, Cameroon, Cote d'lvoire, Uganda, Botswana, Rwanda, Swaziland and Zambia. It conducts its mobile operations in Africa through three business units, namely MTN-SA (South Africa), MTN International (territories other than South Africa) and Strategic Investments. The group had 20.6 million mobile subscribers as on 30th September 2005, with 80 percent of the subscribers present in South Africa and Nigeria.

Table 1 provides a regional snapshot of MTN's mobile operations in Africa as on 30th September 2005.

Table 1: MTN - Mobile Operations in Africa

MTN - Mobile Operations in Africa

Source: Company Reports

At the end of the financial year 2005, the group employed 5,283 people, of which 2,490 were based in South Africa, 1,844 in Nigeria and 949 in other regions. The total revenue of the group for the financial year ending March 2005 was USD 4.7 billion. MTN Group is listed on the JSE Securities Exchange South Africa under the telecom sector. Prior to 2002, the group was known as M-Cell.

Chart 1: MTN Group operations in Africa 2017

Map of Africa showing countries that mobile phone operator MTN Group currently has active operations in

Business Strategy

MTN has been focussing on increasing its network coverage to more and more African countries. This is being done by forming alliances with local operators or by acquiring those operators altogether. It has strong strategic interests in Nigeria, where the number of subscribers increased by 123 percent in the financial year 2005 and the group incurred a capital expenditure of USD 890 million. The group has adopted a customer-focussed strategy in its markets of operation and has taken steps to improve the customer care services.

Specifically, MTN highlights the following strategies:

Expand geographic scope

MTN has long term geographic expansion plans in developing countries both within and outside Africa, either by acquisitions or by forming alliances with local operators. For instance, it acquired operators in Cote d'lovire and Zambia recently and the company is renewing bidding opportunities in Tunisia and Namibia. It has strong interests for network expansion in Nigeria, where it incurred a CAPEX of USD 890 million in 2005, the highest investment by any company in a single year, in that country.

Improve customer care services

MTN has adopted a strategy of customer retention and overall customer base growth by offering better customer care services. For this, it has:

Built more customer call centers

Appointed senior executives for managing customer care operations

Has been offering prioritised customer care services to high usage customers, without lowering the quality of service offered to lower usage customers

Increase Profit Margins in South Africa

MTN is focussed on increasing its EBITDA margin in South Africa. In the financial year 2005, its South African EBITDA accounted for about half of the total EBITDA of the group. As such, the group believes that the increase in EBITDA in South Africa will give an impetus to the overall EBITDA of the group. It has aimed to maintain its EBITDA margin above 40 percent in all its markets in Africa. Further, the group has adopted a pro-active bargaining policy, by which it aims to maximise savings by bargaining with the top suppliers over procurement of network equipment, airtime vouchers, handsets, etc.

 

Financial and Operational Performance

Revenue

In the financial year 2005, the group reported revenues of USD 4.7 billion, an increase of 38.2 percent over the previous year. The increase in revenue was primarily due to strong performance in Nigeria and South Africa, boosted by the favourable economic environment in these markets. Together, the operations in South Africa and Nigeria accounted for 93.1 percent of the group's revenues. The revenue from data services has remained almost constant during 2004-2005, with non-voice services contributing only 3.9 percent in 2005 fractionally up from 3.6 percent in 2004.

Profitability 

In terms of profitability, MTN recorded an EBITDA margin of 41.5 percent in 2005, registering an increase of 3.6 percentage points over the margin of the previous year. The EBITDA in South Africa accounted for about half of the total EBITDA of the group. The group continued to improve MTN South Africa's margin, and EBITDA margin in South Africa increased by 10.4 percentage points and had reached 34 percent at the end of financial year 2005.

Figure 1 shows the revenue and EBITDA margin of the operator from 2003 to 2005 and Figure 40 depicts the revenue break-up, by geography, for 2005.

Figure 1: Revenue from Mobile Sector (2003-2005)

Revenue from Mobile Sector (2003-2005)

Source: Company Reports

Note: Others include Cameroon, Uganda, Rwanda, Swaziland and other operations

Figure 2: Revenue Break-up - by Geography (2005)

Revenue Break-up - by Geography (2005)

 

* Note: Others include Cameroon, Uganda, Rwanda, Swaziland and other operations

Source: Company Reports

Capital Expenditure

The total CAPEX incurred by MTN was USD 1.2 billion for the financial year 2005. Capital expenditure had increased by approximately 72 percent over the financial year 2004 due to the group's strategy of network expansion in developing countries, particularly in Nigeria.

Operating KPIs

The total size of the group's mobile subscriber base had reached 14.3 million at the end of March 2005, registering a year-on-year increase of 50 percent. Moreover, the number of subscribers increased significantly by about 45 percent during the six months ending September 2005 to 20.6 million.

Figure 3, below, shows the total mobile subscribers of MTN in Africa from 2003 to September-end 2005.

Figure 4, also below, depicts the break-down by region of the total mobile subscriber base in the period 2006 to 2016.

Figure 3: MTN Mobile Subscribers by Region 2006 - 2016

MTN Mobile Subscribers by Region 2006 - 2016
Source: MTN c. Blycroft 2018

Figure 4: MTN MEA Major Markets by Mobile Subscribers 2016

MTN MEA Major Markets by Mobile Subscribers 2016
Source: MTN c. Blycroft 2018

Table 2 gives the key performance indicators of MTN for the financial year 2005.

Table 2: Key Performance Indicators in different geographies (2Q 2017)

  Share-holding % Licence period (yrs) Population (mn) Mobile penetration (%) No of operators Market share Outgoing MOU (mins)
SEA              
South Africa 100 20 56 161 2/4 34.56% 82
Uganda 96 20 41 49 1/8 54.70% 89
Rwanda 80 15 12 71 1/3 41.94% 99
Zambia 86 15 17 70 1/3 49.26% 45
South Sudan 100 20 8 18 2/3 34.84% 54
Botswana (joint venture) 53 15 2,2 150 1/3 54.61% 80
Swaziland (joint venture) 30 10 1 85 1/1 100.00% 48
WECA              
Nigeria 79 15 177 70 1/4 42.42% 109
Ghana 98 15 28 113 1/9 53.82% 177
Cameroon 70 15 24 71 1/3 55.47% 39
Ivory Coast 59 20 24 145 2/3 31.06% 77
Benin 75 20 11 67 1/4 54.27% 50
Conakry 75 18 11 96 2/4 24.13% 51
Congo B 100 15 5 88 1/3 55.10% 78
Liberia 60 15 4 73 1/3 46.55% 78
Bissau 100 10 2 72 1/3 59.64% 54
MENA              
Iran (joint venture) 49 15 81 130 2/4 45.87% 66
Syria 75 20 17 80 2/4 43.35% 46
Sudan 85 20 39 56 2/3 34.91% 154
Yemen 83 15 28 44 1/4 42.00% 98
Afghanistan 100 15 34 53 1/5 36.31% 68
Cyprus 100 20 1 115 2/4 42.23% 235

Source: Company Reports

Ownership Structure

A majority of the shares of the operator (85 percent) are free floating. The other shareholders of the company are the employees, directors of MTN Group Limited and major subsidiaries and Newshelf 664 (Proprietary) Limited, which have been together referred to below as 'Non public'.

Figure 5 shows the ownership structure of MTN as on 31st March 2005.

Figure 5: MTN - Ownership Structure (March 2005)

MTN - Ownership Structure (March 2005)

 

Source: Company Reports

Recent Developments

The following are some recent developments for MTN:

 

MTN Rwanda expects to see revenues greater than RWF 90 billion (USD 104.7 million) in 2017 up from about RWF 77 billion (USD 89.5 million) last year, their Chief Executive said  CAPEX this year accounted for USD 18 million in 2017. 

An MTN Ghana Senior Manager advised that MTN had hit a total of 17,817,273 voice subscriptions as at the end of September 2017. This was confirmed by the NCA but varies from the 17.59 million reported in the MTN Group Quarterly Update for the same period. 

MTN Ghana signed a GHS 510 million (USD 113.2 million) syndicated loan facility arranged jointly by Ecobank Ghana Limited and EcobankDevelopment Corporation (EDC) in December 2017. The loan will be used to finance infrastructure expansion and working capital, and has a 5-year tenure.

MTN Ghana extended its network coverage in December 2017 to include 130 under-served and unserved communities in nine regions as part of the roll out for 2017.

January 2018: MTN Group said last that it had assigned a USD 231 million shareholder loan to tower group, IHS Holding Ltd, which will consequently impact its 2017 profits. MTN has returned to profit in the first half of its financial reporting year in the absence of one-off charges related to a USD 1.1 billion Nigerian fine.

MTN Rwanda regained its market dominance during November 2017 having dropped to within a percentage point of rival Tigo in October. MTN had 42 percent of the mobile market in November, up from 41 percent the previous month. 

January 2018: MTN Rwanda and Vanu were said to be integrating their two networks, extending MTN's Network in rural areas. The deal would allow the provision of GSM services, including voice and data, which were previously inaccessible to several thousand people. 

MTN claimed to have achieved download speeds of more than 20 gigabits per second in its first trial of 5G technology. In a statement issued on 7 January 2018 it claimed that this is the highest speed yet achieved on an African mobile network. The 5G trial is based on commercially available baseband hardware and 5G mobility is supported.

MTN has said that it is aiming to increase its mobile money subscriber base from the current 21 million to 60 million in the next three to four years across Africa. MTN Group Chief Executive Officer Rob Shutter shared this aspiration with the Deloitte Africa in 2018 Outlook conference in South Africa in February. 

Swazi MTN has introduced Fixed Wireless Services it was reported in February 2018. Swazi MTN CEO said: "The launch of fixed wireless is a first, and a huge milestone for Swazi MTN and the country, this wireless solution has a solid appeal to both households and business in the country, we can easily see the growth in the number of smart homes which leverage on technology." 

 

Mergers and Acquisitions

In October 2005, MTN entered into Iran by acquiring 49 percent stake in Irancell, one of the two mobile network operators in Iran. This was the first expansion of the group outside Africa.

In August 2005, it entered Zambia by completing the acquisition of Telecel Zambia after finally getting the approval from the local telecom regulatory body. Telecel Zambia was one of the three mobile network operators in the country and accounted for 19 percent of the market share (in terms of number of subscribers), in September 2005.

In June 2005, it launched its network in Cote d'lovire by acquiring 51 percent stake in Loteny Telecoms, which had over 80,000 mobile subscribers in the country with a market share of 50 percent.

Network and Service Expansion

In November 2005, MTN introduced trial 3G services based on the High Speed Downlink Packet Access (HSDPA) technology in South Africa for corporate customers. In the same month, it also launched Blackberry Connect in South Africa in partnership with Research in Motion (RIM).

In August 2005, it launched MTN banking in partnership with Standard Bank in South Africa, enabling its subscribers to manage their banking transactions through their mobile.

In April 2005, it launched Blackberry commercially in South Africa.

Future Outlook

MTN has adopted an aggressive network expansion strategy in a number of developing markets in Africa by entering into strategic partnerships or alliances with local operators, or by acquisitions and mergers. The group is yet to launch its 3G services fully in South Africa and GPRS in Nigeria, which are its two biggest markets. The future outlook for the group's operations in Africa is as follows:

South Africa

The group has launched 3G services commercially in South Africa, as of June 2005. With the liberalisation of the telecom market and changes in regulatory policies in 2005, the group is expected to face challenges in South Africa from other operators due to increased competition in the market. The regulatory market began to change with the introduction of convergent billing in February 2005, which opened more sources for revenue and extended operating rights for the existing operators.

Nigeria

The group's operations in Nigeria will be the most interesting and most likely fastest growing, in the years to come. In the financial year 2005, the number of subscribers in Nigeria had increased by 123 percent, while revenues increased by 53 percent. The group will endeavour to maintain its hold in Nigeria by increasing network coverage and services, by offering innovative solutions, by increasing penetration levels and MTH is also expected to launch GPRS services in the country very soon. Furthermore, a recent increase in the GDP of the country, due to economic reforms introduced by the government and the privatisation endeavours, should further help to expand the subscriber base of the group.

Cote d'Ivoire

The country continues to be of strategic importance for the company, which can be judged by the fact that it had registered the highest growth rate for GSM services in Africa in the last five years. The country holds a good potential as the penetration level is low, at only 11 percent in 2004.

Zambia

The group has recently entered this country following the acquisition of Telecel Zambia. The key growth drivers in this market will be the recently increased competition among the players and the low penetration rate of mobile services, which stood at just 3 percent in 2004. Moreover, the network coverage is presently concentrated in urban areas and the rural market continues to remain untapped. Telecel has already introduced 400 community payphone lines and intends to penetrate deeper into the rural areas of the country, and the local telecom regulator is also encouraging such measures by all operators.