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Issue Date: August 2007

MTN's success as a 'risk-taker'

August 2007

MTN's aggressive penetration into markets shunned by other operators is the group's most significant competitive advantage according to global growth consultancy Frost & Sullivan. The company's position as a 'risk-taker' continues to show rewards.

"They have managed to thrive in challenging markets such as Nigeria where other operators have failed to survive," says Frost & Sullivan research analyst Spiwe Chireka. "It is this ability or willingness to go where no one else is willing to go that puts MTN apart from its competitors."
The company's results released today show a substantial growth of 20% in its overall subscriber base. The group now serves 48,2 million users across all its regions. This includes significant increases in subscriber numbers in Iran, Ghana and Sudan.
Its move into Sudan is the latest of its high-risk undertakings. The conflict in the country is well publicised and several international companies have withdrawn from the region. But MTN has seen this vast untapped market as one of Africa's largest opportunities.
"Growth opportunities in Uganda are also huge," notes Chireka. "The highly successful MTN VillagePhone project is increasing the penetration of cellular phones in the rural areas of this country, where 80% of the population resides,"
In the competitive South African market, MTN's growth was stable. The primary growth continues to come from lower-usage segments in the prepaid sector.
Chireka however points out that the average cost per user (ARPU) continues to decline for all cellular operators as they increase their subscribers in low-income groups. The challenges this creates is that revenues from calls are lower and that this segment communicates mostly via SMS, which is not a substantial income generator.
"MTN's revenue in South Africa comes mainly from interconnection fees rather than from voice calls by its subscribers," Chireka says. "With that in mind, ICASA's hearings into reducing the interconnection fees between cellular operators are a threat."
MTN will therefore look for increased revenue growth from its data and fixed-line services. MTN has started building a fibre-optic cable in South Africa and has also invested in fibre-optics in Nigeria to increase the penetration for fixed-line services.
"This fibre in South Africa has the potential to take customers away from Telkom as it will provide major customers with direct access to MTN's network," Chireka says. "It will also go towards meeting the increased demand for data connectivity."
For more information contact Patrick Cairns, Frost & Sullivan, patrick.cairns@frost.com


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