MTN largely has the flavour-of-the-week approach of SA's prepaid mobile consumers to thank for its growth in subscriber numbers, while its own change of tack in the mobile price war has also served it well.
MTN revealed in its quarterly financial update yesterday that it had added 1.4 million net subscribers to its base, bringing the total number of SIMs on its network to 26.7 million - 80% of which are prepaid.
On the other hand, average revenue per user (ARPU) dropped by 4% - a sign of the times, say analysts, and for MTN, an indication that it has to start driving data usage more aggressively, as users' spend is a far better sign of success than customer numbers in SA's multi-SIM environment.
Africa Analysis analyst Dobek Pater says the fact that MTN's growth was primarily in the prepaid arena - coupled with the "considerable decrease" in ARPU - means the operator has probably been attracting mainly price-sensitive users.
Data drive
MTN has significantly decreased its effective per megabyte data rate over recent months, and recently introduced a music streaming service. MTN SA chief marketing officer Larry Annetts yesterday said the company would also enter the subscription video-on-demand (VOD) fray, with plans to bring the bundle-based offering to market by the end of November.
These efforts, in conjunction with getting more customers on smartphones, should help the company get its ARPU up through data, say analysts.
BMI-TechKnowledge director Brian Neilson says MTN may be making progress in this department. "The race is on to get customers on your network and using more data."
Annetts points out, earlier this year, Cell C's out of bundle data rate was 15c (before the operator hiked it to 99c in May), while MTN's was R2. "We were out of kilter if you looked at the price range for data, so we adjusted those and have seen extremely good elasticity coming through. But it takes some time. We can see strong revenue and recovery coming through in October for the full month."
Neilson says MTN could glean considerable revenues from a VOD play, if the company can tap into the advertising revenue stream, as over-the-top (OTT) players like YouTube are already doing very effectively. "There is nothing to stop operators like MTN from also playing in this way, provided they can come up with compelling content."
Pater says a lot of MTN's success in the VOD space will depend on how it approaches the market and, to a large extent, what content the operator will be able to offer. "The scale of VOD operations will also depend on the operator's fixed wireless connections (subscribers); for example, LTE used as a home connection via a modem or dongle and tablet penetration within the subscriber base, as well as fibre to the home in the future."
Trimming spend
On the cost-cutting front, Annetts says the operator managed to get its marketing spend down 80%, thanks to an experiment in which it abandoned above-the-line advertising in favour of what he calls discreet intervention - reaching customers using MTN's primary asset, its network. "SMS and voicemail advertising has proven to be far more effective than above-the-line, so we are definitely going to continue using that model. The mobile phone is being seen as the new TV in terms of advertising."
This move may also have played a part in MTN luring back former or inactive users via word of mouth, says Neilson. Pater notes, while mobile advertising will work for its existing subscriber base by offering more direct and personalised engagement, it will still have to spend on above-the-line advertising to try and attract customers not on its network.
MTN SA CEO Ahmad Farroukh is confident MTN will be able to maintain the customers it has gained, while continuing to participate more actively in the price war, which analysts have indicated is shifting from voice to data. "We have become very competitive. We are back in the game when it comes to gaining customers in the prepaid space."
In terms of the increasing pool of OTT players that has started vexing operators this year, Farroukh says the short-term effect on MTN's revenue stream is minimal. "At this point they are just enablers, their access point is our data."
As far as the year's biggest mobile brawl - over mobile termination rates - goes, Farroukh says MTN just wants to "put itbehind us" now. "We have a plan and we know now what is happening [in terms of inter-network fees] for the coming two or so years and we will continue from there."
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