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Price competition, regulations impact MTN

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 24 Oct 2013
Subscriber growth failed to meet expectations in the third quarter as competition increased, says MTN CEO and president Sifiso Dabengwa.
Subscriber growth failed to meet expectations in the third quarter as competition increased, says MTN CEO and president Sifiso Dabengwa.

Although MTN has hit the 203.8 million subscriber mark - across its 22 countries - growth has been held back in key markets by price competition and the need to register subscribers.

During the third quarter, the listed group says it grew its base by only 1.1%, as SIM registrations in Nigeria led to disconnections, and both SA and Iran reported slower gains in new customers.

Group CEO and president Sifiso Dabengwa says the third quarter was "characterised by lower than anticipated subscriber growth, following ongoing price competition and subscriber registration requirements across a number of markets".

MTN has been focusing on segmented competitive voice and data tariffs, as well as improving network quality to cater for increased traffic. "Data and mobile money remain a key focus for the group with traditional voice revenue under pressure," it says. Data revenue gained 34.7% year-on-year and now accounts for 14.1% in total revenue.

Tough going

MTN previously admitted it was slow to react to more competitive pricing in some of its key markets. In SA, its third-largest market after Nigeria and Iran, the group added 233 000 users, taking its base to 25.2 million.

The group says, in its trading update for the nine months to September, its local operation "showed some progress after a challenging first half". It expects conditions to remain challenging for the rest of the year. MTN's year-end is December.

MTN says its base grew because of more competitive product offerings and focused marketing campaigns.

"The prepaid segment grew its subscriber base marginally, gaining some traction through its revised MTN Zone offering and the launch of a competitive international calling campaign. The postpaid segment delivered a satisfactory performance driven by segmented marketing campaigns and attractive classic and hybrid packages," says MTN in a statement.

Year-on-year, lower voice tariffs and slower subscriber growth impacted its revenue stream, as growth in income dropped. Data, seen as a future area of growth for operators, gained as its base grew to 13.9 million users and data revenue increased 16.6%.

Net impact

Nigeria kept its market share in what MTN characterises as a "highly competitive" market. Subscribers grew marginally, to 55.6 million, because of mandatory SIM registrations, lower gross connections in GSM, as well as disconnections in Borneo after services were shut down.

"These factors will continue to impact net additions for the balance of the year," says MTN.

MTN Nigeria has been focusing on improving network quality and introducing more value-added services to customers. It added 812 2G and 497 3G sites and its services now meet the regulator's requirements, allowing it to implement promotional products and services.

"Segmented product offerings remain a focus as price competition persists."

In Iran, where MTN has been trying to find a solution that will allow it to repatriate money stuck there due to US sanctions, its subscriber base dropped 1.7%, to 41.3 million, quarter-on-quarter. The slowdown in gross connections was because of a weaker economy in a market that is saturated, as well as increased competitive offerings.

"New promotional offers have subsequently been implemented to address acquisition and retention," says MTN. Despite the decline in users, the gains in revenue - which it saw at half year - are continuing, it adds.

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