As MTN comes under increasing top line pressure, the group is wading further into the e-commerce field in a bid to eventually generate a substantial amount of income from the sector, negating declining voice revenue.
The group is seeking ways to expand its product offering outside of traditional voice, and aims to increase its presence in the digital space by leveraging technologies and taking advantage of low levels of Internet penetration.
MTN, Africa's largest cellphone operator, says its bid to deliver additional services through the Internet will be bolstered by a partnership it is entering into with Rocket Internet, which is expected to be wrapped up by July. At the same time, it will enable carrier billing; allowing people to buy applications and services through their cellphone bills.
The listed company says in its recently-released results that the Rocket partnership will enhance growth in its Internet business in Africa and the Middle East, which will bolster data uptake.
Not enough
However, World Wide Worx MD Arthur Goldstuck notes MTN's e-commerce play is not going to solve its immediate challenge of dwindling voice revenue, which has yet to be replaced by data income. Although e-commerce is an "inadequate" solution, it is a good long-term bet if it is part of MTN's endeavours to diversify revenue, he adds.
In the year to December, voice continued to face pressure as a result of aggressive price competition and lower mobile termination rates, which caused a decrease of 1.8 percentage points in its contribution to overall revenue.
The group's overall top line only gained 3.1%, when currency gains are stripped out, to R136.5 billion.
Goldstuck says the slowdown in voice use - and the resultant increase in data at lower margins - has been coming for some time, but operators have been slow to react. He notes MTN either has overestimated e-commerce's potential as a money generator, or is making a long-term play.
MTN expects to invest around EUR300 million (R4.5 billion) in the next two years into two ventures that will be created to cover the African continent, and the Middle East. Rocket Internet already has a presence in several Middle Eastern countries, and has rolled out a series of high-growth online businesses, including Easytaxi, Lamudi, Namshi and Hellofood, the group said in its initial December announcement.
While Rocket has been successful in Africa, the e-commerce space on the continent is still very small, says Goldstuck.
Figures provided by World Wide Worx indicate the total e-commerce sector globally is worth an estimated $963 billion. The local online retail sector was estimated to be worth R4.23 billion in 2013, an amount that has rocketed from R800 000 in 1996.
"If SA is still small, the rest of Africa is microscopic," says Goldstuck. He adds while MTN has taken a different approach to tackling the voice dilemma - with other operators just chasing data - the company will not steal a march on its competition.
"It's different in a way that doesn't make a difference in terms of the challenges that face them."
Great prospects
MTN group president and CEO Sifiso Dabengwa said recently the Internet will play an important part in e-commerce in the future, and MTN sees a "major opportunity" because of low penetration rates. He says the joint venture also opens up opportunities in Latin America and Asia.
MTN is currently a financial investor in Rocket, which sees "high-level" synergies between the two businesses, says Dabengwa. Rocket builds online companies and has, so far, created more than 100 entities in more than 50 countries.
Dabengwa says although the venture is "very much a work in progress" there is "a lot of work taking place" currently, such as in Nigeria - its largest market - and Ghana. He says MTN has opportunities to work with its 200 million subscribers.
Investor relations executive Nik Kershaw explains the group could look at preloading some apps onto its devices that would allow free browsing on some sites. He adds there is a lot of targeted marketing MTN can do as it knows where its subscribers are.
MTN is also pushing data-enabled devices into the market in a bid to boost data growth rates faster, adds Dabengwa.
Dabengwa notes financial services, such as mobile money, will continue to be a key focus.
Kershaw adds its current mobile money offering is a "big" contributor in a number of markets. He also points out that the operator has an investment in Amadeus Capital Partners, which will invest in late stage venture and growth companies.
Amadeus' investments will mostly be in mature markets as it seeks to develop online and mobile applications and services targeted at the rapidly expanding middle classes in Africa, the Middle East, Asia and Latin America.
MTN is also planning to offer carrier billing across Windows, Android and BlackBerry platforms in the second quarter of the year, but only for contract customers. It says the shift will allow it to charge customers directly when they purchase applications and services, instead of a credit card being required.
It adds it will look at extending this value-added service over "various m-commerce domains".
* Additional reporting by Bonnie Tubbs.
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