MTN Nigeria, which celebrates its 10th birthday this month, will pump another $1 billion, or R7.1 billion, into its network to beef up capacity and add more subscribers in a highly-competitive environment.
The company was initially expected to spend R7.7 billion on its network this year, after trimming capex to R4.7 billion last year, from the R10.2 billion it spent in 2009. MTN Nigeria has spent more than R50 billion since launching a decade ago.
However, its new investment goes against the current trend of outsourcing infrastructure rather than investing directly, and is viewed as a bid to bolster its subscriber base in a market nearing maturity.
MTN Nigeria is the cellphone giant's largest operation, with 40.2 million subscribers at the end of March - more than double the amount of subscribers it has in SA. MTN expects to add another 4.4 million subscribers to its Nigerian base by the end of this year.
During the 2010 year, its R4.7 billion capital investment went into rolling out its WiMax network and upgrading its GSM network. The company also completed a 696km fibre backbone ring.
According to its 2010 results presentation, the company had already authorised R7.7 billion to be spent in Nigeria this year.
However, the company is now increasing this spending. CEO Brett Goschen said during a function to celebrate its tenth anniversary “we are committed to investing an additional $1 billion to upgrade [the] network in the current financial year”.
Goschen explained the company has almost 7 000 base stations located around the country, and is “still rolling out more”. “In a dynamic market such as Nigeria, you cannot stop investing if you want to remain the leader,” he noted.
MTN entered Nigeria in August 2001 and has around 52% of the market, which has a penetration rate of 49%. The entire market is anticipated to grow to 117 million people by 2015, from an estimated 80 million currently, based on MTN's latest figures.
“To maintain our leadership position, we would continue not only to out-invest the competition, but also persist in providing innovative products and services that satisfy the aspirations of our teeming customers,” said Goschen.
Billions invested
The cellular company, Africa's largest, owns 76% of MTN Nigeria. The balance of the operator is 21.2% held by Nigerian partners and 3% by the World Bank's investment arm, the International Finance Corporation.
However, MTN Nigeria is under pressure, as lower mobile termination rates eat into revenue and increased competition puts pressure on its ability to grow its subscriber base in a maturing market.
In May, MTN said its Nigerian subscriber base grew only 4%, as competitor campaigns and promotions stepped up. It responded by introducing new segmented tariff plans and bundled offerings towards the end of January, which enabled it to keep its market share.
MTN Nigeria secured one of four licences to operate digital GSM services in February 2001 and launched full operations in 2001. By February 2003, it recorded a million active subscribers, the first operator in Nigeria to hit that milestone.
The operator has spent more than $7 billion - or almost R50 million - on facilities and fixed assets. Its coverage spans 2 394 cities, towns and villages in Nigeria's 36 states, covering 85% of Nigeria's 158 million people.
MTN Nigeria has also constructed a digital microwave transmission backbone, Y'elloBahn^a, which has so far covered 11 500km. Its fibre backbone spans 8 530km.
Goschen says these networks are among the most “expansive” in sub-Saharan Africa. “With investments running into several billions of US dollars, we have installed the biggest network in sub-Saharan Africa, and continue to aggressively invest in Nigeria by continuously deploying a state-of-the-art multimedia technology highway.”
Competitive move
Richard Hurst, senior analyst of emerging markets at Ovum, explains MTN Nigeria's investment is a bid to bolster its subscriber base. Growth in the West African country is slowing, although the market is not yet saturated, he adds.
By investing that kind of capital, MTN Nigeria will be able to serve more customers as the “big thing” in Nigeria is capacity, says Hurst. However, MTN's investment into its network goes against the current trend of outsourcing base stations and infrastructure, he points out.
Hurst explains operators cut back on capital investment in 2008, when the effects of the global recession started being felt. The worldwide downturn took out banking giants such as Lehman Brothers and many economies are still trying to shrug off its effects.
However, from the third quarter of this year, Hurst expects capital spending to start picking up again. He says investments will focus on Africa, which is a frontier market and growing at a better rate than other regions.
MTN Nigeria is a “cash cow” for the group, says Hurst. However, Nigeria is highly-competitive, with players such as Bharti Airtel, M-Tel, Glo and Etisalat, he notes.
Share