Why MTN is building its own messaging app
MTN has developed an instant messaging platform which it hopes will become the "African WeChat", with plans to launch it in two markets in the next month or so.
"We intend to launch it across the entire portfolio, South Africa included, but we will start with the West and Central Africa (WECA) markets as a kind of a pilot or beta stage," MTN group president and CEO Rob Shuter told a media briefing after the group's full year results presentation in Johannesburg yesterday.
WeChat is a Chinese messaging, social media and mobile payment app developed by Tencent. Shuter said MTN's messaging app also plans to integrate payments into the messaging platform.
"The plan is to integrate MTN Mobile Money (MoMo). This is obviously more relevant in markets where we have MoMo. I've made the parallel that it will be the African WeChat, but it will look like a messaging-centric app where you imbed a payment mechanism," he said.
MoMo is active in 14 markets with plans to soon launch in four more, including SA. At the end of December 2018, MTN had a total of 27 million active MoMo subscribers.
Shuter said the messaging app will also be different from its peers as MTN is building in SMS integration.
"The existing instant messaging apps only really work from a data subscriber to a data subscriber. As the penetration of data customers increases in our market, increasingly they will be conversing with non-data subscribers, so this is going to be an important differential between the existing instant messaging apps and the one we are building."
Shuter said MTN is doing a lot of local market customisation for the messaging app, including local languages, and already has 54 languages on the service.
"Another big thing is we will increasingly bundle it into the underlying data services as well. That is a key differentiator for the telcos."
Shuter himself has been testing the beta version of the app for the last few months. He said his team built the app from scratch, "we didn't white-label, we didn't buy it" and he sees it as "a very exciting development for us".
Besides the messaging app, MTN also wants to launch its own music streaming application in 2019 as an extension of its digital strategy and spread MTN Mobile Money into new geographies.
MTN will re-launch MoMo in SA and extend the service to Nigeria, Afghanistan and Sudan as well, boosting its MoMo reach from 14 to 18 countries.
He said the previous version of MoMo was too focused on building a digital banking system that would compete with the commercial banks. The strategy this time would be to target the areas of SA where there are large unbanked or under-banked populations.
"What we see in the rest of the markets is we are successful when we set ourselves up to compete with cash. Because these are markets with large cash economies, and customers that are operating in the cash economy are already used to recharging for prepaid airtime and it's very easy to basically transform that system to not be just airtime recharge but make it e-money recharge and then people can do person-to-person payments, remittances, bill payments, etc, and your primary objective is to displace cash," Shuter said.
"So when my guys ask me who we are competing against I say you are competing against cash. A lot of the newer digital players, the commercial banks are competing against each other; that's not really our sweet spot."
The group's digital business did not do that well last year but the fintech business, which includes Mobile Money, insurance, airtime lending and e-commerce, saw a huge improvement.
As part of the group's results for the year ended 31 December 2018, it disclosed that digital revenue had decreased by 32.9% to R3.9 billion.
"Digital revenue declined because of further optimisation of value-added services, but we expect a return to digital revenue growth," the group said.
Digital revenue declined by 22.5% in the Southern and East Africa and Ghana region; it declined by 38.8% in the WECA region, but increased by 27% in the Middle East and North Africa region, excluding Iran.
However, fintech revenue increased to R7.8 billion, a rise of 46.8% year-on-year.
Shuter told journalists the history of fintech at MTN started with the launch of the Mobile Money services to enable person-to-person transfers and remittances but has now expanded into other areas.
"We also have quite a big airtime lending business across the group. This is where you score customers based on their performance and you allow the prepaid wallet to essentially go into a small overdraft. It's very popular with customers, as they can still use some minutes or use some data and it comes out of the next recharge.
"So, all of this is rolling up into the fintech category and it will increasingly, as we go forward, be a combination of these things: fee revenue from mobile money transactions and then the more advanced services like airtime lending, insurance, micro-deposits, micro-loans, marketplace," he explained.
Overall group revenue for the year was up by 10.2%, service revenue increased by 10.7%, supported by growth in Nigeria (up 17.2%), Ghana (up 23%), South Africa (up 4.2%) and Uganda (up 8.9%). MTN's operations in Cameroon and Ivory Coast, however, saw a 7.3% and 6.6% decline in service revenue respectively.
"So what we are signalling is our ambition to expand it into more markets, to significantly boost the customer base and to put a significant investment into the advanced services. And I think it's important that particularly investors can now get visibility of the scale of the business we have today and what we are trying to build," Shuter added.