BUSINESS TECHNOLOGY MEDIA COMPANY
Companies
Sectors
Columnists

The future is y'ello

In 14 years, MTN has attracted more customers than the entire South African population.
Read time 5min 10sec

Imagine a company that is just 14 years old. Then, imagine that in that brief period it had expanded into 21 countries, achieved a market capitalisation of more than R222 billion and more subscribers than the whole population of South Africa.

If you were able to imagine such a thing, you'd be calling that company MTN. Whether or not you love or hate your cellular operator, you'd have to admit that MTN's growth has been nothing short of spectacular. Management has been aggressive and, although it sounds like a clich'e, visionary. I mean, who in their right mind would leap into war-torn and politically unstable climates like Iran, Sudan and Syria? But that is what MTN has done and with success.

However, part of that success is due to over-regulation in other markets and goes a long way to proving that the telecoms sector worldwide operates better if there is heavy regulation, state interference and anti-competitive practices.

It sounds mad - supposedly the private sector functions better when self-regulation is at play, when the state minds its own business and when competition is as fair as humanly possible. But let's not forget that MTN is a company that grew up in South Africa, where regulation has been a hodgepodge of strategies, the government had its own telecoms interests, and the cellular operators haven't competed so much as they've colluded.

Growing up in this environment gave MTN the skills to take on the risks of other third-world markets and to go places where few would dare to tread. What's a bit annoying, though, is that unlike in South Africa, MTN has been beaten about for not serving its customers in other markets.

In Nigeria, for example, its network became so congested that subscribers were seriously disadvantaged. Quickly, Nigeria's regulator banned MTN from advertising until it expanded its capacity and then fined the operator more than R150 million. If the same had happened in South Africa, the regulator would have held a meeting or two, there might be a report floating about and everyone would be debating the issue to death while subscribers were left without a decent network connection. A swift and decisive slap around the chops in Nigeria and MTN got its act together. No doubt, MTN's Nigerian business is now stronger than ever and consumers are happy again - everyone won. We play too nice in South Africa.

Another example of this would be Sudan, where for some odd reason all subscribers had to register their personal details with their cellular operators or be switched off. This may mean that subscriber numbers in that country were not falsely bolstered by foreigners, who were just using a line while on holiday or on business. MTN, which suspected a competitor or government might have been trying to knock MTN out of the market, lost 1.1 million subscribers, but retained a 25% market share and is determined to hang in there.

When it comes to managing a company, there is no such thing as a merger - there is always a winner who runs the merged entity.

Ren'ee Bonorchis, Business Day, editor at large

Further, the Sudanese government launched its own operator with vastly reduced prices. That's kind of funny - a government trying to oust foreign competition through anti-competitive practices that actually benefit the consumer. No doubt MTN was outraged, but at some point you've got to think that MTN had it coming. That's because South African subscribers have paid through the nose for their services and continue to do so, despite the fact that there is supposedly competition in the South African market. If you look at average revenue per user, it sits at about $19 in South Africa. Of MTN's 21 countries, average revenue is of the highest in South Africa, despite the country's high numbers of subscribers. Volumes have not translated into cheaper cellular services locally. And although regulation in the local market appears to have been largely ineffective, regulation in other countries has become a nuisance for MTN.

However, I would suggest regulation has kept the company leaner and meaner and has not deterred it from aggressive expansion.

That expansion is now under question though - MTN has failed to bed down a deal in India. Word is that this is because although the company says it wants to find a suitable operator to merge with, what it really wants is to acquire an Indian operator. When it comes to managing a company, there is no such thing as a merger - there is always a winner who runs the merged entity and it would appear that MTN's desire to be the winner is stymieing any possible deals.

Of course, another way to gain further access to the world stage would be for this company to list in other markets. There's London, New York, Dubai and more to choose from. But I get the impression MTN wants to fly a little below the radar until it has made enough acquisitions that it does not become an acquisition target itself.

As MTN adds more countries to its list, however, South Africans are left a bit confused. We like to be proud of our companies that make it in other markets. But a bit like the gold rush of the 1800s and 1900s and the companies that profited at the expense of many, MTN is doing well after having learnt how to drain the resources out of the back pockets of South Africans. Our mistake was letting MTN get away with it. Now, the best way to get your money back is probably by doing something incongruous like buying MTN shares.

* Ren'ee Bonorchis is Business Day's editor at large.

Login with