New MTN CEO clarifies subscriber culling
MTN's new CEO Rob Shuter says the group is targeting a strategy of value and not volume when it comes to growth in its subscriber base.
This as the telecoms operator saw group subscribers drop 3.6%, to a total of 231.8 million, during the six months to 30 June - partially impacted by MTN's new initiative to modernise its subscriber definitions.
Shuter was presenting his first set of results to shareholders, analysts and the media in Johannesburg yesterday, after taking up the role of MTN group CEO and president on 13 March.
He said that in many markets, MTN regards a customer as 'active' if they are generating revenue; however, in markets where there is a lot of bulk SMS, often subscribers are only kept active because they are receiving a bulk SMS.
"We really feel this is distorting the reality of the business, so you will see for example in Nigeria alone we took about seven million subscribers out of the definition of active because they are only alive for this particular phenomenon," he explained.
"[Modernising subscriber definitions] is an ongoing process and we need to finish it by the end of year and then we will have a clean read of where we are, how deep we are into the markets and what kind of opportunities there are," Shuter said during his presentation.
Nigeria was one of the biggest drags on total group subscribers in the half, with the subscriber base dropping 14.3% during the six months to 53.1 million active customers. In Ghana, the subscriber base declined by 10.3% to 17.3 million.
He said the group had also done a clean-up in terms of how it defines active data subscribers.
"Historically, we have reported around 120 million active data subscribers, but we know there are some subscribers who only use about 1MB of data per week - we call them accidental subscribers. Again it's not really a good representation of the opportunity in the market.
"So we have already changed that definition. In the results you will see active data subscribers are now around 70 million, so that is a really good measure of what we have got - but also shows a lot more opportunity perhaps than anyone would have thought historically," Shuter added.
MTN operates in 22 countries in Africa and the Middle East, and group revenue for the six months decreased by 18.5% to R64.3 billion. In constant currency terms, however, revenue grew by 6.7%, underpinned by 10.8% growth in revenue in Nigeria and 5.2% organic growth in service revenue in SA.
The subscriber base in SA ticked up by 1.5% in the six months, to 31.2 million, and grew 4.7% year-on-year. Shuter told ITWeb that in terms of the modernisation of definitions, MTN had not started the process yet in the South African market.
Rival operators have also recently reported improved subscriber numbers locally. Vodacom's trading update for the quarter ended 30 June showed its SA customer base had grown 12% year-on-year to 39.4 million. Telkom's results, for the year ended 31 March, showed an almost 48% year-on-year improvement in its active subscriber base to close to four million. Cell C said it grew its subscribers by 20% to 15.3 million during the year ended 31 December 2016.
But Shuter didn't seem worried that MTN's competitors were actively adding subscribers.
"We are really trying to move to a value strategy not a volume strategy - quality subscribers, quality networks and base management retention. So we don't want to lose ground but we are not going out with a kind of 'spray and pray' approach," Shuter said.
"If you follow the South African prepaid market over the years there is a lot of volatility in prepaid subscriber numbers. You know you will see somebody put on a big chunk of subscribers in one quarter and then a lot drop off the next quarter and it's a very promotionally-driven market. So you know we are not really, in prepaid, aggressively steering on gross adds right now," he added.
MTN's prepaid customers increased by 1.7% to 26 million in the six months. The postpaid segment showed a slight recovery in the second quarter of the year - after dropping in the first quarter - and ticked up by 0.2% to 5.2 million over the six months.
"I think on postpaid we have had just a very early sign that we have stabilised the base. We very much need to move back to growth in postpaid; that I think is very much required.
"The postpaid market is growing in SA and we also have people moving from prepaid to postpaid, so the pool of postpaid subscribers is growing and we expect to do better there moving forward," Shuter added.
Interim revenue in SA increased by 1.6% to R20.2 billion. Service revenue increased by 5.2% on an organic basis to R16.8 billion, supported by strong growth in data revenue and digital revenue, up 18.5% (organic) and 37.6% respectively.