BUSINESS TECHNOLOGY MEDIA COMPANY
Companies
Sectors

Nigerian bank licence frees MTN from traditional business

Read time 3min 40sec
MTN Group president and CEO Ralph Mupita.
MTN Group president and CEO Ralph Mupita.

As MTN celebrates receiving a provisional licence to operate its Mobile Money (MoMo) platform in Nigeria, analysts believe the telco will now accelerate the loosening of its traditional business model and search for new revenue streams.

The Pan-African mobile operator announced the licence news on Friday, saying it is the first step in the process towards final approval, subject to the fulfilment of certain conditions as stipulated by the Central Bank of Nigeria.

With the Payment Services Bank licence, MTN Nigeria will offer a wider range of mobile financial services beyond the traditional person-to-person mobile money transfers, such as lending and bill payments.

The latest development comes on the back of bold moves made by MTN in recent months, as it pushes for alternative sources of revenue outside voice, with a goal of generating 20% of group revenue from mobile money services by 2025.

Some analysts believe the telco will now further relax its traditional business model and search for new customers and yields.

“The company has been working to strengthen partnerships with OTT [over-the-top] companies such as Facebook and WhatsApp,” says Ofentse Dazela, director for pricing research at Africa Analysis.

“MTN has also entered partnerships with various companies in recent years, to support rich media services such as YouTube, Kwese, Showmax and Deezer.

“Moreover, Travelstar and Zando are some of the companies that have partnered with MTN to assist the company to deliver e-commerce solutions to its customers. Thus, the intention is really to diversify revenue streams at an accelerated rate.”

Dazela adds: “MTN obviously recognised this about two to three years ago. The company identified a number of areas it wanted to explore and among these was to introduce more digital services, increase its e-commerce portfolio, as well as ramp up wholesale services.”

Explaining the knock-on effect of the Nigeria licence approval on MTN, Dazela says: “Essentially, this is done to offset the dwindling revenue streams from traditional services such as voice, data and SMSes.

“The move to diversify income streams is already yielding desired results, judging by the company’s September 2021 quarter update. Looking at these results, one notices that wholesale revenue increased substantially by 52.8% year-on-year versus mobile data, which only grew by 11.8% in comparison.”

In the third quarter ended September, MTN focused on driving its connectivity business and also sustained voice revenue growth of 6.9%.

Data revenue grew by 34.5%, and according to MTN Group president and CEO Ralph Mupita, this was “supported by robust growth in data usage, up 52.6%, and a 4.1 million addition to active data users in the quarter to reach 119 million, as demand for work-from-home services, digital entertainment as well as online education remained robust”.

“The key drivers of growth for telecoms operators in Africa are mobile data and mobile money,” comments head of equities at Mergence Investment Managers Peter Takaendesa.

“Getting full mobile money licences in key countries is therefore a key foundation for growth over the next five years, as traditional voice revenues are likely to start to decline in maturing countries.

“Focus is likely to remain on Africa and services that leverage their mobile networks and billing systems. MTN is exiting non-core businesses as part of its asset realisation strategy.”

In addition, Takaendesa says, African telecoms companies need to accelerate the adoption of mobile money services before competition from “pure play international fintech services companies” increases with growing internet penetration over the next few years.

Nesan Nair, senior portfolio manager at Sasfin Securities, says the bank licence is “very important” to the telco.

“MTN has a large subscriber base here [Nigeria] and as a result, may become a formidable player in mobile banking – look at Tencent’s success in China, leveraging its subscriber base to sell financial services.

“Companies must evolve, and for the telcos that are targets of very strict regulation and pricing practices, it is imperative to seek revenue opportunities in higher margin products/services that are in fact complementary to their businesses.”


See also