MTN: Connecting Africa and the World

Founded in 1994 as M-Cell, the MTN Group has outgrown its humble beginnings in South Africa to become a formidable force in the telecommunications industry. Today, with a mobile subscriber base of about 273 million, MTN is the eight largest mobile network operator in the World and the largest in Africa.

With a workforce that is believed to be in excess of 19,000, an asset base valued at US$19.43 billion and revenues exceeding US$9 billion as at 2019, MTN controls significant wealth in the continent, making it a true herald of our Companies That Own Africa segment.

Humble beginnings

MTN was, however, not always the giant that it is today. 27 years ago, the company was non-exist, even on paper. The transition from Apartheid to democratic government, however, created a new impetus for black-owned businesses to thrive in the newly born South African republic. With only one in 100 black South Africans owning a phone line, black empowerment company New Africa Investments saw an opportunity and approached the government for a mobile phone license. The government, desperate to shift key industries away from white-minority ownership, gave the founders their blessing, paving the way for MTN’s path to success.

Soon after its launch, MTN launched a number of innovative solutions such as the Prepaid Pay As You Go model and the Short Message Service (SMS), aimed at making mobile communications affordable to all South Africans. Its affordability and black ownership background made the company popular among South Africans, especially the majority black population. 4 years after its launch, MTN had achieved so much success in South Africa that it was now ready for exploring further opportunities in the underserved markets of Africa, north of Limpopo.

Expansion into Africa and beyond

In a bold move to bring world-class communication to the developing world of Africa, MTN began its expansion in 1998 with the acquisition of licences in Rwanda, Uganda and Swaziland. In all the three countries, MTN achieved remarkable success, helping connect thousands, and now millions, who had heretofore not enjoyed the convenience of mobile communication.

The successes recorded in the three countries emboldened an ambitious MTN to explore further expansions into the vast and untapped African market. Within the first 5 years of the 21st century, MTN had expanded its reach to more than 7 African countries, boasting of a total subscriber base of 25.4 million and revenues of more than US$1 billion. At its peak in 2018, MTN had expanded to 22 markets spread across Africa, Middle East and Europe.

MTN Nigeria was arguably the company’s most profitable bet to date. The subsidiary was launched in February 2001, 19 years later and US$1.8 billion of investments, MTN Nigeria is the group’s most profitable venture accounting for and about a third of its total revenues.

Leading innovations in the continent

“Innovation and being a step ahead are hallmarks of our company,” says MTN South Africa CEO Godfrey Motsa. Motsa could not be far from the truth, as the company has been continuously innovating since the first call was made on its network in 1994.

Two years after its launch, MTN introduced SMS to South Africa and was the first telco to roll out Pay As Go model for calls, making communication easier and affordable to South Africans. As the Internet started picking up at the turn of the century, MTN was again at the forefront, becoming a tier one Internet service provider in 2001, to better serve South Africa and several other African nations where it had already set base.

In 2002, MTN again pulled an industry first by installing solar-powered payphones in Uganda’s Lake Victoria region where electricity was unheard of at the time. A year later, MTN brought video calling to Africa and later intensively invested in 3G networks, becoming the first operator to bring the network to the African market in 2005. With digital becoming increasingly popular, MTN innovated again, launching online banking services in 2007 to make it easier for people to access money in their bank accounts. Later that year, MTN partnered with Multichoice to provide mobile TV in South Africa.

Come 2009, MTN launched one of its most impactful innovations yet – the mobile money service popularly known as MoMo. Styled after M-Pesa, which was launched two years earlier by Safaricom, MoMo went on to achieve what M-Pesa couldn’t, scale. Unlike Safaricom, which was confined to Kenya, MoMo during its launch was rolled out in 7 countries, 6 in Africa and Yemen in the Middle East. 13 years later, MoMo has gone ahead to attract over 40 million subscribers, helping drive financial inclusion in some of its major markets such as Ghana and Uganda.

According to MTN, the value of MoMo transactions have grown overtime to hit US$96.1 billion in 2019 with 9,200 transactions processed per minute. MoMo is trully driving the financial inclusion agenda in Africa, helping connect even the poorest and underserved communities to a robust, effective and convenient financial service.

Moving into the future, MTN is still playing its role as a leader in innovations that matter to Africans. The company is currently investing heavily in technological capability to take Africa to the next level of telecommunication – 5G.

A bumpy ride to success

MTN’s journey to Africa’s most valuable brand has, however, not been a smooth ride. The telco giant has had to contend with a number of challenges in its goal to become the continent’s largest brand.

In 2015 for instance, the telco was slapped with a US$5.2 billion bill by Uganda over the failure to switch off unregistered sim lines on its network. It took the intensive lobbying and intervention from its home government to have the fine reduced to the final US$1.17 billion to be paid over a period of 3 years. Its Nigerian operations are routinely attacked by angry Nigerian mobs in retaliation to periodic xenophobic attacks to Nigerian nationals in South Africa.

Apart from Nigeria, MTN has also been facing a number of challenges in various other markets from Ghana to Afghanistan and Iran. In Iran where the company controls a 48% stake in Irancell, the company has had to fight cases to prove the legitimacy of its operations. It has been accused of illegally obtaining a mobile operating license, to helping Iran procure critical US technology at a time when sanctions were imposed on the country. It is also due for a court hearing in 2021 after it was accused of aiding the Taliban, providing the insurgency with money that was used to attack and kill U.S. troops. In Ghana, the company had to go to court to prevent the national communications authority from declaring it as a dominant market player, which could have exposed it to tighter restrictions.

In its home market South Africa, things have not been good either. The company has been grappling with stagnating growth, shedding over 2 million subscribers to competitors within a span of two years. South Africa’s sluggish economy, rising living costs and high unemployment are not helping MTN’s business either. Consumer prepaid revenue has also been declining, plummeting 2.7% YoY compared to a 5.1% YoY decline in the three months to June 2019. To add to its woes, South African regulators have been pushing for lower data prices to help the industry’s poorer customers, a factor that is constraining the company’s revenues even further.

Defining a fintech future

Despite its challenges, MTN is soldering on with its ambition to remain the top telecommunications company in Africa. Its BRIGHT strategy is a significant driver of the company’s future with ambitious target of achieving 300 million active subscribers by 2022. In response to increasing competition from competitors across all its markets, MTN is also shifting focus to more lucrative financial services, mobile gaming and music streaming – hoping investments in these areas will offset the falling margins in bread-and-butter telecom services such as phone calls.

Going into the future, MTN plans to pull out of the Middle East to concentrate on its pan-African strategy and simply its portfolio. Letting go of the extremely risky and controversial markets will be a breather on the MTN and boost up its financial war chest even as it seeks to further expand in Africa. The company has already announced intentions to venture into the lucrative Ethiopian market with a population of more than 105 million people. Fitch analysts also project that Angola is the other market that MTN would be interested in following the willingness of the government to open the sector to private investment.

The work of piloting the MTN’s ship into the future now rests on Zimbabwean Ralph Mupita, an engineer and an alumnus of the Harvard Business School who assumed the role of CEO of the Group in August 2020. Mupita, who has been critical to the implementation of MTN’s Bright Strategy and his rich experience in finance having worked for Old Mutual for 16 years, is an excellent choice for the company, as it shifts focus to fintech as the next driver of growth.

The story of MTN’s evolution from a good idea into a multibillion-dollar company in less than two decades is the stuff of corporate legend. In a short 26 years, it has become one of Africa’s top multinational companies in an industry that has revolutionised the African continent and beyond.

What is clear is that since inception 25 years ago MTN has been a significant contributor to the economies and communities within which it operates. A lot of this has been with respect to the infrastructure that is the backbone of the economies that MTN operates in, and often, that enables connectivity of people in the most remote areas.

Confident in his company’s future, MTN SA CEO Godfrey Motsa says “Our network is future-ready as we look forward to the next 25 years as Africa’s best and most trusted network.”

This feature appeared in the December 2020 edition of Africa Inc. magazine. You can access the full digital magazine HERE

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