Africa-Press – South-Africa. MTN will ramp up its distribution and dealer network as well as improve its location-based pricing in South Africa to claw back market share in the prepaid market as it revises earnings targets for the business.
The company, which has 39.8-million subscribers in South Africa, 29.5-million of whom are on prepaid, has been under pressure as competitors intensify their fight to win customers. The prepaid voice segment was the hardest hit with revenue down 2.2%.
MTN Group CFO Tsholo Molefe said in an interview this week that region by region, voice had been declining.
“We obviously believe that we can improve on prepaid data. So there’s quite a number of interventions that we are looking at, location-based pricing, in terms of how we bundle our proposition to customers.
“On postpaid would like to see it improving on a stable ground. In as far as enterprise is concerned, we also want to make sure that we have a healthy balance sheet, strong cash flow and liquidity. So the need for commercial execution is quite a big one,” Molefe said.
MTN Group CEO Ralph Mupita said: “We’re investing a bit more at the dealer and at the distribution end in South Africa, I think you’ll start to see that come through.”
Peter Takaendesa, chief investment officer at Mergence, said MTN SA’s woes were partly a function of a weaker economy and partly MTN losing service revenue market share to Telkom Mobile and recently also to Vodacom.
“The prepaid market is the most price sensitive and less loyal to telecom operators, so reduced visibility on key factors that drive the consumer’s choice in this regard leads to immediate market share loss than what is the case in the postpaid market.
“Telkom Mobile is still dominating mind share in affordable mobile data offerings while Vodacom is still strong on the higher end consumer in addition to a highly promotional short validity prepaid offering. MTN is now focusing on price optimisation and its device strategy to compete better, but a sustained turnaround is likely to take some time given competition is likely to tighten further with Cell C’s recovery plans and aggressive MVNOs (mobile virtual network operators).”
Management has revised the medium-term guidance earnings target for MTN SA. It expects service revenue growth of “low to mid-single digits” from “mid-single digits”, and an earnings before interest, taxes, depreciation and amortisation margin of 35-37% (from 37-39%).
“We just wan to be realistic around the competitive dynamics that we’re seeing. We still aspire for 30 to 35% of all net additions in the market. That aspiration has not changed,” said Mupita.
MTN has appointed Ferdi Moolman as CEO of MTN South Africa with Yolanda Cuba as his deputy. The former CEO Charles Molapisi has been appointed group chief technology and information officer.
“I think these are strong appointments that stand a much better chance of driving a sustained recovery in MTN SA. Ferdi is probably one of the most experienced operational executives at MTN and has some of MTN group’s largely prepaid markets outside South Africa such as Nigeria.
“Yolanda’s appointment bodes well for succession planning and she also comes with solid operational experience from some of the challenging prepaid markets outside South Africa. Fixing South Africa is very important for MTN group’s cash flow profile as there are no cash repatriation risks that they experience with other large MTN markets such as Nigeria. Holdco debt holders will sleep better with a stronger MTN South Africa,” said Takaendesa.
He expects MTN to continue to benefit from the strong recovery in the rest of Africa operations while they stabilise South Africa over the mid term and “therefore we believe their high teens constant currency group service revenue growth over the mid term is reasonable. We will also be watching how MTN SA’s fibre market strategy plays out after rival Vodacom’s success with the CIVH stake acquisition.”
For More News And Analysis About South-Africa Follow Africa-Press
