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Market Insight

MTN looks to deepening smartphone penetration and e-commerce in 2014

March 06, 2014

Julian Watson Julian Watson Principal Analyst, IoT, IHS Markit
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MTN achieved strong growth in smartphone and mobile money users in 2013 and is set to strengthen its e-commerce capabilities this year.

  • MTN's group revenue rose 12% in 2013, driven by 24.5% growth in Nigeria, its largest market.
  • There was strong revenue uptick here and other "large cluster" markets, such as Cameroon (36.9%), Uganda (35.5%), and Ivory Coast (32.9%).
  • The weakening of the South African rand against other currencies boosted MTN's group revenue, but South Africa (-6.1%) and Syria (-40.1%) were a drag on revenue.
  • Data users grew 37.4% to 80.6 million and smartphones rose by 59% to 34.8 million.
  • At the end of 2013, MTN had 7.3 million smartphones in South Africa, 6.2 million in Nigeria, 10.3 million in Iran, and 1.8 million in Côte d'Ivoire.
  • MTN Mobile Money users grew 57.3% to 14.8 million.

Our take

MTN achieved a 9.8% growth in subscriptions to 207.8 million in 2013. Net additions were dragged down by the impact of SIM registration programmes, which led to the disconnection of low- or no-usage prepay SIM. The group is forecasting net additions of 16.75 million in 2014 to reach 224.6 million, up 8.1% year-on-year. It expects Nigeria (5 million), Iran (2.5 million), South Africa (2 million), Sudan (1.25 million), and Uganda (1 million) to account for nearly 12 million of these.

2014 will be a pivotal year for MTN. It is seeking deeper smartphone penetration through the recent launch of its own-brand, low-cost Steppa device. This type of device will be the main channel for growing e-commerce transactions. It is seeking to increase its exposure to this area by investing in the Africa Internet Holding (AIH) and Middle East Internet Holding (MEIH), while leveraging its growing base of users who use their handsets to make financial transactions. As a counterpoint to its increasing focus on content and internet experience, it will likely seek to sell more passive infrastructure, following tower divestments in four markets in 2013. The group will also move more on LTE in 2014, but its pace of deployment is largely out of its hands. In both South Africa and Nigeria it is waiting on LTE spectrum allocation, while in Ghana the regulator has purposefully granted LTE spectrum to non-incumbents.

MTN also faces considerable risks in 2014. The environment for doing business in Iran and Syria will remain challenging. In South Africa, it faces the prospect of lower mobile termination rates (MTRs), but like Vodacom is challenging regulator ICASA's decision. If the MTRs are implemented, these will weigh down on its wholesale revenues. Vodacom's prospective acquisition of Neotel and the backing of Vodafone will also challenge MTN's performance in its ICT business. In markets such as Nigeria, regulators are taking an increasingly tough stance towards operators failing to meet quality-of-service obligations. This may result in further fines for MTN and its peers in 2014.

Aside from its AIH and MEIH acquisitions, MTN did not make any major deals in 2013. This is in distinction to Bharti Airtel, which consolidated in Congo and Uganda, and Etisalat, which agreed to acquire Maroc Telecom, which has fixed and mobile operations across several sub-Saharan African markets. MTN's strong position in many markets limits its potential to engage in in-country mobile consolidation. South Africa, where it is second to Vodacom, may be an exception. MTN is a potential partner for 8ta, the loss-making mobile arm of Telkom South Africa. MTN will also consider opportunities beyond its footprint: it has no assets in Tanzania for example. However, it takes a cautious approach to any such deals.

 

Organization
MTN Group
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