Mobile operator MTN released its year-end results today for 2007, showing solid subscriber growth across all its operations. Global growth consulting company Frost & Sullivan believes that for MTN to continue to realise this level of growth, its data offerings will become increasingly important.
MTN’s major operations are in South Africa and Nigeria, and it grew its subscriber numbers in these countries by 17% and 34% respectively. Most of this growth came from prepaid subscribers, with low-denomination vouchers being a key driver. However, postpaid, or contract, subscribers in South Africa grew by 9% and, although this is not broken down in the figures, Frost & Sullivan believes data contracts would have made up a key portion of this.
“Data will continue to be a major growth area for MTN, as most of its markets in Africa have mobile data penetration rates of less than 10% at present,” notes Frost & Sullivan ICT analyst Spiwe Chireka. This is going to grow quickly given all the broadband infrastructure investment taking shape in Africa, and taking the worldwide experience of broadband growth into account.
Recent analysis by Frost & Sullivan into South Africa’s broadband market shows that the number of mobile broadband subscribers is quickly outgrowing the number of fixed line or ADSL subscribers. This trend is expected to prevail across the whole of Africa since fixed-line infrastructure is poor on the continent.
Chireka adds that data services also have better revenue-generating potential, as the average revenue per user (ARPU) for data is expected to increase, while ARPU’s for other services are declining.
“Data ARPU is expected to go up given MTN’s upgrades in markets such as Cyprus and South Africa to HSDPA and soon to HSUPA,” she says. “This is also likely to spread into its other markets given the high potential of data ARPU.”
Last year MTN’s ARPU declined marginally in almost all of its operations due to its increased penetration into lower income and lower usage segments.
Chireka also notes that MTN is facing a number of important challenges in Nigeria, where the regulators are starting to “bite”. MTN has been ordered to pay back $1,50 to every subscriber as a penalty for poor service. This equates to 8%-9% of its monthly ARPU.
“With the next round of testing due in May 2008, MTN must have its house in order if it would like to avoid another round of penalties,” Chireka says.
Chireka does however acknowledge that MTN’s recently upgraded credit rating puts it in a favourable position to finance important projects and improve its services. She expects the planned $1,3-billion capital expenditure in Nigeria to become a reality soon, with other investments not far behind.
“Network upgrades and capacity expansion should be carried out in the near future if the company is to avoid further complications such as they had in Nigeria,” she says. “Frost & Sullivan believes it is only a matter of time before other regulators across the continent follow Nigeria’s example, and MTN needs to be prepared.”