Although MTN is facing increased competition in a number of its markets, the mobile operator continues to post strong performances. Its expansion and capacity investment strategy over the past few years has placed it in an excellent position for future growth.
MTN released its interim results today, revealing a 24,2% increase in group revenue and a 24,8% growth in EBITDA over the comparable period last year. The group's West and Central African operations consolidated their position as the major generator of revenue, contributing 46% of group revenue. Its Middle East and North African operations increased revenues by 51% over the comparable period.
"Over the past two years, the Nigerian and Iranian markets have been good growth centres for MTN," says Frost & Sullivan senior ICT industry analyst Lindsey Mc Donald."The group has focused on the rollout of infrastructure in both of these markets as a means of attracting new clients."
Frost & Sullivan has noted that there is also now a shift in emphasis from the provision of basic voice and data services to the mass market, to solutions that are more targeted at corporate customers.
"This is characteristic of a maturing of the African and Middle East market as a whole," Mc Donald says. "MTN's strategy of entering a market and then acquiring or partnering with a local ISP is a means of furthering its corporate data business."
The company's presence in many African markets remains a major advantage. The fact that it is able to offer businesses expanding into Africa a good level of service throughout the continent is becoming more and more important.
"The management team and the emerging market expertise that are housed within the organisation are clear advantages for the operator," Mc Donald notes. "This is no doubt one of the reasons why Bharti continues to show such a high level of interest in MTN."
Mc Donald believes that the challenge for MTN moving forward is going to be client retention. As the market matures, subscribers will come to expect more from their operators and the quality of service offerings is becoming paramount.
"This year has been particularly challenging for MTN in terms of the quality of its network," she says. "While most of us are aware of the problems experienced in South Africa, the same issue was also present in Zambia and Nigeria, as well as some other markets. The South African and Nigeria situations are however in the process of being addressed through the rollout of additional infrastructure and network upgrades already underway."
A challenge for MTN is for it to effectively communicate these efforts to clients and pay far more attention to the management of the client relationship.
Mc Donald adds that the negotiations with Bharti continue to dominate market discussions around the group. She believes that the fact that the negotiation periods have been extended twice is a sign that both parties are definitely interested in the deal.
"Were this not the case, the talks would have ceased," she says. "It is most likely the complicated nature of the deal that is resulting in the time consuming negotiation process."
Frost & Sullivan believes that the synergies that exist between MTN and Bharti include the fact that each operator has a unique understanding of its market and they would be well placed to support one another's expansion into other emerging markets.
"Despite its large size, Bharti is only present in a couple of markets, while MTN has presence in over 20," Mc Donald notes. "The cost saving synergies are apparent in terms of the operational and reporting processes and this is likely where both companies are to gain experience. We do not expect to see a rebranding exercise and there is great hope that the deal does come to fruition, as this would be a remarkable win for a South African company."