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MTN’s investment into the rest of Africa has continued to pay dividends. The  company’s South African operations appear to have recovered from the previous year’s performance to emerge as one of the top performing operations in the group as a result of the 2010 FIFA World Cup.

However, single digit growth in EBIDTA across all its key African operations, including Nigeria, is a sign that the cost of doing business in Africa is increasingly becoming a challenge.
MTN released annual results for the 12 months ended 31 December 2010 today, revealing 2,5% growth in group revenue to R114,7-billion. Subscribers grew by 22% and EBIDTA margin (excluding MTN Zakhele) increased to 44% from 41,9% over the previous comparative period. Data revenues in South Africa were up by 47%, although this was offset by a decrease of 10% in interconnect revenue.
“MTN has continued to be resilient despite increasingly challenging conditions across Africa,” says Frost & Sullivan ICT analyst Spiwe Chireka. “MTN’s South African operations appear to have recovered from the impact of RICA following the impressive growth in subscriber numbers. Nigeria and Ghana continued to perform relatively well in terms of customer growth.
“However, the ongoing downward spiral in subscriber ARPU in the rest of Africa, as well as the progressing price competition prevalent in those markets, are expected to continue impacting the company’s revenue performance negatively across these key markets.”
Despite the good performance during 2010, the future for MTN in the African market is a challenging one.
“In South Africa, MTN will need to focus on maintaining ARPU, as the number of service provider options for customers are increasing. Mobile data services will, however, continue to buoy the company’s performance in South Africa, but with the likes of Cell C garnering for what used to be MTN and Vodacom’s turf in the mobile data services segment, MTN will need to be proactive in protecting its market share,” Chireka says.
She adds that MTN Business has a greater chance of success in the rest of Africa where the enterprise segment is grossly underserved. “In South Africa, the company can still carve a niche for itself in the fixed mobile convergence services space, but the competitive advantage is likely to be short lived as all the other telecommunications providers’ strategies are headed in the same direction.”
Bharti is a viable competitive threat to MTN’s position in Africa. This is particularly the case at the low end and rural customer segment, which Bharti has made clear it will aggressively be pursuing on the basis of its experience with the Indian model.
“MTN should therefore consider accelerating its rural expansion strategies in order to gain first mover advantage or alternatively, ensure that it is on par with the competition – in this case, Bharti,” says Chireka.
However, Frost & Sullivan believes the addressable market for MTN in the rest of Africa is still relatively large. Therefore, the company can continue to experience double digit growth across most of its operations but the same cannot be said for revenues.