/ 1 February 2022

MTN’s focus on fibre might be the only way for it to regain market share

Mtn Group Share Price Down

South Africa’s second-largest mobile operator, MTN, is restructuring its South African business, which has been playing catch-up to Vodacom for years. 

MTN has recently made two appointments as part of a wider executive reshuffle after its chief executive, Godfrey Motsa, stepped down a month ago. These are new chief technology and information officer, Michele Gamberini, as well as a managing director for MTN Supersonic, the company’s fibre and broadband internet service unit, Megan Nicholas. 

MTN said Nicholas’s appointment is strategically part of the group’s ongoing commitment to growing its Supersonic business in an ever-changing environment. 

The mobile operator has been losing market share in South Africa for the past decade, largely to Vodacom and Telkom. 

MTN’s subscribers increased by about 849 000 to 33.5-million for the quarter ended 30 September 2021, whereas Vodacom reported that had 45.4-million subscribers at the end of the same period.

MTN has been on a continuing losing trend domestically after it shed 1.9-million subscribers in South Africa over six months in 2019. Attempts to resuscitate the telecommunications company have been made but it has a long journey ahead. 

Peter Takaendesa, head of equities at Mergence Investment Managers, said MTN is a very strong number two, after Vodacom, with 30% share of the market in South Africa. 

He said that when MTN lost market share, this was because the company was struggling with issues such as the quality of its network, as well as customer service. “It does not matter how good your customer service is, if the network is not good then customers are not going to be happy,” he said. 

Currently Telkom has about 14% of South African mobile customers; Vodacom dominates with 42.5%, and MTN with 30% of the market, as the Mail & Guardian previously reported.  

“I don’t think anyone is ever going to overtake Vodacom,” Takaendesa said. 

“[MTN has] not been able to grow much bigger because they are trying to claw back lost market share. If they perform well and get back market share then the story could be different in a few years,” he said. 

MTN is no longer just fighting for market share from its biggest competitor, Vodacom, but also from smaller players such as Telkom and Rain. 

“Telkom and Rain have a bit of an advantage to keep gaining market share, and it is important that it happens because, if the smaller operators are squeezed then issues of market dominance will arise,” Takaendesa said.

He noted that it is in MTN and Vodacom’s interest to forgo some market share in favour of the smaller operators and allow them to show success, “but not too much”. 

There has been talk of MTN buying Telkom, as reported by Bloomberg. But, Telkom’s outgoing chief executive Sipho Maseko insisted that there was no takeover deal being considered.

If this takeover were to happen it would be a “game changer” for MTN, said Takaendesa. 

He said that every mobile operator in the world is trying to add fibre to its portfolio, because it is going to be a big advantage when it comes to 5G and the increase in traffic it brings. 

Instead of electricity, fibre relies on light to transmit data and this facilitates much faster internet connections that can handle higher bandwidth. Communications become clearer and more reliable because fibre networks are not affected by electrical interference. 

Telkom has the largest fibre network footprint in South Africa. 

MTN is trying to bolster its fibre and broadband internet service unit with the appointment of Nicholas, whose career spans a number of companies, including Telkom, Cell C, Motorola and Nashua Mobile. 

According to MTN, Nicholas “has the relevant industry, commercial and operational expertise to further strengthen the Supersonic business”.

“MTN wants fibre because their largest competitor Vodacom has already gone for a fibre business, Dark Fibre Africa [in a deal worth R13-billion]. The only other big fibre company that MTN can go for at some stage is Telkom,” Takaendesa said.

  
Anathi Madubela is an Adamela Trust business reporter at the M&G.