MTN to refocus on Africa and mobile money under new CEO

Following years of legal difficulties in challenging markets, MTN Group’s new CEO Ralph Mupita is expected to turn over a new leaf by capitalising on technological growth and a demographic dividend within Africa to cement its position as the continent’s largest telecoms provider.

The firm’s Middle East operations have underperformed in recent years, while legal and regulatory difficulties in Nigeria damaged shareholder confidence in the overall expansion strategy.

Former chief executive Rob Shuter – who will become CEO of BT’s Enterprise unit – had to deal with a record $5.2bn fine, later reduced to $1.5bn, levied by Nigeria’s Communications Commission after failing to disconnect 5.1m unregistered sim cards, while grappling with the Nigerian government over an additional $2bn tax claim, which was finally dropped earlier this year.

Now it falls to MTN’s new CEO, Zimbabwean Ralph Mupita, to extricate MTN from the Middle East, grow its mobile money platform, and invest in 5G.

“He has financial experience in the banking sector and this is becoming increasingly important if not critical for MTN, because of the growing size of mobile money,” says Dobek Pater of research consultancy Africa Analysis. “Mobile operators are the biggest threat to traditional banks, and Mupita knows the changes that need to be made to steer MTN forward in that industry.”

Mupita is an internal appointment, having joined MTN in 2017 as group chief financial officer, after a 16-year career at Old Mutual, including a five-year stint as CEO at Old Mutual Emerging Markets. He has less telecoms experience than his peers, yet has a wealth of financial experience.

An engineer and an alumnus of the Harvard Business School, Mupita has been a key player driving MTN’s BRIGHT strategy, a five-year plan to reach 300m subscribers by 2022, and bolster new revenue streams in financial services, mobile gaming and music streaming, to offset the falling margins in bread-and-butter telecoms services such as phone calls.

“Ralph’s experience as the group CFO, strong knowledge of our businesses and markets, as well as successful background in financial services, M&A and emerging markets, place him in an excellent position to lead the growth and sustainability of the business going forward,” said a statement from the firm.

Although MTN has emerged from the worst of its labyrinthine legal problems in Nigeria, its exposure in risky markets like Iran, Afghanistan and Syria, and investment in non-core businesses like Jumia and IHS, contributed towards a share price plunge of more than 50% during Shuter’s tenure.

However, analysts say the corporate culture has improved in recent years. MTN took a leading role in financially supporting employees during lockdown and launched a coronavirus education campaign.

“There’s no longer a cowboy-type culture, and with that you have less legal issues,” says Michael Treherne, portfolio manager at Vestact Asset Management. “MTN’s biggest problem is that currently their share price largely tracks oil, and they’ve been exposed in very oil-dependent economies. MTN’s other problem is that it costs a huge amount of money to maintain its network, and 5G is now about to roll out. That’s going to cost them billions, so some shareholders are thinking, ‘you’re going to need a lot of money to do these short-term investments in infrastructure, but will it be worth it long-term?’” 

South African telecoms regulator ICASA is preparing to issue an invitation for firms to apply for high-demand spectrum and its Wireless Open Access Network (WOAN). Competitors MTN, Vodacom and Rain started rolling out 5G networks in major South African cities this year, using temporary spectrum allocated by the regulator to support communications during lockdown. ICASA will hold auctions to issue permanent high-demand spectrum licences by December, and MTN is interested in a permanent contract to grow its broadband offering.

Despite MTN’s share price challenges, the company has grown to 262m subscribers in more than 20 countries since it was founded in 1994, adding 11m in the first six months of this year. Covid-19 lockdowns improved the appetite for increased data within African markets, with MTN South Africa’s data traffic up 77% and an increase of 14.1% in active subscribers to 14.2m in the country, according to Shuter.

Middle East retreat

Outside Africa, MTN will exit Middle East operations “in an orderly manner over the medium term”, after growth in the region was hampered by security issues and controversy surrounding the firm’s 49% minority holding in the Iranian government-controlled Irancell, which drew the ire of a US government which is sanctioning the Islamic Republic.

With all eyes now back on Africa, MTN could target an entry into Ethiopia if the government forges ahead with plans to partially privatise state telecom provider Ethio Telecom and open the sector to foreign competition.

“Ethiopia is a low-income market, with low mobile penetration levels, but that’s likely to change,” says Pater. “Ethiopia is one of the two highest growth markets from an economic perspective currently in Africa, and the population will have more disposable and discretionary income; and with MTN’s track record it’ll be relatively easy to gain market share once they enter the country.”

Pater says MTN will also target a move into Angola, having failed to win in the previous licensing round.

Withdrawal from non-African markets and consolidation and expansion on the African continent will likely characterise Mupita’s early tenure, but overseeing MTN’s renewed efforts in mobile money and a continued push into Nigeria could define his legacy. By 2025, the mobile money market across Africa could attract 850m customers, supporting $3 trillion in transaction volume, and $30bn in yearly revenue from financial transactions alone, according to Boston Consulting Group.

M-Pesa, jointly owned by Kenya’s Safaricom and South Africa’s Vodacom, has the biggest reach in Africa with 38m active customers, processing more than 11bn transactions. In a bid to compete, MTN has launched the MoMo mobile money app, which includes online shopping and micro loans in partnership with Ubank. The firm hopes the products can dig away at M-Pesa’s domination and the power of traditional banks. 

Mupita may try to convince the Nigerian Central Bank to further liberalise its roll-out of mobile money, but established Nigerian banks will resist extra competition and it remains to be seen whether the company can repair its damaged reputation in Lagos.

The firm is also expected to diversify in other ways. In March last year, MTN launched a WhatsApp channel enabling customers to buy airtime and data bundles through the messaging app, and also check their balances. In August, it launched a prepaid data campaign called MyTown Offers, which allows customers to get specific data bundles based on where they live, targeting people with vastly different economic circumstances.

Another sector MTN could target is the logistics industry, says Pater. The sector experienced strong growth during lockdown, as major African firms like Jumia and Ethiopian Airlines managed to leverage existing infrastructure to make inroads.

“All the booths they’ve got where airtime is being sold by their agents in different countries could be used as physical courier distribution points. [They could] send packages across the MTN network because they can deliver it in the middle of nowhere, and build their infrastructure around and through their agents. It’s not implausible that they will try to move themselves in all sorts of directions that will generate money for them.”