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MTN aims to cut as much as R6bn in costs at its South African business over the next three years as the country’s second-largest mobile provider seeks to boost local earnings. Despite having more customers outside the country in fast-growing markets such as Nigeria, South Africa remains an important anchor for the JSE-listed telecom group. Yet investors are concerned about its anaemic growth at home amid the country’s paltry economic expansion.At a capital markets day presentation on Wednesday, MTN sought to reassure investors by outlining its plans for growth over the next five years. (Dorothy Kgosi) MTN South Africa CEO Ferdi Moolman said the group is in a similar situation to that of European telecom providers a few years ago — a mature market with slower subscriber growth where expansion tends to be a function of price increases or expense efficiency. Moolman emphasised that the South African business cannot grow at the same “sheer volume levels” as other African countries where MTN operates. Its primary strategic role in the broader group is to act as a “cash upstreaming engine” and a dividend anchor, he said.To that end, MTN has set itself a number of priorities at home, starting with costs. The company aims to cut R4bn-R6bn across its operation by 2029.“Ebit [earnings before interest and tax] and ebitda [earnings before interest, tax, depreciation and amortisation] growth are far more important than ebitda margin,” said Moolman. The company is moving away from basic “expense efficiency programmes” towards a fundamental structural reset, leveraging modern technology and AI to unlock “deep back-end efficiencies” in its operations, he said.Prepaid pressureThe company is also continuing with efforts to fix its prepaid offering. MTN and archrival Vodacom have experienced pressure in their prepaid efforts in recent years as consumers came under strain in the economic downturn. They have also had to deal with increased competition from Telkom, the country’s fastest-growing mobile business, as well as nontelecom players such as Capitec and FNB.“I’ve moved on from terms like ‘we need to repair prepaid’… it’s more about leveraging the value that we’ve created in prepaid to look at quality growth,” Moolman said. “The value for us is more in terms of quality growth as opposed to just looking at market share growth.”A big part of that strategy is to aggressively cut the number of prepaid packages and bundles.“We’ve got complex products in the market … and there are lots of them in the market. There are 450 [bundles/SKUs]. There was double that number at some particular point…. This confuses the consumer [and] it’s difficult to manage these things,” Moolman said.In its mission to increase data usage on its network, MTN aims to become a major player in the market for fixed connectivity in the home and is targeting a 30% share of that segment by 2030. For an operator with a market share of about 30% in South Africa, mobile virtual network operator (MVNO) services are “highly accretive” if targeted at segments MTN cannot natively penetrate, Moolman said. Done correctly, MVNOs could lift MTN’s data value share by 3-4 percentage points. However, pricing frameworks must be strictly managed so MVNO partners do not turn into loss leaders that cannibalise the premium brand, Moolman added.
