MTN SA needs pricing strategy re-think
Frost & Sullivan, the market research firm, says that MTN SA is likely to experience a sharp decline in revenues amid a tense price war with rival operators.
In its interim results posted Wednesday (8 August), MTN Group revealed that its subscriber growth was higher than expected because of increasing competition in flagship markets, such as Nigeria and South Africa.
The group reported a 6.9% growth in subscriber numbers to 177 million, and a 17.5% increase in group revenue to R66 billion.
F&S pointed out that ongoing investment into broadband and data solutions has helped MTN Group maintain a healthy performance in terms of revenues over the first six months of 2012. Data revenues increased its contribution to 10% from 6% reported in the previous interim result.
“MTN South Africa (SA) has recorded 23.5 million subscribers, representing a growth rate of 6.8%,” stated Frost & Sullivan’s ICT research analyst Mervin Miemoukanda.
“This proves the company’s successive marketing promotional campaigns have paid off. It is interesting to note that most new subscribers are dual SIM card holders and low-income earners.”
F&S said that with the current mobile operator price wars, MTN SA is likely to experience a sharp decline in revenues as their subscribers are expected to sign up to other more competitive operators.
“This will put a lot of pressure on group revenues as subscribers are likely to spend their income between MTN and its rivals. If MTN SA replicates Cell C and Vodacom’s tariff plans, its revenues are likely to further decline, as the company cannot compensate the loss for airtime revenues with revenue generated by subscriber acquisition,” it said.
“MTN SA, therefore, needs to re-think its pricing strategy to remain competitive in the market,” the research group added.
“It should be noted, however, that there are a lot of growth opportunities in the broadband and enterprise solution space”, Miemoukanda pointed out.
“It is possible for MTN Group to have an upper hand in the broadband and data centre space in key markets, such as Nigeria and Ghana.”
A case in point is MTN Business, which has taken over leadership positions of ISPs in Nigeria and Ghana in less than one year. This impressive performance, according to F&S, can be attributed to MTN’s expansive telecom infrastructure in these countries.
“MTN Group is likely to enjoy slower growth rates, in terms of subscribers and revenues in the second half of 2012, because of the challenging operational environment, intense competition in most markets, the uncertainty about the Iran operations and ongoing war in Syria” finished Miemoukanda.
At MTN’s results presentation in Johannesburg, Karel Pienaar, the MD of MTN South Africa admitted that growth recorded for the six months ended June 2012, was unlikely to be sustained in the second period, “not to the same level,” he said.
“We have a few things in the pipeline to sustain similar levels…watch this space, we will maintain our competitiveness.”
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