MTN defends neutral approach to price war
Karel Pienaar, CEO for MTN South Africa, has defended the group’s neutral stance in the ongoing price war in the mobile space in South Africa.
“We are not in that war personally, especially in the prepaid space, because our pricing has always been much better than anybody else,” Pienaar told BusinessTech in an interview following the group’s results presentation on Wednesday (6 March).
“I’ve said it time and time again, we publicised recently what our effective rate is, so now why do you get involved in arguments of the pricing, when you have the best pricing already in the market, and the other people are just adapting to that pricing,” Pienaar said.
Following his appointment as Cell C CEO in April 2012, Alan Knott-Craig has launched a host of aggressively-priced voice and mobile data products into the market, which was initially greeted by rival operators Vodacom and MTN, by a wait and see approach.
However, more recently, Vodacom has taken to announcing numerous data and voice cuts of its own, while MTN at the end of last month announced that it had slashed the price for voice calls on its One Rate prepaid plan to 2c per second (R1.20 per minute) to all networks at all times. The calls are charged per second.
Results
On Wednesday MTN South Africa recorded an impressive operational performance with its total subscriber up 15.4% to 25.4 million, driven primarily by 15% growth in the pre-paid segment to 20.9 million.
This was largely due to competitive offerings and in particular the MTN Mahala and MTN Zone offerings, as well as data services.
Total revenue grew by 7.1% to R41.4 billion, primarily driven by solid growth in data (excluding SMS) and airtime revenue, supported by subscriber growth. Ebitda increased by 6.5% to R14.5 billion.
“We’ve always been particularly good at finding the gems and finding elasticity….you can see our minutes have increased,” Pienaar said of the group’s prepaid segment.
“We have been giving our customers a lot more for free…it just generates more traffic, so you end up with a lot more volume.”
Knott-Craig confirmed late last year that he is repositioning Cell C to function in a low-margin, high-volume business environment, adding that it is financially sustainable.
“Ultimately all operators will have to do the same,” said Knott-Craig.
Pienaar heralded the group’s data revenue growth. Data revenue increased by 37.6% to R6.4 billion and contributed 15.5% to total revenue (excluding SMS).
Data revenue was boosted by the increase in data users to 13.4 million from 10.9 million, and 5.5 million smartphones on the network.
Shares in MTN closed R2.27 or 1.26% lower to R177.33 on the JSE on Wednesday after the group’s results were slightly below analyst’s forecasts.
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