MTN s Success Story: Expansion beyond South Africa s Borders. A Case Study Research Report presented to:

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1 MTN s Success Story: Expansion beyond South Africa s Borders. A Case Study Research Report presented to: The Graduate School of Business University of Cape Town in partial fulfillment of the requirements for the Masters of Business Administration Degree by Fred Papa Kwofie 2 nd December 2005 Supervisor: Loyiso Mbabane

2 Table of contents 1. Acknowledgement...III 2. Abstract...IV 3. Glossary of terms... V 4. Acronyms... VII 5. Research Methodology Theoretical Overview- Balanced Score Card (BSC) The core concept and application Financial Perceptive Customer Perceptive Internal Process Perceptive Learning and Growth Perceptive Strength of the balanced scorecard Weakness of the balanced scorecard The African Continent Political environment Economic environment Risk and Challenges Telecommunication in Africa Review of Mobile Telecommunication in Africa Growth factors in the mobile industry Opportunity in the mobile industry Significance of Mobile Telephony in Africa Communications within the Regional Economic and Political blocs Current and future developments in the mobile industry The Case Study: MTN s Success in Expanding to the Rest of Africa The birth of MTN Why the choice of GSM? The battle to secure a license Race to success MTN Group Profile MTN goes on a safari to the rest of Africa MTN Uganda MTN Rwanda MTN Swaziland MTN Cameroon MTN Nigeria Criteria for entering into new markets I

3 12. Challenges in entering markets MTN s expansion objective in relation to NEPAD Future of MTN Teaching notes Exhibits Bibliography II

4 1. Acknowledgement This report is not confidential. The Graduate School of Business has the right to use it. Firstly, I am grateful to the Lord Almighty for giving me the strength and wisdom to pursue this course thus far. Praise to his Holy name! I wish to thank my supervisor, Loyiso Mbabane, for his contribution and support especially for the detailed feedback sessions and efforts in pointing my research in the right direction. My deepest appreciation goes to the Management of MTN who granted me access to information and interviews to gather additional insight to the companies operation and strategy. Special thanks go to Tshepo Ramodibe- Manager-Group Corporate Affairs who steered and Copyright anchored the interview and information process. UCT To Roderick Wolfenden, an alumnus of the school and Manager with the MTN Group Strategic Investment, I say a big thank you for lobbying on my behalf to get approval to undertake this case study. The case study process on this topic has given me key insights for operations doing business in the rest of Africa. I have enjoyed the Safari and learnt the dynamics in pursuing business on the continent. I certify this case study to be my own work and that all references and quotations used are accurately reported. Much of the case has been written from information gathered from interviews and documents received from MTN and is accurate to the best of my knowledge at the time of writing. I dedicate this report to my fiancé Marian, for her support and inspiration. Signed: Fred Papa Kwofie III

5 2. Abstract MTN s success story in expanding into the rest of Africa Established in 1994 as a second mobile operator in South Africa, MTN has grown to become the leading telecommunication company operating within six African countries, and has the highest number of subscribers on the continent. This case study examines MTN s expansion into the rest of the continent and will focus specifically on the strategies adopted and the success factors ascertained with the use of the original Balanced Scorecard (BSC). The aim of this case study is to apply the BSC to review factors and strategies adopted by MTN that led to its successful expansion and to its heightened leadership position on the African continent. This case study reviews the challenges and risks MTN faced in pursuing its Copyright expansion including the political, economical UCT and social environmental factors on the African continent. Key words: balanced scorecard, financial perspective, customer perspective, Internal process perspective, learning and growth perspective, Corporate Social Responsibility initiative, expansion, infrastructure, innovation, license, risk management, strategy, mobile telephony IV

6 3. Glossary of terms Active subscribers Prepaid subscribers that have made or received calls in the last 30 days Base station The primary sending and receiving site in a telecommunications facility network Dual band The capability of GSM network infrastructure and handsets to operate across two frequency bands, that is 900 MHZ and 1800 MHZ Empowerment A mechanism by which people, organizations, and communities gain mastery over their affairs. Fixed-line A telephone line which travels through a physical, landbased medium. This is distinguished from a mobile cellular line, where the medium used is the airwaves. GSM Global System for Mobile communications or telecommunications Mobile penetration Number of mobile users in relation to the total population MyChoice TopUp MTN s innovative post-paid/ pre-paid hybrid package offering consumers the benefits of a contract with the control of a pre-paid service MTN International MTN International (Proprietary) Limited MTN Group MTN Group Limited formerly known as M-Cell V

7 MTN Cameroon Mobile Telephone Networks Cameroon Limited MTN Nigeria MTN Nigeria Communication Limited MTN Rwanda Rwanda Cell S.A.R.L MTN Swaziland Swazi MTN Limited MTN Uganda MTN Uganda Limited Orbicom Orbicom (Proprietary ) Limited Post-paid subscribers Subscribers that have a contract Pre-paid subscribers Subscribers without a contract that purchase pre-paid Copyright vouchers UCT Second generation Refers to the second form of cellular telecommunications system that was introduced. The digital system, which utilized low speed data services, was oriented towards voice services only SMSpop A PC-based SMS application that enables users to send and receive SMS messages on PCs or on mobile handsets. Teledensity A term commonly used to describe the number of telephone lines per unit of the population Y ellobahn Nigeria s first nationwide transmission infrastructure that spans 3,400 kilometres and allows for 1900 voice calls simultaneously VI

8 4. Acronyms 3G Third generation AFRALTI African Advanced Level Telecommunications Institute AIDS Acquired Immune Deficiency Syndrome ARPU Average revenue per person ARPM African Peer Review Mechanism BSC Balanced scorecard CEO COMESA Chief executive officer Common Market of Eastern and Southern Africa CSR Corporate Social Responsibility EBITDA Earnings before Interest Tax Depreciation and Amortisation GSM Global System for Mobile Communication IGAD Intergovernmental Authority on Development ITU International Telecommunication Union Kobo 100 Kobos equals 1 Naira in Nigeria VII

9 NEPAD New Partnership for Africa's Development Naira (N) Nigerian currency Newshelf 664 Newshelf 664 (Proprietary) Limited PAPU Pan African Postal Union RASCOM Regional African Satellite Communication Organization SA South Africa SIM Subscriber Identity Module SMS Short Message Service WiFi WiMax Copyright Wireless Fidelity UCT Worldwide Interoperability for Microwave Access VIII

10 5. Research Methodology Desk research: The Internet was used extensively to collate information, with MTN and the International Telecommunication Union websites. Other electronic databases, such as Emerald and EBSCOhost were used primarily as a source of information for the literature review. Interviews: Interviews with managers and ex-managers of MTN were conducted to verify information gathered from desk research and also to give additional thought and insight into the subject of this case study. Interviews were conducted via telephone as well as in person. Research Center: Working papers from research centers like the Ernst and Young Centre for Business Knowledge and the South Africa Institute of International Affairs were utilized to get an overview of the business environment on the continent. Documentation Analysis: MTN provided relevant information accessible to the public for this case study. A list of available documentation is listed in the bibliography. In addition to the information provided by the organization, relevant research reports on the case study in the communication industry were used. 1

11 6. Theoretical Overview- Balanced Score Card (BSC) 6.1 The core concept and application Financial measures alone do not provide adequate information to properly manage organizations operating in a complex environment. The Balanced Scorecard (BSC) is a method of measuring and managing business performance. This method serves to give a balanced view of the financial and non-financial perspectives in order to accelerate the management process ( King,1999). The balanced scorecard was developed by Professor Robert Kaplan and David Norton of the Harvard Business School. According to Kaplan and Norton (1993), the balanced scorecard provides executives with a comprehensive framework that translates a company s strategic objectives into a coherent set of performance measures. The BSC looks at a range of information from the company including: financial performance, its continuous improvement strategy, partnerships, the level of teamwork, and the company s involvement on the global scale. This comprehensive set of information facilitates the successful growth of the company, as illustrated in the diagram below (Kaplan and Norton, 1992). Source: Kaplan. R & Norton. D, 1996, in The Balanced Scorecard 2

12 According to Hafner (1999), the balanced scorecard translates an organization s vision and strategy into operational objectives and performance measures for four different perspectives: Financial Perspective examines the financial measures of the organization. Customer perspective looks at how the customer and market segments affect the organization. Internal Process perspective examines how well the internal process is functioning in the organization and how it can better benefit the customer. Learning and Growth perspective the learning and growth area is concerned with infrastructure, i.e. the foundations required to achieve objectives in other areas of the business. The organization s vision and mission remain at the center in the diagram; therefore, the BSC measures the performance of the four aforementioned perspectives in relation to the core strategy of the company. 6.2 Financial Perceptive According to Kaplan and Norton (1996), the BSC should link the organization s financial objectives to its corporate strategy; the financial objectives and measures should continuously be considered in the other three scorecard perspectives. The BSC should therefore illustrate the company s strategy, starting with: 1) the long-term financial objectives; 2) linking these financial objectives to the sequence of actions that must be taken with financial processes, including customers, internal process and employees and systems; and 3) the completed scorecard should thus point to what measure must be taken to deliver the desired long-term economic performance. Financial objectives and measures play a dual role in that they define the financial performance expected from the strategy and thus they also serve as the ultimate target for the objectives and measures of all the three other scorecard perspectives. 3

13 Kaplan and Norton (1996) take into account that the financial objectives will likely differ considerably at each stage of the business cycle. They identified the three stages in the business cycle as: Growth This generally occurs at the early stage of the business. The financial objective at this stage emphasizes sales growth growth in new markets and to new customers stemming from new products and services. An important financial consideration at this stage is the need to maintain adequate spending levels for product and process development, and for employee capability and distribution channels. Sustain This occurs when the organization still attracts investment and reinvestment, but is required to earn excellent returns on invested capital. Emphasizing traditional financial measurements such as ROCE, operating income and gross margin are the financial objective at this stage. Harvest This occurs when the business unit has reached a mature phase of its life cycle and the company Copyright wants to harvest its investments made UCT over the period. The financial objective during this stage will focus on cash flow; any investment must have immediate payback. The financial plan during this phase is to maximize the cash that can be returned to the company from all the investment previously made. Effective financial management must address the risks as well as the return. According to Kaplan and Norton, many businesses include an objective in their financial perspective that addresses the risk dimension of their strategy. For example, an objective might be made to diversify revenue sources or core operations from a narrow set of customers or a particular geographical location in order to spread risk more evenly. Kaplan and Norton (1996) identified three financial themes associated with the three stages in the business cycle: Revenue growth and mix This refers to expanding the products and services offered to new customers and markets, changing the product and service mix toward higher valueadded offerings, and re-pricing products and services. 4

14 Cost reduction / productivity improvement This refers to the efforts made to lower the direct costs of products and services, to reduce indirect costs, to facilitate the sharing of common resources with other business units. Asset utilization / investment strategy Managers under the asset utilization scheme attempt to reduce the working capital levels required to support a given volume and mix of business in order to obtain a more efficient utilization of their fixed asset base. 6.3 Customer Perceptive For a company to achieve its vision, how should it appear to its customers? Kaplan and Norton suggest that, in order for a company to achieve superior long-term financial performance, they need to identify the customer and market segments in which they have chosen to compete. The customer perspective therefore translates the mission and strategy of the organization into specific market and customer-based objectives that can be communicated throughout the organization (Kaplan and Norton:1996, p.64) Market share In analyzing the customer perspective, it is important for organizations to measure their market share. This can be done once the targeted customer group or market segment is established from the total market size. Customer Retention In the quest to increase market share, it is import to retain existing customers. Companies can measure customer loyalty by the percentage growth of business with existing customers. Customer Satisfaction According to Kaplan and Norton, customer satisfaction measures provide feedback on how well the company is doing. It is important to note simply scoring adequately on customer satisfaction is not sufficient for high customer retention or profitability. 5

15 Customer Profitability Since customer satisfaction and high market share are themselves a means of achieving higher financial returns, their measurement will not be complete without measuring the profitability of customers in the target segments as well. 6.4 Internal Process Perceptive Kaplan and Norton (1996) describe managers under this perspective as identifying the critical processes at which they must excel if they are to meet the objectives of shareholders and the targeted customer segment. Although improvements in internal business processes do not have any bearing on the management of business at the strategic level, they do contribute towards noticeable improvements in business in the long-term. Kaplan and Norton suggest the following measures for these processes: source: Kaplan and Norton, 1996, The Balanced Scorecard The above perspective considers core competencies in analyzing the internal processes of the business. An importance is placed on setting objectives in terms of what internal business processes an organization should add or expand upon, rather than simply focusing on existing internal business processes. 6

16 6.5 Learning and Growth Perceptive Lastly, the ability to meet ambitious targets for financial, customer and internal process objectives depends on the organizational capacity for learning and growth. Kaplan and Norton (1996) stress that the objectives in the learning and growth perspective act as drivers for achieving excellent outcomes in the first three scorecard perspectives. The learning and growth perspective stresses the importance for investing in the future, which includes investing in people, systems and procedures. This type of investment goes beyond the traditional areas, such as equipment and research. Companies that place an importance on learning and growth are seen as leveraging themselves for long-term financial growth objectives. Kaplan and Norton (1996) describe the following enablers for learning and growth: 1. Employee Capabilities a. Employee satisfaction b. Staff turnover c. Productivity d. Number of employees qualified for key jobs 2. Information Technology a. Information coverage ratio b. Return on data 3. Motivation and Alignment a. Suggestions received b. Suggestions implemented c. Rewards provided The above list indicates the extent to which the BSC broadens the scope of performance measurement beyond the traditional methods. Kaplan and Norton believe that the BSCs contribution to measuring and managing performance should be an integral part of any organization s strategic planning. 7

17 6.6 Strength of the balanced scorecard The BSC presents managers with four different perspectives from which to choose measures. The scorecard complements traditional financial indicators with performance measures for customers, internal process and innovation and improvement activities. While traditional financial measures report on what happened in the last fiscal period, they do not explicitly state what actions must be taken to improve performance in the following fiscal period. Using the BSC thus acts as a complement to traditional financial measures, in that it looks at a range of business data to facilitate the current and future success of an organization (Kaplan and Norton, 1993). A major strength of the BSC is the emphasis it places on linking performance measures with business unit strategy. Kaplan and Norton (1996b) introduced a framework to link the scorecard with the management of strategy, in what they termed the Strategic Framework for Action. The framework consists of the following four processes: Clarify and translate vision and strategy Communicate and link strategic objectives and measures Plan, set targets, and align strategic initiatives Enhance strategic feedback and learning In relation to the manageable performance evaluation, the BSC provides a comprehensive evaluation approach that allows for the specific context of the organization, as well as taking into account the different potential measures in place within the organization. The BSC also improves upon the communication and awareness of the company s overall strategy within the organization; it does this by aligning staff efforts, building support among external audiences, and communicating how the organization intends to achieve its mission. Using a BSC is thus an effective evaluation tool to make an organization s mission tangible to its stakeholders while also allowing its employees to be actively involved in implementing the strategy. 8

18 6.7 Weakness of the balanced scorecard Nelly, Adams and Crowe (2001: 6-12), argue that the BSC is outdated since it does not take into account the changes that have occurred in the global economy and the rise of the New Economy. They go further to say there is a need for a second generation performance measurement framework that will address today s business issues so that long-established corporations can update their BSCs to deal with issues pertaining to the New Economy. Business issues which affect stakeholders and should be addressed in a second generation performance measurement framework include social responsibilities, corporate governance, environment, and ethics. Bourne (2002) also criticized the BSC for not including People and Suppliers. According to him, although many companies that implement the BSC method interpreted the innovation and learning perspective to include a focus on people, this was not the original version of the Scorecard. By not measuring people, an impression is given that, they do not matter to the business and they need not be considered when strategizing a new way of Copyright working. UCT Bourne goes further to argue that suppliers should have been included in the Scorecard since they are critical to business success especially where suppliers are routinely being outsourced, especially in relation to applications development and communication network. For this research case study, the balance scorecard will be improved to cover areas such as: risk management in expanding into foreign markets; the importance of measuring Corporate Social Responsibility ( CSR ) initiatives; and, the need to operate in a business-friendly legal and regulatory environment. Despite the criticisms against the use of the BSC, the framework has the strong ability to provide an organization with management and measurement systems that enable it to clarify its vision and strategy and translate them into action. One of the strengths of the BSC is the ability for an organization to tailor the analytical framework to suit its specific context and needs. The BSC thus allows any business to add a component that focuses on people, ethics, social responsibilities, or any range of measurements 9

19 7. The African Continent 7.1 Political environment The African continent has experienced a relatively stable political period over the past five years except for countries such as Somalia, Ivory Coast and the Democratic Republic of Congo which have experienced varying levels of political tension and anarchy. More than two-thirds of Sub-Saharan countries have held democratic elections over the past five years which serves as a testament to the overall improvement in the political situation on the continent. The recent peaceful democratic elections that led to the first woman African president in Liberia, a country that witnessed civil war throughout the 1990 s, also signals a new wave of political change and stability on the continent. The widespread political stabilization and entrenchment of democracy was made possible by the effort and commitment of African leaders through the aims and objective of NEPAD, and Copyright by complying with the African Peer Review UCT Mechanism. NEPAD is designed to address the current challenges facing the African continent. The New Partnership for Africa s Development (NEPAD) is a holistic, integrated sustainable development initiative for the economic and social revival of Africa ( The organization was established by leaders of the African Union to address the current challenges facing the African continent including escalating poverty levels, underdevelopment and the continued marginalization of Africa, all of which require radical intervention to develop a new vision that guarantees Africa s renewal. The main objectives of NEPAD are to: a) Eradicate poverty; b) Place African countries, both individually and collectively, on a path of sustainable growth and development; c) Halt the marginalisation of Africa in the globalization process and enhance the continent s full and beneficial integration into the global economy; and d) Accelerate the empowerment of women 10

20 The African Peer Review Mechanism (APRM) is an instrument voluntarily acceded to by member states of the African Union as an African self-monitoring mechanism. The mandate of the APRM is to ensure that the policies and practices of participating states conform to the agreed political, economic and corporate governance values, codes and standards contained in the Declaration on Democracy, Political, Economic and Corporate Governance ( The primary purpose of the APRM is to foster the adoption of policies, standards and practices that lead to political stability, high economic growth, sustainable development and accelerated sub-regional and continental economic integration through sharing of experiences and reinforcement of successful and best practice, including identifying deficiencies and assessing the needs for capacity building. The APRM had 23 countries listed as of 7 th August ( According to Dr. Bernard Kouassi, Executive Director of the African Peer Review (APR) Secretariat, good governance is the number one issue in creating a climate conducive to investment. Without which he said, will be difficult Copyright to elevate the level of growth and development UCT in a country. Bannatyne (2005). 7.2 Economic environment Even though the African continent is the world's tenth largest economy (US$ 350 billion annual NNP, and US$ 750 billion GDP), its share of world trade is less than 2%. (PricewaterhouseCoppers, 2005). Intra-African trade remains at less than 10% of Africa s total trade despite efforts by governments and international funding agencies to facilitate the growth of regional trading. Problems of cross-border trade, free movement of people and goods, and currency restrictions are often experienced in conducting business on the continent. Shelley (2004) contends that, right now, Africa probably presents the world s last business opportunity no other continent offers so many untapped opportunities and no other continent are growth, wealth creation and employment so desperately needed. 11

21 (2004). Despite previous widespread political crises and large-scale population displacements on the continent, the population age structure of Africa is relatively young in comparison with the other regions of the world. The continent has a fragile natural environment which is not as damaged as the rest of the world. The natural environment consists of the world's largest varieties of wildlife and the widest variety of vegetation. Shelley (2004) goes further to say the African continent boasts of being the world's largest supplier of raw materials and strategic minerals necessary for the operation of the world economic system. These resources include petroleum and natural gas, gold, as well as agricultural products such as palm oil, plantains, cereals, and beverages. Despite the abundance of these resources, in many countries they remain untapped or not actively extracted as a result of political conflict. Sierra Leone and the Democratic Republic of Congo, for example, have large deposits of diamond reserve that are not currently utilized as a result of political conflicts in both countries. Stanley Subramoney (2005) mentions that Africa has witnessed its gross domestic product (GDP) Copyright rise since 1989 and the continent is expected UCT to have one of the world s fastest economic growth rates between now and Average economic growth rate on the African continent is about five percent; however, per capita GDP has barely increased as a result of rapid population growth, which means that anticipated growth needs to be vigorously pursued and maintained at the highest possible levels. Africa also accounts for just two percent of world s GDP even though it has thirteen percent of the world s population. According to Stanley, despite previous sluggish GDP growth rates, the continent has the highest return on investments in the world four times more than in the world s seven wealthiest countries and twice as much as Asia. The future of the continent s economic development in the 21 st century depends largely on its oil and gas deposits. The Doing Business in Africa Conference Report (2004) says African countries, through NEPAD, have committed themselves to creating conditions that are conducive for economic growth and sustainable development and also by mobilizing the African people to become the main agent of development. Positive signals from the impact of the effort of NEPAD includes the World Bank earmarking US$ 500 million for boosting 12

22 agricultural research and technological development through the implementation of the Multi-country Agricultural Productivity Programme. According to Kouassi (2005), the best way to inspire investor confidence is for the entire continent to work together to improve standards and benchmark best practices to achieve good governance. He goes further to say The APRM is not a scorecard, nor is it an exercise in self- recrimination or political scoring. Rather it is about recognizing strengths and weaknesses and disseminating best practice across Africa. 7.3 Risk and Challenges Despite the political stability currently being experienced in most parts of the continent, for investors who have an interest in conducting business in Africa, the continent is still considered volatile. Some of the current risks and challenges on the continent according to Shelley (2004) include: High levels of corruption across all levels of the society. The Doing Business Conference report (2004) estimate corruption cost the continent US$ 148million per year. Lack of accurate information Fluctuating currencies and their corresponding effect on exchange rates Bureaucratic red tape, which is slowly being overcome. According to the Doing Business in 2005, it takes an average of 465 days to get a business license in Nigeria, typically involving 16 procedures and costing 355%of income per capita. Nepotism Wars and civil unrest Lack of local capital Monopolies and high level of government ownership and involvement in business Foreign exchange restrictions, High corporate taxes 13

23 HIV/AIDS Africa is highest infected region in the world. Lack of basic infrastructure such as roads, telecommunication, and electricity These factors deter foreign direct investment (FDI) and increase the cost of doing business on the continent, thus repressing potential growth. Sub-Saharan Africa receives only 0.6% of global FDI s. ( Doing Business in Africa Conference Report -2004). Government and institutions operating on the continent are aware of the challenges and the effect they have on doing business in Africa and attracting investment. Efforts are being put in place to overcome these challenges, such as the substantial efforts currently being implemented by NEPAD. 14

24 8. Telecommunication in Africa 8.1 Review of Mobile Telecommunication in Africa Since the first mobile phone call in Africa was made in Zaire in 1987 by the Telecel, the continent has become the fastest growing region in the world for mobile communications and may well position itself as one of the preferred investment destinations anywhere in the world (Vodafone Africa, 2005). Africa's mobile markets have expanded rapidly in recent years; mobile penetration levels now far outstrip those of fixed-lines across most of the continent as shown in the diagram below. Source: ITU 2004 (d) Table 1- African Region Total Fixed and Mobile Subscriber growth from (e- estimated, f- forecasted) The number of voice telephony subscribers (fixed and mobile combined) in Africa has more than doubled in the past three years. By 2001 mobile subscriber numbers had increased at such a rate that they had overtaken those of fixed lines, making Africa the first continent to achieve this (International Telecommunication Union, 2004c). In 2003, the continent had 73 million total voice telephony subscribers comprising 22 million fixed and 51 million mobile subscribers, up from a total subscriber base of 35.4 million (19.7 million fixed and 15.7 million mobile) in Mobile penetration on the continent reached 6.2% at the end of 2003, in contrast to 3% for fixed lines during the same period. In Nigeria, Africa's most populous country, mobile telephony has increased total telephone penetration from 0.5% to 3.3% in just three years (ITU 2004b). 15

25 According to the ITU (2004d), mobile telephony is now firmly established as the predominant mode of telephony in almost every African nation. Analysts forecast the industry will grow from its current level of 51 million subscribers to 67 million by the end of Africa is currently the region with the highest level of mobile communications growth in the world. 8.2 Growth factors in the mobile industry Market liberalization and regulatory reforms in many African countries have helped shape an environment which fosters competition, making it the main reason for the high levels of growth in the mobile industry. Regulatory bodies are being established to oversee the introduction of services, resolve disputes, and support competition. According to the International Telecommunication Union Annual Telecommunication Regulatory Copyright Survey (2004), 90 % of African nations UCT authorize competition in the provision of mobile services. Competition in the mobile industry has benefited even the poorest countries, including the Democratic Republic of Congo and Ethiopia, both of which have an average per capita income of around US$100. The Democratic Republic of Congo (DRC) boasts of a mobile penetration rate of around 2%, 15 times greater than that of Ethiopia, which stood at 0.13% at the end of The difference is due to the fact that the DRC has 3 GSM networks whilst Ethiopia has only 1 GSM operator. A competition-friendly and transparent regulatory environment is required in the region in order to sustain growth. According to the ITU (2004d), mobile policies have gone beyond licensing competition, as the competition in the majority of African markets have now moved beyond one mobile operator. 16

26 The emergence in the past decade of African based pan-regional mobile operators, like MTN, Vodacom, Orascom, Telcom, and Celtel, is another significant reason behind the growth of the mobile industry. The presence of the telecom giants ensures that competition is of suitable quality, thereby enhancing market growth in the respective countries and on the continent. The extension of economies of scale enjoyed by these telecommunication companies has accounted for this significant growth in the mobile telephone industry on the continent. Mobile subscribers in Nigeria increased by 143 % within 6 months in 2003, signaling just how rapid mobile use is on the continent. (ITU,2004d) Seventy-three per cent of African countries had competitive operators active in the mobile sector in The number of African countries that have sought to establish a regulatory environment that allows for new entrants has risen from five in 1992, to forty in 2004, with a 21% increase in the last four years alone (ITU, 2004c). 8.3 Opportunity in the mobile industry While traditional telecommunications markets in Europe and the United States are nearly saturated which has led to a global downturn in the overall industry Africa is positioned as the preferred destination for new mobile communication investment due to the continent s huge potential. The African continent has the least amount of telephones (fixed and mobile) with a continental average of 7.36 telephones per 100 inhabitants, compared to in Asia and in Europe. (ITU 2002, quoted on MTN presentation slide- a) As the above figures suggest, the telephone penetration rate in Africa is still low, despite the recent high growth rates; this signals that there is a wealth of opportunity for future market growth. Only 73 million of Africa's total population of about 900 million inhabitants are voice telephony subscribers, which thus presents investors with significant challenges and opportunities to increase mobile penetration rates on the continent. Should the African continent reach the kind of mobile penetration rates enjoyed in some Western European countries, which is nearing 90 per cent, it would represent a potential market of over 810 million subscribers. 17

27 Data transmission using mobile phones has not been fully developed in Africa and is seen as a big opportunity within the continent since voice transmission currently accounts for approximately 95% of revenue for telecom companies. Data transmission products are currently being promoted and developed to suit the needs of corporate clients. 8.4 Significance of Mobile Telephony in Africa Kofi Owusu, a 45 year old cassava farmer in Ghana, regularly traveled 40 kilometers to the nearest town to call the agricultural marketing center so that he could check current prices. The phone call, if successful, enabled him to fix a price for his produce. Kofi now phones traders at the market centre from his mobile phone, thereby eliminating the two hour trip that he previously had to take to place a telephone call. The above scenario illustrates the positive effect mobile telephony has had on the continent, and the potential that mobile phones have for adding communication infrastructure Copyright throughout the continent without the high UCT fixed-costs of landlines. People from developing countries use mobile phones differently compared to people from developed nations. Developing countries experience a low telecommunication gap; the lack of network and access in many villages increases the cost of doing business, and reduces business opportunity because information is difficult to gather. The increase in mobile technologies has the potential to overcome these impediments to business. According to Waverman, Meschi and Fuss (2005) investment in telecommunication generates a growth dividend because the spread of telecommunication reduces costs of interaction, expands market boundaries, and enormously expands information flow. The growth of mobile telephony on the continent as a result of an increase in infrastructure investment has triggered a positive multiplier effect through the following: Economic growth Cellular operations have been highly profitable, making substantial contributions to GDP growth on the continent. Revenue estimates for all operators on the continent stood at US $14 billion in 2004 ( MTN presentation 2005d) 18

28 Job creation- Thousands of jobs have been created as the growth of innovative and indigenous companies have emerged. In Ghana and Nigeria, call centers using mobile phones have opened up in towns and cities to serve as public phones which are absent due to the poor state of fixed-line telecommunications. Prepaid card sellers, normally referred to as umbrella people in Nigeria (they use umbrellas to provide shade whilst they trade), are often youth who would otherwise be unemployed. Bridging the digital divide- Mobile telephony has the most realistic potential to bridge the digital divide on the continent. Mobile telephony is being used as the preferred means of accessing the internet for example, as compared to the traditional means of fixed-line telephony, which seems not to be reliable or non-existent. The development of 3G mobile service will for example bring the internet to mobile phones anywhere there is mobile coverage on the African continent. 8.5 Communications within the Regional Economic and Political blocs The growth in the communication industry, especially in mobile telephony sector, is also reflected within the various regional economic blocs and communities on the continent. Voice calls between countries within the various regional blocs have increased steeply over the years. According to the African Telecommunication Union Annual Report (2003) the increase in regional mobile phone operators is a result of regulators from across Africa teaming up to share their experiences in regional regulatory organizations and through other international and regional organizations. Recently, co-operation agreements have been signed with COMESA, IGAD, AFRALTI, RASCOM, and PAPU. To support and promote initiatives aimed at promoting regional market integration, various meetings and seminars have been organized to discuss interconnection, licensing and universal service and access in general terms. 19

29 The goal of these regional blocs is to promote the growth of trade and finance, reduce production and service costs by enhancing the accessibility and affordability of information, and link Africa regionally and create linkages with the rest of the world. Several treaties have been signed by African countries calling for the modernization of equipment and the harmonization of policies, standards, tariffs, and communications laws. In a bid to eliminate the challenges in telecommunications delivery that African countries are subject to including the high cost of regional and international telecommunications traffic, high internet access costs, low bandwidth and poor ICT infrastructure the NEPAD Heads of State and Government Implementing Committee (HSGIC) approved the NEPAD ICT Infrastructure Programme which aims to establish a fiber-optic ring around Africa, and establish connection between all African countries and to the rest of the world through a submarine cable system. The prime objective of the program is to integrate the African continent by harmonizing ICT Infrastructure initiatives across the continent, thereby enabling trade, social and cultural interchange to take place with ease and affordability, Copyright and to ultimately assist Africa UCT to bridge the digital divide. (: 20

30 8.6 Current and future developments in the mobile industry There has been an increase in accessing the internet using mobile phone technology as compared to the traditional method of fixed phone lines, which has a limited penetration rate through most parts of Africa. According to the ITU (2004), the so-called second generation services such as WAP (Wireless Application Protocol) and SMS (Short messaging service) are gaining ground, with South Africa topping the monthly SMS league table with 17 messages per month, putting it firmly ahead of the global average of 4. In Kenya and Ghana, election results were recently provided using SMS. Africa is poised to remain the world s fastest-growing market for cellular communications. Future growth in the region s mobile markets will depend on services becoming affordable to the majority of the population. Future developments Copyright in relation to growth in the sector UCT will remain steady though at lower rates in certain markets, such as South Africa, due to increased market saturation. Mobile call rates in Africa, whose citizens have the lowest per capita income in the world, will be crucial for the future of this industry. The rates will have to decline in order for it to be affordable to the masses and thus increase the number of subscribers. According to the ITU, operators will still need to be able to extract revenue in order to make their operations viable. The industry faces the challenge of how to sustain its growth in the face of constraints on affordability. Short-term growth will depend on potential subscribers being able to afford the services which operators are offering. If new subscribers can be reached quickly, then operators will see a faster return on investment, thus a higher Average Revenue per user (ARPU). Based on different growth scenarios for the mobile market in 2010, the African mobile penetration is expected to reach between 10% to a possible 20%, from 6% in 2003 (see Table 3). Table 2

31 source: ITU 2004 b Revenue estimates for GSM operators within the continent are set to increase from US$14 billion in 2004 to US$31 billion by 2010 (MTN 2005d). Voice transmission will remain the main revenue driver; the growth of mobile data transmission is expected to be slow and will be driven mainly by corporate customers. New technology trends like Voice Over Internet Protocol (VoIP), Wireless Local Area Network (WLAN) will present a huge challenge to the mobile communication companies. Voice Over Internet Protocol, for example, will push African GSM operators to reduce prices by a significant amount in order to compete, thereby decreasing the ARPU of subscribers. The ability of GSM operators to respond to these technological trends within the industry will certainly be crucial. Demand for internet access in Africa will fast-track the development of technologies such as Wifi and WiMax. This technology will offer high speed connectivity to the internet and will help narrow the bridge the digital divide. The development of 3G will allow for faster mobile data delivery systems, including additional services such as multimedia data applications including video and photography. 3G technology will also allow for video calling, so that two callers can have a conversation using real-time video recording 22

32 9. The Case Study- MTN s Success Story: Expansion beyond South Africa s Borders. The MTN s bidding team for a mobile telephony license in Nigeria touched down at the Lanseria Aiport in Johannesburg late in the night of 20 January The team, led by Irene Charnley (Commercial Director), had secured a mobile license to operate in the most populous nation in Africa, Nigeria. A hero s welcome awaited them at the airport with placards and banners reading celebratory statements such as: MTN: A Winner in Africa and MTN + Nigeria = The Better connection. Two years after receiving the license, MTN had increased its market share in Nigeria to close to 50%, and the company had expanded into four other African countries as well. 9.1 Copyright The birth of MTN UCT The new South African nation was born in 1994 following successful democratic elections and the official dismantling of the apartheid regime. That same year, the country witnessed the rebirth of mobile telephony in the country with the launch of a second operator MTN. The country at that time had the best telecommunication infrastructure in Africa with four million fixed-line phones; yet, only 1% of black South Africans owned telephones. MTN was part of the M-Net group of companies that became Multichoice Africa, the first pay-television in Africa, which hit South African screens in Multichoice embarked on various ways in which it could further utilize its existing technology which led to the creation of the cellular project. In 1990, Multichoice realized the need for an international partner with cellular experience, which led to an agreement with Cable and Wireless International Mobile for a technical partnership, and led to agreements with other shareholders including New 23

33 Africa Investments Limited (NAIL) and the Foundation of African Business and Consumer Services (FABCOS). The Global System for Mobile Communication (GSM) technology was chosen as the method to provide MTN mobile service. 9.2 Why the choice of GSM? The decision to use digital GSM technology was seen as risky and expensive at that time, especially since most networks were using analogue technology. The choice for GSM stemmed from the demand from subscribers for better and increased bandwidth which eventually led to the development of second-generation (2G) cellular phones and systems. Despite the advantage of going GSM, there were doubts about the success of the technology since the results from trial networks started in 1992 were uncertain. 9.3 The battle to secure a license After securing shareholders and the appropriate technology for the mobile service, the next important step was to secure an operational license. An initial proposal for the formation of a joint venture between Cable and Wireless International Mobile, M-Net and Telkom (South Africa s state-owned telecommunication provider) to develop GSM cellular service in the country was turned down. The reason for the failure to secure an agreement was that Telkom wanted to develop its own cellular network, a decision which led to the creation of Vodacom South Africa s first cellular provider in The process of obtaining the license was further marred by lobbying for the Africa National Congress (ANC) political party on the role of mobile phones, and by the socio-economic uncertainty within South Africa at the time. A license for MTN and its partners to operate was not awarded until September 1993, four months after Vodacom had started operations. In January 1994, MTN began to build its own network. 24

34 9.4 Race to success The race to provide cellular service was intense especially since MTN was effectively four months behind Vodacom. The 20-member staff at MTN s first network office in Cape Town raced around the clock to provide quality and reliable service to subscribers. In the words of Noel Meier, who came across from Telkom to work Regional General Manager and later became CEO of MTN Uganda, All the 20 staff working with MTN, lived, ate, slept and dreamt of MTN. Ask anyone who worked at the Pin Mill Farm, MTN s second office, in Sandton what the early days were like, and they will invariably make reference to the incredible environment, serene on the outside, chaotic on the inside many left only to go home for a quick shower. MTN finally began to unroll its network eight months after Vodacom. Within six months after the roll out, MTN was on par with Vodacom in the number of base stations. MTN had managed one of the fastest roll-outs in GSM network history with a commissioning rate of 100 base stations per month. The coverage area of MTN of more than 900,000 square kilometers was larger than the combined area of Germany and France. The public launch of MTN was held at the end of February 1994 with guests making calls on 15 mobile phones that were available for testing. The effect of the pre-launch marketing campaign, which utilized catchy advertisements, facilitated in bringing in many new subscribers to the MTN network. According to Heinz Grimm, one of MTN s first customers from Western Cape, he recalls wild enthusiasm over the brick-like mobile phone at his office at Caltex. His department had been honoured with five pool mobile phones. After the peaceful 1994 elections in South Africa, the new South Africa was born. Around the same period, MTN business began to grow as substantial numbers of subscribers began to sign up and MTN continued to open new regional offices and open up operations in new countries. At end of December 2004, the MTN Group employed 6,063 staff and had more than 13 million subscribers across South Africa and six additional cellular network operations in the continent of Africa. (Exhibit- Achievement against expectations) 25

35 Exhibit 1 Achievement against expectations MTN subscriber numbers ( 000) Actuals Initial business plan 352 source: MTN presentation slides-c 9.5 MTN Group Profile The MTN Group describes itself as the leading provider of communications services on the African continent in offering cellular network access and business solutions. The Group has a vision to be a leader in telecommunications in developing markets. The Group operates on the following values: Leadership - foresight, commitment and guidance Integrity solid principles, trusted and togetherness Can do optimism, future focus, passionate and happening Innovation simplicity, imagination, insight and creativity Relationships teamwork, friendly, personal, warm and caring MTN Group operates three business divisions: MTN South Africa, MTN International and Strategic Investments (Exhibit 2) 26

36 MTN South Africa MTN launched mobile service in 1994 and the group operates through the MTN Network Operator and the MTN Service Provider. MTN is South Africa s second largest cellular network operator with 7.7 million subscribers. The company continues to invest in its operations with total investment to date over R 9.5 billion in infrastructure development, which includes 4,245 base station sites and a coverage area of over one million square kilometers. MTN International This group offers mobile network access and associated services through its subsidiaries and joint ventures in Nigeria, Uganda, Rwanda, Cameroon and Swaziland with a combined total of 5.6 million subscribers across its network at the end of Strategic Investments This section of the MTN group looks towards the future and works towards delivering innovative products and keeping MTN ahead of the competition. This group manages MTN s investments in non-mobile ventures, including: MTN Network Solutions provides managed network services to the corporate market; Airborn responsible for exploitation of innovation and intellectual property; Orbicom a pan-african Satellite signal distributor. 27

37 10. MTN goes on a safari to the rest of Africa Due to MTN s success and experience in South Africa, the potential saturation of the home market, a higher return on investment on the African continent, and the huge potential of the African market, MTN decided to embark on expanding its operations beyond South Africa. MTN s safari into the continent began with a tentative and unsuccessful attempt to enter the Zimbabwean market in Ross Macdonald, who came across from M-Net and later became Executive of International Business Development explains how MTN s move into Africa begun: In 1994, one of the shareholders in MTN, Cable and Wireless, had shown interest in pursuing a mobile license in Zimbabwe. Having been involved in the MTN s bid the previous year, and because of my involvement in the financial model and business plan, I undertook to work with Ericsson on the submission of a combined bid. However, on the day of submission in Harare and with numerous high-profile international players ready to pitch, the Zimbabwean authorities cancelled the tender. MTN remained undeterred, and since its experience in Zimbabwe the company has expanded its operations to six other African countries from the period of 1994 to 2004 (see Exhibit 2 and Exhibit 3) 10.1 MTN Uganda MTN s first successful expansion beyond South Africa began in Uganda in Following several cancelled tenders due to the Ugandan government s decision to better prepare itself before issues a second operating license, MTN was eventually awarded a license in April Within six weeks of the launch of MTN Uganda, the company had signed up more customers than its competitors had done in three and half years of their operation. The teledensity in the country, which was one of the lowest in Africa, soon changed and was tripled. 28

38 MTN Uganda demonstrated it ability to operate fixed and mobile services in the country by investing over US$176 million in infrastructure for both operations. The infrastructure upgrade included 257 base stations, providing approximately 70% of the population and 35% geographic coverage respectively. In 2004, six years after entering the market, MTN Uganda accounted for a 65% market share of all telecommunication activity in the country and had an 83% market share of the mobile sector. Success in Uganda The MTN brand received high name recognition from it customers at 98% among surveyed Ugandans but it was its leadership in product innovation that made their operations Uganda successful. MTN Uganda aimed to make communication accessible to all by installing payphones throughout the country and established a subsidiary company, MTN publicom, to manage the roll-out. In 2000, MTN Uganda started to build its own fiber optic line to enable it to provide a wide array of telecommunication services including broadband and multimedia services. January 2001 saw MTN Uganda introduce its fixed-line business, a wireless local loop that gives customers voice, fax and high-speed data services. The same year saw the company responding to the massive demand for it services by launching its own dual band network in MTN Uganda has subsequently launched MTN VillagePhone, extending telecommunication access to the rural villages across Uganda. 29

39 10.2 MTN Rwanda The license allowing MTN to operate in Rwanda was approved in 1998 two weeks after MTN was granted a license to operate in Uganda. MTN Rwanda is the first and only mobile telephony operator in the country. Operations started on July 4, 1998 (Liberation Day in Rwanda). The timing of the start of operations was symbolic and in the words of John Mirenge, Chief Operating Officer at MTN Rwanda [the operations] started a telecommunication revolution that changed the way people live and do business in the country. The revolution started at a time the nation was recovering from the 1994 genocide. Despite the poor infrastructure in the country, especially in the years following the genocide, the roll-out for Rwanda was much quicker than anticipated because MTN Rwanda was able to deploy a containerized solution. Ross MacDonald, Executive: International Business Development, remarked how the arrival of giant Russian cargo planes bearing our first deliveries of network equipment was a momentous occasion. The ability to deploy whole components of a telecommunication network in a single delivery was significant and had an impact on the deployment of subsequent mobile networks in Africa. By 2004, MTN Rwanda s infrastructure included two mobile switching centers and 77 base stations; its geographical service coverage that year was 70%. In just under five years, MTN Rwanda had become the leading company in the country and has also demonstrated itself as a socially responsible company through its participation and investment in a number of social and community projects. Rwanda Success The timing and delivery of technology to boost the growth of the economy after the 1994 genocide led to the success of MTN Rwanda. Product innovation played a successful role by helping to ensure the brand s popularity in the country. The provision of community pay-phones known as Tuvugane, which facilitate development in the rural community are a good example of country-specific innovation. The roll-out exceeded expectation by introducing 600 payphones during the year of its launch. 30

40 The involvement of local businesses in the distribution of its service was also seen a success factor in Rwanda. In 2004, MTN Rwanda had two service centers, 18 authorized distributors, four franchisees and more than 900 dealer outlets and kiosks across the country. Andrew Johnson, the former CEO of MTN Rwanda, remarked during his tenure that skills development and community building are generally regarded by the people of Rwanda as more important than financial reward at this point. After the success in Rwanda, MTN s goal had to change. Paul Edwards (former Chairman of MTN) said they were no longer focusing on becoming the biggest in South Africa but rather they wanted to be the biggest in Africa MTN Swaziland Launched in 2000, MTN Swaziland was and is the sole cellular operator in the country. The group Copyright entered into a partnership with Swaziland UCT Posts and Telecommunications Corporation (SPTC), the only company that had the license to operate in Swaziland. The people of Swaziland celebrated Independence Day in 1998 with the first cellular call being made by the King Mswati III. The introduction of a cellular network changed the lives of the people in Swaziland and increased the country s teledensity from 3.2% to almost 8% by the end of The landlocked Kingdom of Swaziland, with a population of about one million, has MTN s International lowest number of subscribers at 134,000 as of March Since 2000, the company has spent R226 million on infrastructural developments. To date, MTN Swaziland has 66 base stations providing geographic and population coverage of 78% and 88% respectively. The operations in Swaziland also boast of a staff complement of 100% indigenous Swazis. 31

41 Success factors The MTN Swaziland brand enjoys recognition and respect for its innovation and social commitment. The brand awareness in 2004 was reported at 98% across the country. Amongst its successful innovations were new offerings for customers which offers a sixmonths pre-paid option, catering for the needs of contractors working in the country. Another innovative product was the introduction of SMS-to- and the Who Called service. In terms of social commitment, MTN Swaziland is an active supporter of sports development in the country and sponsored the Swaziland Olympic and Commonwealth Games Association. The Group also supports many charities and plays a key role in promoting HIV/AIDS awareness in the country Copyright MTN Cameroon UCT In February 2000, MTN successfully bid against top international operators, and for a fee of US$60 million acquired Camtel Mobile, the first GSM operator on the continent. The acquisition move was the first of MTN into a Francophone territory as well as its first move into West Africa. Within months of the acquisition, the newly-renamed MTN Cameroon came up with a new attitude, a new look and a commitment to serving customers, thus completing the transformation. MTN Cameroon upgraded the network to triple its capacity, doubled its subscriber base, and had the ability to provide coverage in all ten provinces through 219 operational base station sites. MTN Cameroon by the mid-2004 was among the ten largest companies in Cameroon and had plans of being the leading company in the country as well as being the employer of choice. In 2004, the company had a market share of 52%. 32

42 Innovative success In 2000, the company launched two new products ConnectaPlus, a package for the intensive user, and ConnectaPlan, which gives regular users the option of paying for the service in advance or entering into a contract. In the words of Jean-Simon Ngann Yonn, Chief Marketing and Commercial Officer for MTN Cameroon- MTN is the network of choice, the brand Cameroonians love and feel close to MTN Nigeria With a population of over 135 million people, but with a low teledensity rate of just 750,000 phones in the year 2000, Nigeria was seen as a golden pot for telecommunication companies in the world. The low level of teledensity had previously required business and society to rely on messengers or errand boys to deliver messages or to set up a meeting. All of this was about to change with the announcement in the year 2000 that the Copyright government was going to auction licenses UCT to mobile phone operators in Nigeria. After months of hard work preparing for the historic auction of the Nigeria s GSM 900 and GSM 1800 licenses, MTN was awarded a license in January 2001 which was acquired for US$285 million, the highest amount paid for a mobile license at that time. MTN was one of the five international players competing to the get the license. MTN s main rival, a British-based network, pulled out when the price for the auction reached an unexpected level. After celebrating their success in obtaining the license, MTN started delivering the switch center and other equipment to Nigeria. In August 2001, just six months after signing the license, MTN Nigeria commenced commercial operations beginning with three cities Lagos, Abuja and Port Harcourt. This marked the beginning of the end of an era when one had to pay US$10,000 for a telephone line or travel for several kilometers to the nearest town with a telephone. Two months after commencement of their operations, MTN Nigeria signed up 50,000 subscribers which quickly increased to 500,000 in less than a year. Staff had to work around the clock to cope with rate of subscriptions. Adrian 33

43 Wood, the former CEO of MTN Nigeria remarked that, One of our South African engineers, Manie Boschoff worked on the network in a remote area for four days with no sleep, indicating the commitment of MTN Nigeria s staff to setting up operations in the country. Up until the end of 2004, MTN Nigeria had invested a total of US$972 million in infrastructure roll-out. In the year 2002, MTN Nigeria constructed a digital microwave transmission backbone network the Y ellobahn a US$120 million investment that spans 3,400 kilometers and enables 1,900 voice calls simultaneously. The network is serviced by 839 base stations in operation. Success in Nigeria MTN Nigeria s marketing campaign of using high impact newspaper ads and striking, unconventional outdoor billboards helped its brand recognition to remain consistently high at 71% Copyright and have helped MTN Nigeria to be recognized UCT as the top brand in the country for the past two years- (exhibit 17) MTN Nigeria s market share in 2004 was close to 50%. The group had a subscriber profile of predominantly pre-paid customers, with postpaid customers totaling just 3%. The dominance of pre-paid customers in the group s profile improved the cash flow of the operation in Nigeria by minimizing bad debts as a result of overdue or unpaid bills. The introduction of tailored products and tariff structure added to MTN Nigeria s success. Products such MTN Flexi enabled subscribers to enjoy lower tariffs and more talk time. A per-second talk time option was introduced that charged subscribers a flat tariff of 80 kobo per second. MTN Nigeria also catered to low-income users by introducing the N750 (Naira) and a virtual booster service, which halves the pre-paid tariff for a month and can be loaded by subscribers using their available credits. Procurement using local suppliers as well as an image of corporate responsibility ensured a positive image of the brand and accounted for the success of MTN Nigeria. Over 34

44 US$250 million was spent on procurement from local suppliers, thus creating incomegenerating possibilities for local Nigerians. MTN Nigeria also spent over R29 million in various Corporate Social Responsibility initiatives through the MTN Foundation. It did not take long for the people of Nigeria to realize that telecommunications, specifically mobile telephony, was not just meant for the rich. MTN has helped to change the image of mobile service in the country by coming up with country-specific products and services that cater to the range of income levels in Nigeria. 11. Criteria for entering into new markets The low teledensity on the continent made telecommunication companies, especially mobile operators, take up opportunities in entering into these green fields of mobile telephony. MTN s method of entering, during the period this case study was written, was mainly through Copyright the acquisition of a license to operate in UCT these countries. A reason for MTN expansion into these new markets was attributed to the maturing market condition especially in the country s home market of South Africa. Another reason for expansion was the demand, potential market size, and high returns that the African continent presented. Certain criteria were reviewed and evaluated in searching for these new markets including: Size and growth potential the market was analyzed to ensure that is room to increase the number of subscribers. For example, Nigeria s population of over 135 million were using only 750,000 telephones (fixed and mobile) in 2000, thus pointing to the potential for high growth rates in the mobile industry. Entry cost license fees before infrastructure roll-out starts. License period- The period the license allows the service provider to operate thus enabling it factor pay-back period of financing Minimum shareholding in the entity Political and economic stability Effective and Independent Regulator 35

45 12. Risk Management MTN s managing of the perceived risk in operating outside South Africa has been a leading factor in succeeding its expansion program into the rest of the continent. Managing these risks required a holistic risk management strategy. MTN has in place a risk management framework approved by the Group board that sets the foundation of risk management within the organization- Exhibit 10. MTN had an enterprise-wide risk management methodology that ensured an integrated risk management framework, where all risks were identified, accessed, managed and monitored in order to achieve an optimal risk-reward profile. Risks were classified into group and operational. Group risk related to issues including the following- network quality, repatriation of earnings, political factors, HIV/AIDS, management performance, currency exchange, Copyright asset management, interconnect revenue, UCT tax and regulatory as well as strategy. Operational risk were issues to do with- competition, financial performance, corporate culture, brand, customer service, fraud, media and public image, personal accident, management authority social and strike. Whereas other competitors saw the risk in expanding their operations to the rest of the continent as a clear and present danger to their operations, MTN overcame it and maximized it. In response to his opinion on MTN s expansion program, Alan Knott- Craig (CEO of Vodacom) said- I certainly sometimes wish we had the freedom to move as freely as MTN does, and I think they are doing very well. They are being very bullish, and doing the right things.

46 13. Challenges in entering markets MTN had the following challenges when entering into the six African countries mentioned in this case study: A major challenge on the continent was the lack of infrastructure in most of the countries of operation. In Nigeria, the Y ellobahn was constructed because of the absence of sufficient transmission capacity in Nigeria. Due to the unreliable power supply MTN was forced to construct its own power system, named Y ellowatts. The system was constructed to keep the entire MTN Network at peak performance 24 hours per day, 365 days a year. Each base station is constructed with twin generators and a large diesel tank and is manned by an armed guard to protect it from looters. MTN also faced the challenge of inadequate funding for projects in its Africa Expansion program as a Copyright result of the associated risk in investing on the UCT continent as well as the poor credit ratings in some countries. In recounting his experience in MTN S expansion to Nigeria, Rob Nisbet (Chief Financial Officer-MTN) said he actively lobbied investor analysts and assisted in convincing shareholders that investing in Nigeria would reap long-term rewards. Our faith in the Nigerian market has been fully justified, he says. High import tax and quotas leveled against imported equipments and recharge units in certain African countries hampered the operations of MTN. The Nigerian government, for example, imposed high taxes on imported recharge cards to the country leading to a recharge scarcity period. The scarcity was as a result of MTN Nigeria not being able to pay the high duty at the port of discharge and resulted in a period where there was a shortage of recharge cards. Another challenge was the absence of credible information to evaluate the viability of the opportunity and prepare a good business case for investment, especially in the case of MTN Nigeria and Rwanda. MTN Group was made to understand the number of 37

47 telephone lines in Nigeria was about 700,000. Upon paying for the license, it was realized the figure was about 500,000 lines. The African continent has different national and business cultures. Buying gifts as a token of appreciation in prospective markets is seen as the right thing in some countries and improper in others. There seems to be a thin line in establishing what is right in one country and not in the other. In Nigeria, for example, MTN was criticized by a section of the public for giving discounts on calling rates to members of the legislature. Other challenges included the following: Consortium composition to participate in bidding processes - MTN faced difficulty in identifying suitable local partners to pursue the opportunity and share the associated risk. Equity funding concerns in relation to : o Foreign source of funding due to South Africa Reserve Bank regulation o Political risk insurance Property ownership - Finding a property and erecting buildings takes time. In Nigeria rent is paid two years in advance leading to budgetary constraints for MTN Nigeria. 14. Corporate Social Responsibility (CSR ) Initiatives MTN in 2004 became one the first companies to feature on the JSE Security Exchange s new Social Responsibility Index but had been involved in CSR initiatives long before that. MTN s Foundation was created in 2001to manage R22 million social investment program in a structured manner. The Foundation was formally inaugurated by former South African President, Dr. Nelson Mandela. MTN s objective in setting up the foundation was the need for private sector social investment to invest in areas of national priority. The Foundation placed a priority on science and technology, arts, education and HIV/AIDS programs and also is partner in advancing education- particularly in rural areas. In Nigeria, 1% of the groups profit goes to the Foundation. 38

48 As a Group, MTN has operated and abided to sound legal and regulatory structures as well as being ethical in all of it operating countries. MTN has zero-tolerance for corruption and has successfully gone about it operations as a non-corrupt company. 15. MTN s expansion objective in relation to NEPAD As a group that depends on the support of the African people for success, MTN subscribes to and supports the African Union s vision enshrined in NEPAD; a vision which aims to place African countries both individually and collectively on a path of sustainable growth and development, thus halting the marginalization of Africa in the globalization process. NEPAD has the following Information Communication and Technology (ICT) goals ( : Double teledensity by 2005 Lower cost and improve reliability of service Develop Copyright local content software, based especially on UCT Africa s cultural legacy Facilitating economic development in Africa is a goal that runs through MTN s investment philosophy. The Group s infrastructure not only provides networks that enable communication across countries and continents but also facilitates and supports other infrastructural and social development initiatives that contribute to long-term domestic benefits for the countries within which the Group operates. MTN s successful investment in mobile networks and infrastructural development on the continent and the significant commercial yield it has witnessed has contributed to NEPAD s goal to decrease negative investor perceptions of Africa being a high risky investment destination. 39

49 MTN s expansion on the continent drives economic progress in underdeveloped communities on the continent by providing mobile telephony and its multiplier positive effect in job creation and social development through Corporate Social Responsibility (CSR ) initiatives. This has lead to the empowering and improving the lives of the local people. 16. Future of MTN MTN will continue to pursue its vision of being a leader in telecommunications in developing countries by continuing to explore value-enhancing expansion opportunities in Africa and the Middle East. MTN s expansion will also seek to explore business opportunities complementary to the core mobile telephony business. In the future, MTN may become involved in fixed-line operations where they go hand in hand with cellular licenses, as well becoming involved in innovative initiatives such as cell phone banking. Each operation, in countries in which it operates, will face different challenges within the industry. MTN s key challenges will be to aggressively pursue new growth opportunities, create and enhance intellectual skills and capacity, and to internalize the MTN brand and values. Earnings from foreign operations, which contributed to 36% of group turnover at the end of 2004 is expected to increase. At the time of writing this case study, interim results for the 3 quarter of 2005 indicated foreign activities had increased profit margins with MTN Nigeria producing a spectacular 52.2% margin compared to 37.7% in South Africa. According to Yvonne Muthien (Group Executive Corporate Affairs) MTN s strength and success will continue to be innovation, being proudly African, being a caring corporate citizen, operating according to sustainable business practices and having a reputable corporate brand. 40

50 Given the limited supply of virgin markets on the continent, future expansion is likely to be through mergers and acquisitions. In 2005, MTN acquired a 51% stake in Loteny Telecom, a cellular operator in Ivory Coast and has also entered an agreement to acquire 100% of Telecel Zambia. It had also acquired 49% stake in Irancell, a mobile operator in Iran; the first acquisition outside the continent of Africa by any African telecommunication company. 41

51 17. Teaching notes MTN s Success Story: Expansion beyond South Africa s Borders. Synopsis The case study seeks to teach students and other users about MTN s process of expanding into five African countries within ten years after beginning operations in South Africa. The case study addresses the opportunities and challenges South African businesses, such as MTN, and other business from developed countries face when expanding their operations into African markets. The study also highlights success factors in making the MTN brand a highly recognized brand, and in achieving high levels of market share in each country of operation. A review of the mobile telecommunication industry in Africa and the effort of NEPAD in promoting Africa as a preferred investment destination are covered in the study. The case study ends by giving a positive outlook for MTN s goal of becoming the market leader in telecommunications in developing markets. 42

52 Teaching Objective This case study can be used as a teaching tool for courses and conferences such as: Business, Government and Society The case study highlights the importance Corporate Social Reporting (CSR) initiatives and rewards to corporate bodies and institutes play in building a successful business. The study also refers to the efforts of institutions such as NEPAD in promoting the continent as a preferred investment destination. Strategy The case study mentions the challenges and opportunities on the continent and describes how companies can use such issues as a conduit to success in expanding their operations on the continent.. The Balanced Scorecard, as a theoretical overview for this case, can be used as a performance measure to determine Copyright financial and non-financial measure successes UCT of MTN. Risk Management The case study looks at how companies and factor and manage risk when pursuing business expansion on the African continent. Doing Business in Africa Conference The case study can be used as a working paper to highlight the challenges and opportunities in doing business in Africa, particularly in relation to the telecommunications industry. The objectives of NEPAD in relation to the ICT can be reviewed, measured and accessed. 43

53 Issues raised in the case Expanding Mobile Operations in Five African Countries The case study begins by describing the early operations of the company in South Africa. The study then looks at MTN s decision to expand its operations into other African markets, and examines the challenge and opportunities that were presented due to that decision. Innovation Key to Service Delivery The MTN Strategic places a priority on innovation within the organization. The study brings describes the importance of developing new technologies and products in order to improve customer service delivery and remain as the preferred mobile network. Successful Management of Perceived Risks MTN s expansion involved the management of risk associated to their operations. A holistic strategy was designed to identify and understand the risk factors that might hinder MTN s expansion. Discussion Questions 1. Discuss reasons for firms expanding their business beyond their country borders? 2. Discuss the criteria for entering into foreign markets. 3. Discuss the importance of corporate social responsibility in relation to the activities of multinationals. 44

54 Discussion Question 1 Discuss reasons for firms expanding their business beyond their country borders? Proposed Answer There are several reasons for firms expanding their businesses globally despite the inherent risk associated with it. The law of comparative advantage states that production will be located where it is relatively cheaper to produce as a result of factors of production: land, labor and capital. According to Smit and Cronje (2004) the following are reasons for doing business across international boundaries: Access to new markets especially when the home market becomes saturated and has intense competition within the industry. One of the reasons why MTN expanded Copyright into the rest of Africa was for the reason UCT stated. Different corporate taxes and tax system attracts companies to do business outside their home market with the objective of maximizing profits. Economies of scale that are unavailable in a single market may be possible on a global scale. For example, BMW established a plant in South Africa to achieve substantial cost savings by producing for the South African and export market. International operations create a certain degree of synergy, that is, presenting an organization with the opportunity to transfer learning from one country to another. The success of the Y ello marketing campaign in Nigeria led to introduction of the campaign in all operating markets. Various incentives from foreign host governments like subsidies, interest-free loans and no restriction to repatriate foreign earnings attracts companies to do business abroad. MTN were given a 10 year tax- holiday to operate in Nigeria. 45

55 In spite of the benefits associated with expanding businesses beyond borders, organizations should not ignore the risks associated with it. Risks should be measured and evaluated constantly in order before making the decision to expand. Discussion question 2 Discuss the challenges for entering into foreign markets. Proposed Answer Political and Economic stability is a key challenge for businesses expanding their operations into foreign markets. Organizations, as a perquisite to entering new markets, need to protect their investments is a safe, sound and stable political environment. Most part of developing countries especially in Africa do not have such conducive climates to attract businesses to expand their operations into foreign Copyright markets. UCT Culture- National and business cultures in foreign markets present a challenge to business expanding or doing their business abroad. Business culture in China is based on forming a long- term relationship whilst the opposite is what occurs in developed countries. It is accepted to show appreciation by giving gifts in certain business culture especially in some parts of Africa. This gesture maybe seen as a form of a bribe and prevents countries from doing business. Vodacom, a South African mobile operator pulled out from a mobile license bid when it came to the notice of management that money had been paid to certain individuals as a facilitation fee. Information- Lack of credible information to evaluate the viability of a business venture is a common challenge to firms expanding their business abroad especially into Africa. 46

56 Infrastructural development like reliable source of electricity, water, roads and other amenities hampers development and a challenge to entering a foreign market. Cost of doing business- The Doing business database (2005) mentions the high cost of doing business in developed countries especially in Africa. The bureaucratic and red tap nature of doing business adds up to the high cost of doing business. Marketing - Which region, country, segments, pricing, promotion and distribution. Sourcing - whether to obtain raw materials or products locally or imported especially in the case where there are local sources or are expensive to purchase. Investment and control Through joint venture, global partner, acquisition and franchising. Discussion question 3 Discuss the importance of corporate social responsibility in relation to the activities of multinationals. Proposed Answer The Department of Human Resources and Skills Development (HRSD) define CSR as the relationship of corporations with society as a whole, and the need for corporations to align their values with societal expectations in order to avoid conflict and reap tangible benefits. 47

57 Multinational enterprises (MNEs) like MTN play an important part of the home and international economy through productive capital, managerial and technological know-how, job creation and tax revenues. Most successful companies will view social responsibility as an important, valuable aspect of their organizational objectives. Today, good financial performance is not good enough in measuring the success of a company. Alfonso and Sharma ( 2005) identify the importance of CSR as follows: o Reputation. Building trust in a company is a long, uphill battle, but losing it can have dramatic effects on share prices and customer loyalty. o Retention and recruitment. Employees want to work for responsible companies that care about their employees and contribute to society. o Operational efficiency. CSR can improve the bottom line by using materials efficiently and minimizing waste. o Copyright Increased sales. Cause-related marketing, ethical UCT and environmentally conscious labels, and new product innovation can influence the top line. Despite the importance of CSR, critics are of the view that it puts pressure on the finances of organizations especially in developed countries where governments abandon their duty of serving the communities and its people. 48

58 Assignment Questions Question 1 Use the Balanced Scorecard to measure the success of MTN s expansion and critique the framework to reflect issues of the new economy. Time allowed: 45 minutes Proposed reasoning for Question 1 To allow students and users of the case study with to apply the theory of the Balanced Scorecard to an organization To establish a linkage between financial and non- financial quadrants versus the strategy and vision of the organization To critique Copyright the BSC theory by identifying issues in UCT the case that reflect on the New Economy Proposed answer for Question 1 This question will require the student or user to apply the original Balanced Scorecard theory (BSC) developed by Kaplan and Norton. The video Balanced Scorecard: Managing Future Performance (HBS 1994) can be used to introduce this question. In line with its strategy and vision of being the leading provider of communication service, the BSC is used to measure the success of MTN s expansion in the following: Financial Perspective MTN Group enjoyed strong financial performance since consolidating its assets by taking control of MTN Holdings in The Group raised revenues by 23% year-on- year to 49

59 R23.9 billion- see exhibit 7. The increase in revenue was a result of sustained subscriber growth over the years in all the operational markets (see Exhibit 4). The group reported adjusted headline earnings of cents representing an increase of 77% for the period ending March 2004 (see Exhibit 8). The group total assets base at 31 March 2004 was R32 billion, representing an increase of 14% from the previous year. MTN s expansion other African markets has led to MTN International contributing 36% of MTN Group s total revenue, 50% of EBITDA and 52% of MTN Group s after tax profit for the year ending March 2004 (see Exhibit 9). MTN s return on investment (ROI) was 22% for the year ended March This is higher than in Europe, Asia, Latin America and the Middle East (MTN presentation slides: d) According to Kaplan and Norton (1996), many businesses include an objective in their financial perspective Copyright that addresses the risk dimension of UCT their strategy. MTN demonstrates this by expanding their operations and products in diversified markets across the continent. Customer Perspective The MTN brand remains the leading brand with customers in the various countries of operation and has a high brand awareness levels. MTN was ranked 6 th in Financial Mail s Top 20 Companies in South Africa Survey in In South Africa, the brand affinity and awareness was measured 78.5% and 99% respectively in In terms of market share, the group has a remarkable high share in all countries of operation (see Exhibit 6). The 100 % market share in Rwanda and Swaziland was a result of an operational exclusivity in both countries. 50

60 Customer profitability, which is measured by average revenue per user (ARPU) averaged US$28.6 in 2004 and was slightly higher than the industry average of about US$15 (see Exhibit 5). The decline of ARPU in certain countries such as Nigeria was the result of currency devaluations and the appreciation of the South African Rand to the US Dollar (see Exhibit 13). Internal Process Perspective The MTN Group, specifically the Strategic Investment department, have excelled in meeting the objectives of its shareholders and its targeted customer segment by providing developing innovative, value-added products, which has resulted in high returns. Innovation is at the core of MTN s ethos and has contributed significantly to the organization s success (see Exhibit 11). The combination of these innovation qualities and processes has placed MTN in the forefront of Copyright other competitors in the African mobile market. UCT Competition amongst cellular operators drives innovation where, increasingly, there is more incentive for the operators to be more innovative in terms of product offerings, quality of service, price structuring and the development of a talented staff skills base. Learning and Growth MTN places an emphasis in investing in people for the future and has positioned itself as the employer of choice in nearly all its countries of operation. The Group had 6,063 employees at the end of 2004 and spent an average of 3% of its payroll in employee training. The MTN s workplace culture is described as emulating a family, and its employees are encouraged to work as a team. The company puts much effort into attracting and retaining its employees. The Group has a staff turnover of less than 2%. As Allyson Rigney, a switchboard operator noted, I plan to work for MTN for as long as they want to keep me. 51

61 MTN has invested heavily in empowerment schemes such as employment equity, skills development and affirmative procurement. An example of the Group s commitment to empowerment schemes is evident when a Black-led management buy-in began in 2002, which resulted in the establishment of Newshelf 664 Limited. This entity allowed management and staff to acquire a percentage of the share capital of the Group. As a result of the family-style culture within MTN, employees share improvement suggestions with the rest of the team and with the Strategic Investment group (which deals with product innovation). Tshepo Ramadibe, Manager of Corporate Affairs, described MTN as a listening company, in terms of employees and customers, which helps lead to practical innovations. Strategy and Vision The four quadrants Copyright of the BSC indicated a positive correlation UCT between the strategy and vision of MTN, which led the Group to become a leading provider of communication services, as indicated above in the financial and non-financial measures. Critique of the Balanced Scorecard In applying the argument against the BSC, Nelly, Adams and Crowe (2001: 6-12) argue that the BSC does not take into consideration issues related to the new economy such as social responsibilities and corporate governance. Social Responsibilities In 2004, MTN became one the first companies to feature on the JSE Security Exchange s Social Responsibility Index, though the company had been involved in CSI initiatives long before that. MTN s Foundation was created in 2001 to manage a R22 million social 52

62 investment program in a structured manner. The Foundation was formally inaugurated by former South African President, Dr. Nelson Mandela. MTN s objective in setting up the foundation was to provide private sector social investment in areas considered national priorities. The Foundation placed a priority on science and technology, arts, education, HIV/AIDS programs, and education (particularly in rural areas). In Nigeria, 1% of the Group s profit goes to the Foundation. Corporate governance As a Group, MTN regards corporate governance as a priority requiring strict observance. The company operates and abides to sound legal and regulatory structures, and conducts itself in an ethical manner in all of its operations. MTN has a zero-tolerance rule for corruption and has successfully conducted its domestic and international operations without incidence. MTN risk management Copyright is structured based on the requirements UCT of the King Report on Corporate Governance that states enterprise is the undertaking of risk and reward. A thorough understanding of the risks accepted by a company in the pursuance of its objectives, together with those strategies employed to mitigate those risks; is thus essential for a proper appreciation of the Company s affairs by the board and stakeholders. (King Report on Corporate Governance for South Africa: 2002). 53

63 Question 2 Discuss the importance of risk management for companies operating in foreign countries, particularly those operating in Africa? Time allowed: 30 minutes Proposed Reasoning to Question 2 This question is designed to test students ability to expound upon the importance of risk management in expanding operations to the international market, especially markets in Africa. Proposed answer to Question 2 Risk management is a requirement for South African companies as presented in the Kings Report of The requirement as mentioned in question 1 requires companies to have a through understanding of the risks accepted by a company in the pursuance of its objectives in business. The responsibility and accountability for management risks remains with MTN s business units as illustrated in exhibit 10. Roles and responsibilities at all levels of the organization, as indicated in exhibit 10, are defined and enforced by performance indicators for observance by the executive management of MTN (MTN Business Report: 2004). MTN s use of an enterprise-wide risk management method ensures that there is an integrated risk management framework within the organization. Phelps and Mellor (2005) define Enterprise Risk Management (ERM) as the management of financial and non-financial risks that is applied across the enterprise to: identify potential events that may affect the organization manage risk within organization s risk acceptance level provide reasonable assurance regarding the achievement of the company s objectives

64 In summary, Phillip and Mellor say the ERM provides a view of potential risks, as well as their potential impacts on the respective business as a whole. The ERM therefore requires management assess how much risk the organization is prepared to accept. MTN classifies risks under the ERM into group and operational risk; Group risk relates to: network quality, repatriation of earnings, political factors, HIV/AIDS, management performance, currency exchange, asset management, interconnect revenue, tax and regulatory environments, as well as strategy. Operational risk refers to: competition, financial performance, corporate culture, brand, customer service, fraud, media and public image, personal accident, management authority social and strike. As George Westerman, a research scientist at MIT put it, ERM reminds him of e- commerce in the 1990s. Everyone wants to be doing it but not many people are actually doing it and Copyright no one is doing it particularly well. ( FT Mastering UCT Risk: 2005). MTN seems to be following the trend. Reputation risk that comes with the brand does not seem to be covered well enough in the material and interviews granted to the interviewer during the research process. It seems to be available on paper but not seen as major threat. Reputational risk refers to a potential loss in reputation that can lead to negative publicity, expensive litigation and a decline in revenues. For example, the negative publicity on offering members of the legislature discounted call rates in Nigeria could have been interpreted as unethical by a section of the society and could have affected the MTN brand negatively. According to Argenti (2005) CEOs like to believe that it is their responsibility to manage reputation; however, no single CEO or person is ultimately responsible for managing reputation and assessing its risk in on a day-to-day basis. It therefore makes it impossible to have a common framework to understand the issues that affect the brand. 55

65 In managing reputational risk, Argenti proposes companies should: Prepare for potential problems by having a framework in a place to manage the reputation of the brand Develop a crisis management process Plan a response Analyze constituencies Provide as much certainty as possible in order to understand the situation Innovation is the backbone of MTN s operations, yet managing the risk of decreasing innovativeness is also a grey area. According to Goffin and Mitchell (2005), the characteristic that distinguishes innovative projects from other types of projects is their level of uncertainty. The authors therefore recommend that continuous assessment must be a priority on the management agenda. Goffin and Mitchell suggest a detailed assessment of each innovation project in the form of both technical Copyright and scenario risk: UCT Technical risk refers to whether the proposed project can be done within the required timeframe and budget. Scenario project refers to the uncertainty over the aims of a project; for example, whether the new project is appropriate for the target market. These assessments will provide a good measure for innovative projects in a firm. 56

66 18. Exhibits Exhibit 1 Group Structure as at 31 st March

67 Exhibit 2-Footprint in Africa 58

68 59

69 Exhibit 3- Group Footprint at a glance 60

70 Exhibit-4 MTN Subscriber growth Total number of subscribers South Africa Nigeria Cameroon Uganda Rwanda Swaziland TOTAL March 02 March 03 March * * Copyright UCT ** ** Growth MTN equity subscribers Excludes application providers: ( ) Includes subscribers in Supercell: ( )

71 Exhibit 5 Subscriber growth update Active Customers as at 31 December 2004 ARPU as at 31 December 2004 ( US$) South Africa 7,719, Pre-paid 6,364, Post- paid 1,355, International Nigeria 3,890, Cameroon 779, Uganda 683, Rwanda 175, Swaziland 134, Total 13,380,000 Exhibit 6 Market Share MTN Group as at March 2004 South Africa Nigeria Cameroon Uganda Rwanda Swaziland 36% 50% 52% 66% 100% 100%

72 Exhibit 7- Analysis of Revenue 2004( R ) m 2003( R ) m % change rand % of total 2004 South Africa** 15,098 12, International 8,687 6, International Nigeria 6,973 5, Cameroon 1, Uganda Rwanda * Swaziland * Mauritius/International * Other * Total 23,871 19, ** Including MTN Network Solutions

73 Exhibit 8 - Adjusted headline earnings per share for the year ended 31March Adjusted headline earnings per share for the year ended 31March 2004 cents 2003 cents % change Wireless Operation South Africa** Nigeria Cameroon Uganda Rwanda Swaziland Mauritius/International Copyright (14.3) (14.7) UCT 3 Other operations (0.1) (1.8) n/a Total

74 Exhibit 9- EBITDA and EBITDA margin for the year ended 31 March 2003 EBITDA and EBITDA % % change 2004 EBITDA margin for the year 2004 R 2003 R change local EBITDA margin ended 31 March m m rand currency margin% % South Africa* 4, , International 4, , Nigeria 3, , Cameroon Uganda (15.0) Rwanda (8.0) Swaziland Mauritius/International Other operations 8.0 (14.0) (10.4) Total 8, , * Including MTN Network Solutions

75 Exhibit 10- Risk Management Structures MTN Group Board Group Risk Officer Risk Management function MTN Group. Risk Management and Corporate Governance Committee MTN South Africa, Nigeria, Cameroon, Rwanda, Uganda, Swazilknd Board Risk and Audit Comittees Executive Risk Committees Executive Management

76 Exhibit 11- MTN Innovation successes Post-paid to pre-paid airtime transfer a world first The first to launch global 2-way instant SMS messaging on the Internet SMSpop, a PC-based application that enables users to send and receive SMS messages on PC or mobile handsets a world first Value bundles (MyChoice Top-up) SA first Traffic cameras (mms applications) SA first Corporate mobility (seamless, secure mobile workforce connectivity) SA first Mobile Credit (mobile POS via credit pipe) SA first Cell secure (intergrated mobile home security system) SA first MTN Villagephone Uganda/Rwanda First solar-powered payphones- Uganda MTN4U Loyalty programme Nigeria Y ellobahn nationwide transmission backbone that spans 3400 km and enable 1900 voice calls simultaneously.. First 3G call in November SA First 67

77 Exhibit 12- Balance sheet for the period ending March 31 March 2004 Balance Sheet As at 31 March ( R million) * % change Assets Non-Currents assets 23,357 22, Current assets 8,643 5, Total Assets 32,000 28, Equity and Liabilities Capital and reserves 21, , Non-current liabilities 4,376 4,056 8 Current liabilities 6,358 6,163 3 Total equity and liabilities 32,000 28, Net debt / equity ( excl. goodwill) -10% 35% Restated for the inclusion of share trust 68

78 Exhibit 13-Business performance ARPU (US$ per month) Mar 02 Mar 03 Mar South Africa Copyright Nigeria Cameroon Uganda UCT Rwanda Swaziland ARPU decline of international operations impacted by currency devaluations SA trend stable, increase in US$ terms due to strengthening of Rand Note: ARPU South Africa: 2004 R203 (2003 R206) ARPU in Nigeria excludes connection fee 69

79 Exhibit 14 Friendship Centre in Lagos, Nigeria Exhibit 15 MTN Cameroon billboard advertising 70

80 Exhibit 16- MTN Rwanda outlets are everywhere including petrol stations Exhibit 17- High brand visibility and loyalty have earned MTN Brand of the year status in Nigeria. 71