West and Central Africa region

Revenue contribution to Group
R31 115 million

West and Central Africa regional contribution to Group total

Country contributions to WECA region total

Overview

The WECA region provided the second-highest revenue and highest EBITDA contribution to the Group. The region continues to show significant opportunities for growth given low regional penetration of 28% and a healthy economic environment with average GDP growth of between 4% and 6%.

Performance

Subscribers increased by 43% to 28 million. ARPU declined by approximately USD1 to USD3 across most markets, which is consistent with increased penetration into lower-use segments. ARPU declined by USD5 in Côte d’Ivoire due to a drop in prices and a reduction in prepaid MOUs from new customers.

Operational

The year was characterised by an accelerated roll out of the network to address capacity and quality constraints, particularly in Nigeria and Ghana. Nigeria continues to be the major contributor to the region, increasing subscribers by 34% to 16,5 million, which is eff ectively 59% of the total WECA subscriber base. The medium‑ and smaller‑sized countries are also showing strong growth. Ghana increased subscribers by 55% to 4 million and Côte d’Ivoire by 65% to 2,7 million. Cameroon increased its subscribers by 44% to 2,6 million, despite the impact of the numbering change plan in the first half of the year.

Competition has increased significantly across the region with an influx of new providers. Ghana, Benin and Guinea Bissau were rebranded during the year and this, together with an enhanced value proposition in all markets, has assisted in addressing competition.

Outlook

There will be significantly increased investment in infrastructure to meet demand and improve network quality, given the strong growth expected from the region.

There are a number of opportunities to extract regional synergies such as leveraging common products, services and infrastructure through a more systematic implementation of regional hubs. We will also focus on enhancing our offering in line with the converging telecommunications industry.

The regulatory environment continues to be challenging in a number of markets and we will continue to focus on building constructive relationships with the regulatory authorities.

MTN Nigeria

Nigeria market information and results

Mobile penetration (%)

Overview

MTN Nigeria increased its subscriber base by 34% to 16,5 million subscribers and maintained its leadership position with market share at 43%, despite network capacity and quality constraints and a highly competitive environment. This performance was achieved through a combination of an effective value proposition, strong brand preference, competitive pricing and an improving Nigerian economy. Accelerated infrastructure roll out in the second half of 2007 helped to address network quality and capacity issues.In addition, MTN Nigeria has not embarked on any promotional activity during the second half of the year.

During the period, ARPU declined from USD18 to USD17, consistent with increased penetration into the lower-use segment of the market.

On 18 February 2008, MTN International disposed of an overall equity interest of 5,96% in MTN Nigeria for US$594,5 million as part of the private placement, reducing its interest to 76,8%. Results for 2007 do not reflect this change in shareholding.

Market environment

The Nigerian economy remained strong with GDP growth of 5% and disposable income of approximately USD900 (2007) and this is anticipated to increase to USD970 in 2008. These improvements are underpinned by increased local and foreign investment, the benefits of structural reforms that government has implemented over recent years and a high oil price. All indications point to the emergence of a vibrant middle class, with additional opportunities in the youth, rural and grassroots markets.The size of the Nigerian market is estimated to be 80 million subscribers by 2012. This estimation is based on the growing economy boosting consumer purchasing power and the prevalence of dual and triple SIMS.

General elections held in April 2007 led toa change in government in May 2007.

MTN remains the market leader, with market share of 43%. The Nigerian market is highly competitive with an influx of new providers with strong potential to compete. Two new GSM licences were awarded during the period and will begin commercial activities in 2008. Two additional CDMA operators and a satellite data services operator are also expected to launch in 2008. There has been significant investment in PTOs by major international operators that want to compete in the broadband corporate market.

Products

During the period a number of products and innovations were launched such as GPRS roaming, Edge and Blackberry services.

Capex (R million)

Subscribers (000)

ARPU (USD per month)

Infrastructure

There have been considerable network challenges, largely due to insufficient capacity and voice quality. Power supply issues in Nigeria continued to affect performance.

Significant improvements were made to the network, particularly in the second half of the year, with 785 base transceiver stations and transmission sites commissioned, bringing the total number to 3 422 sites. Approximately 77 sites have now been integrated with 3G technology. Going forward, the data business is poised for a large scale upgrade.

The Lagos Metro (82km) and Niger Delta (342km) fibre optic cabling were completed in the second half of 2007. The integration and commissioning of the IP/MPLS backbone to service corporate customers has significantly increased capacity.

During the year, R4 789 million was invested in infrastructure development.

Distribution

MTN Nigeria’s distribution points are segmented into wholesale and retail. The wholesale channel is well suited to the Nigerian market and now generates the majority of prepaid business. In total, MTN Nigeria reaches its market through 202 active appointed distributors. There is a second/third tier of distribution totalling 22 877 points identified through existing distributors. In addition, there are 30 000 informal distribution points that are identified by third-party contractors. Twelve service centres are currently in operation to support retail offerings with 26 Connect Stores located in strategic areas.

Regulatory

There has been an increased level of scrutiny on the performance of network operators, especially in terms of quality of service. In the second half of the year, the Nigerian Communications Commission (NCC) issued a directive to operators to pay compensation to subscribers for failing to achieve prescribed quality thresholds. MTN Nigeria and another operator have challenged this and the matter remains pending in court.

There has been full liberalisation and commencement of a unified licensing regime, which has provided more certainty to the Nigerian market.

The NCC has begun consultations for the implementation of number portability, which is likely to be introduced during 2009.

MTN Nigeria was awarded a 15-year 2GHz spectrum licence on 1 May 2007, at a cost of USD150 million, for the delivery of 3G services. In addition the UASL licence was extended for five years.

Looking forward

The outlook for MTN Nigeria is positive with strong growth in subscribers expected to continue. MTN Nigeria aims to maintain its leading market position given its strong brand preference and an effective value proposition. The operation will also leverage on MTN’s sponsorship of the MTN Africa Cup of Nations.

MTN Nigeria will continue to invest in improving the capacity and quality of the network. The network roll out plan has been modified and the operation is now better positioned to adapt to growing demand and quality requirements.

The Nigerian market is ripe for convergence services and hence there will be increased focus on data and non-traditional telecommunications such as 3G and the internet. The operation will also focus on regional benefits such as unified products, services and tariffs and a rural telephony project will be deployed.

MTN Ghana

Ghana market information and results

Overview

MTN Ghana delivered a good performance for the year ended 31 December 2007. Subscribers increased by 55% from 2,6 million to 4 million and market share was maintained at 52%. This was largely underpinned by improvements in network coverage and quality and an enhanced competitive proposition. The operation was rebranded MTN Ghana in August 2007.

ARPU decreased from USD17 to USD15 due to increased penetration and reduced tariffs.

Cost efficiencies were maintained despite electricity supply constraints in the first half of 2007.

Market environment

Ghana’s economy continues to perform well with average GDP growth of 6,2% for 2007 reflecting increased investment, particularly in construction as well as strong performances in the mining and tourism industries. Private consumption is expected to remain buoyant, assisted by higher wage increases and the benefits of the MTN Africa Cup of Nations football tournament.

Ghana has become an increasingly competitive environment with four mobile operators. A foreign operator has purchased a majority stake in one of the non-performing operators, which is expected to launch in the second quarter of 2008. There are currently five mobile licences in issue. The regulator has indicated that another licence may be issued in future. The proposed 10 PTO licences have not materialised to date.

Products

MTN Ghana has enhanced its customer proposition with a strong focus on product development. A new segmented tariff offering was launched as part of the rebranding campaign in August 2007. New products included GPRS roaming, Please call me, Me2U, Access 4 Life, SMS Chat and Ring Back Tones. The peration also launched international calls at local call rates to MTN operations in the WECA region.

MTN Ghana’s marketing strategy is focused on leveraging music and football platforms. In line with this, the operation hosted the MTN Africa Cup of Nations football (Afcon) tournament between 20 January 2008 and 10 February 2008 as part of its focus.

Infrastructure

The capacity and quality of the network was significantly enhanced with the number of base transceiver stations increasing by 718 to 1 660 and four new switches rolled out, increasing the number to 14 switches. At 31 December 2007, geographic coverage was 28% and population coverage was 72%. The benefits of the roll out were highlighted when peak-hour congestion more than halved over the period. These network improvements were facilitated by outsourcing site-building operations.

Over 1 600km of fibre network is planned for 2008, with trenching on metropolitan rings and national routes under way. The microwave backbone transmission rings are substantially complete although upgrades are a continual process.

R1 239 million was invested in infrastructure over the period to enhance coverage and network quality.

Capex (R million)

Subscribers (000)

ARPU (USD per month)

Distribution

During the period, there was heightened focus on increasing accessibility and driving sales through the regions. The regional branches have been restructured under the sales and distribution executive and distribution points are being decentralised, with regional dealers now supplied by regional distribution points.

Distribution channels were expanded with 13 exclusive super dealers, 28 service centres, 12 Connect Stores and 73 000 points of presence. Electronic voucher distribution (EVD) has now been opened up to all primary dealers and their subdealers.

Regulatory

MTN Ghana has a constructive relationship with the regulatory authorities who support the operation’s plans and processes to address quality issues. Interaction was strengthened by the appointment of a corporate services executive during the early part of 2007.

MTN Ghana has applied for a 3G licence which is expected to be issued in early 2008. WiMax licences are likely to be issued later in 2008. Interconnection termination rates were reduced in April 2007 with no further reductions expected during 2008.

Regulatory fees were increased from a flat USD750 000 per annum to 1% of revenue with effect from 1 January 2008. It is expected that communications tax of between 4% and 6% of revenue will be implemented during 2008.

Looking forward

MTN Ghana is focused on improving its value proposition through competitive pricing, innovative product offerings and improved network quality and capacity.

MTN Ghana is now well positioned to embark on a comprehensive corporate and postpaid strategy by introducing advanced products for discerning subscribers. These include internet services, managed data services, mobile money, 3G deployment and WiMax. MTN Ghana will focus on increasing regional sales through the expanded distribution network and improving public access through initiatives such as village phones. The operation will also continue to leverage the benefits of MTN’s West African presence.