Middle East and North Africa region
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MTN’s Middle East and North Africa (MENA) region is
made up of MTN Irancell, MTN Syria, MTN Sudan,
MTN Yemen, MTN Afghanistan, MTN Cyprus and
MTN International Carrier Services. The region is the
fastest growing of MTN’s three operating regions, led
by the two-year-old operation in Iran. MENA users
represent 29% of Group subscribers and 23% of the
Group’s proportionate subscribers. The regional office
is in Dubai. |
Middle East and North Africa regional overview
Middle East and North Africa regional contribution to Group total
| |
Population (million) |
Subscribers (000) |
Revenue (Rm) |
EBITDA (Rm) |
Capex (Rm) |
| Total |
186,7 |
26 346 |
17 215 |
4 654 |
5 772 |
| % of Group total |
36% |
29% |
17% |
11% |
21% |
|
Country contributions to MENA region total
Performance
Most MTN operations in the MENA region performed well
in 2008, with subscriber numbers accelerating 88% to more
than 26,3 million at end-December 2008 driven mainly by Iran
(details of which appear in the separate Iran report on page 59).
This growth was underscored by improved infrastructure roll
out in various markets. Our operation in Sudan (details of which
appear in the separate Sudan report on page 65) disappointed,
mainly as a result of the disconnection of unregistered
subscribers, as required by the regulator.
Mobile penetration increased, but is still between 21% and
23% in Sudan, Yemen and Afghanistan, which highlights the
considerable opportunity that still exists for growth. Average
revenue per user (ARPU) across MENA declined, except in
Cyprus, where blended ARPU increased to USD44 a month
from USD39 in 2007 mainly due to the proportion of postpaid
subscribers with higher ARPU's increasing from 27% to 35%.
This market is at 90% penetration so ARPU stability is more
expected. The increase was primarily due to the business
acquiring more postpaid subscribers at higher ARPUs.
Competition is expected to increase as new licences are
planned for Iran and Syria.
We rolled out various initiatives to create synergies between all
operating companies, by streamlining procedures, particularly
in human resources. Group events, such as Yell'o Stars and the
Group Leadership Conference helped enhance the feeling of
belonging and team spirit.
We are pleased to report successful capex deployment across
MENA. We started sharing infrastructure with some of our
competitors in 2008, and aim to increase this during the year
ahead, with its favourable effect on our environmental footprint
and costs. MTN Syria (details of which appear in the separate
Syria report on page 62) replaced its core infrastructure during
the year with new generation technology.
Product and service delivery were a major focus area, with
MENA operations working towards revamping MTN's value
proposition to customers. This included preparations for
Mobile Money, dynamic tariffing, seamless roaming, customer
segmentation and enhanced sales and distribution.
MTN Afghanistan gained the number two position in the
market mainly as a result of aggressive roll out of the network
and following the re-branding of operations in May. These
significant achievements are notwithstanding the numerous
challenges faced, among them, significant competition,
security concerns, lack of basic infrastructure, a geographically
difficult environment and periodically severe weather
conditions. Border closures from time to time also delayed the
delivery of materials, while recruiting sufficient skilled local staff
remains a challenge.
MTN Yemen maintained its market leadership throughout the
year, with 38% market share. The launch of the "talk free after the
third minute" offer proved to be particularly successful in Yemen,
although the market responded well to most of our offerings.
The employees of MTN Yemen won the Group's joint first prize,
with MTN Côte d'Ivoire, of the "21 days of Y'ello Care Challenge",
with the greatest staff participation in volunteering time and
energies to support worthy projects in the community.
During the year MTN disposed of 49% of MTN Cyprus, selling a
stake to prominent Cypriot trading company, Amaracos, who
has a further option for 1%. At the same time, MTN Cyprus
acquired 100% of fixed-line operator and internet service
provider, OTEnet, as well as retail chain, Infotel. These
transactions provide the operation with significant local know-how, as well as distribution support, and enable MTN
Cyprus to offer comprehensive solutions for mobile, fixed and
broadband communications increasing its market share to a
more healthy 19%.
Outlook
In a challenging environment of ever-increasing competition,
often-uncertain politics and evolving regulations,
MTN’s operations in the MENA region will continue to strive to
grow subscribers by rolling out new infrastructure, particularly
in rural areas, and introducing new products and services. The
Group has authorised an increase in capital expenditure to
R6,7 billion in the region in 2009, although this reflects only our
proportionate share of MTN Irancell’s capex.
We will capitalise on the Group’s sponsorship of the
2010 FIFA World Cup South Africa™ to further build our brand,
while revamping our value proposition to customers and
sharing learning across operating units.
We will continue working to improve sales and distribution,
and structure the retail network so as to limit churn and reward
good distributors. Among a number of new products we
plan to launch in the MENA region in 2009 are Mobile Money,
MTN Zone dynamic tariffing and seamless roaming.
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MTN Irancell |
Launched October 2006, market share 37%, population
71,9 million, forecast market size in 2013 – 53 million,
shareholding 49%.
Overview
In its second full year of operations, MTN Irancell moved
significantly beyond a start-up project, taking more than half
of all net additions in the market. This brought total subscriber
numbers to 16,04 million, up from six million – the largest
annual increase in subscribers of any MTN operation, ever – and
bolstered MTN Irancell’s market share to 37%, from 23% a year
earlier.
Subscriber acquisition was driven by strong brand image,
successful seasonal promotional campaigns and new products
and services.
Average revenue per user declined by USD1 to USD9 . This is
due to the sharp increase in the number of subscribers, which
now includes many more lower-income customers, as well as
the depreciation of the rial against the dollar. Almost 98% of
our users are prepaid, while the rest are on postpaid plans, a
significant change from two years ago when the market was
almost completely postpaid.
Market environment
A steep fall in the price of oil – Iran’s key export – led to a
drop in the value of the rial against the dollar and also stoked
inflation, which at one stage reached more than 23% in the
year. Other reasons for the inflationary environment were Iran’s
expansionary monetary policy, fuel rationing and the lifting
of some government subsidies on general consumer goods.
Strong rises in price levels typically put pressure on disposable
incomes, which impacts spending patterns, although this has
not been evident as yet.
Infrastructure
MTN Irancell invested R2,7 billion (49%) in capital expenditure
(from R1,6 billion – 49% – the year before) to improve the
coverage, capacity and quality of the MTN Irancell network.
By the end of 2008, the operation had added 1 529 base
transceiver stations to the network, bringing the total rolled
out so far to 3 532. We increased our network’s coverage of the
population to 62% at December 2008, from 48% a year earlier.
Gross connection greatly improved to minimise the impact
of churn by rolling out more sites in cities where demand
was high as well as establishing a network footprint in new
cities. We have faced challenges in acquiring sites in some of
the larger cities, including Esfahan and Tehran in particular.
By the end of the year, MTN Irancell covered 699 cities in the
country, up 465 during the year. Another four base station
controllers and eight switches were commissioned during the
year, bringing the cumulative total since inception to 67 and
16 respectively.
Products and services
The Iranian market is very receptive to innovations in mobile
telephony, and to capitalise on this, MTN Irancell had a strong
focus on marketing during the year, particularly offers targeted
at the large youth segment.
Our main promotional activity was the “Buy One, Get One Free”
campaign, driven largely by market research, which helped
boost brand awareness and lifted connection rates to an
average of more than 31 000 a day for the year.
Competitive pricing of SIM packs, which lowered upfront
ownership costs, combined with attractive basic and
promotional tariff plans, contributed to subscriber growth. New
segmented tariff plans, tailored to subscriber usage patterns,
were also well received.
Vitrin, MTN Irancell’s content portal, was launched at the start of
summer as an innovative entertainment product. In an effort to
improve the customer experience, MTN Irancell launched three
new service centres during the year.
Distribution
MTN Irancell introduced a value-based channel strategy in the
year, providing distributors with a greater incentive to sell
MTN packages. MTN Irancell now has 11 established distributors
with 5 980 registered dealers and approximately 64 000 points of
sale nationally. We also set up distribution through three banks
with more than 4 000 ATMs selling ‘logical PINs’ as well as two
banks selling prepaid airtime over the Internet.
An efficient and cost-effective supply chain of warehouses
ensured that the right products, such as SIM and recharge cards,
were available on demand, even though sales during the year
exceeded forecasts. MTN Irancell more than doubled the capacity of the local production of recharge cards (and plans to increase
this further); started the local production of SIM cards; and signed
up two new local SIM kit-packaging suppliers, increasing the
number of local suppliers, as well as local content.
People
To meet the needs of our rapidly expanding customer base
and network, MTN Irancell doubled the number of people
employed during the year, although many were previously
contractors working in a temporary capacity. MTN’s priority is
to attract, recruit and retain people with the relevant skills and
experience. We are also working on a customer-centric culture
programme to ensure excellent customer service.
Regulatory environment
Many regulations in Iran are still being developed and there
is no overarching telecoms legislation or industry-specific
regulations on issues such as interconnection and infrastructure
sharing. During the year MTN Irancell continued to work on
negotiations with the Telecommunication Company of Iran
(TCI) for an interconnect agreement.
One of the main regulatory priorities for MTN Irancell is the
registration of users’ personal details, as required by law. We
have equipped nearly 3 000 dealers with the means needed to
register subscribers.
During the year, MTN Irancell was awarded a WiMax licence
as well as spectrum, and will commence WiMax services in 2009. We also received an ISP licence from the regulator and
plan to roll out ISP services during the course of 2009. Iran
recently named the preferred bidder for a third mobile operator
licence; however, it is not clear when the new entrant will start
operating.
Outlook
In the year ahead we will continue to work hard towards
achieving critical mass and to firmly establish MTN Irancell’s
position in the market against an entrenched competitor as
well as the expected entry of a third operator.
Despite what we expect to be still-high inflation, we see strong
potential for growth in Iran, particularly in the more rural areas,
where we intend to further extend our network. Our estimate
of the addressable market in five years is 53 million subscribers.
MTN Irancell is also looking to penetrate the corporate
segment and to add total of around six million new customers
to our network in 2009. We plan to achieve this through the
launch of a series of innovations to leverage our technological
leadership and stimulate usage. Improvements to customer
service, through segmentation, are a priority and we plan to
develop offerings that attract and retain users in the various
market segments.
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MTN Syria |
Launched June 2002, market share 46%, population
20,4 million, forecast market size in 2013 – 13 million,
shareholding 75%.
Overview
MTN Syria increased its subscriber base by a moderate
14% to 3,5 million in a year in which we replaced the core
infrastructure with new-generation technology. The increase
in user numbers was supported by a number of initiatives,
including a reduction of prepaid tariffs during the last quarter
of 2007; the extension of the validity periods for various
airtime packages; good management of churn and various
promotional offers to the lower end of the market.
The telecoms market in Syria is a managed one, where the
regulator plays a significant role in market activities.
The increasing trend by customers to move to prepaid from
postpaid contracts resulted in a drop in postpaid’s share of
total subscribers to just under 16% from more than 18% a year
earlier. Blended average revenue per user declined USD1 to
USD19 as more subscribers in the lower-income segments
joined the network.
Market environment
The Syrian economy experienced high inflation during the year,
which had a negative impact on the purchasing power of the
lower-income users who make up about half of the MTN Syria
subscriber base. Delays in deliveries of network equipment,
mainly a result of the process required to ensure compliance
with the US embargo on the country, affected roll out and
hence network performance in the early part of the year.
Infrastructure
Network roll out gained momentum in the second half of the
financial year and by year-end, MTN Syria’s legacy technology had
been replaced with a network based on the latest technology,
providing a solid basis for growth. We migrated from a network
based on time division multiplexing (TDM) to an Internet Protocol
backbone for the core network around four major cities. We
rolled out 596 base transceiver stations in the year, bringing the
total to 2 995. This included an acceleration of the rollout of our
3G network, with 145 3G base transceiver stations constructed
during the year. Total capital expenditure more than doubled to
over R1 billion in 2008.
Products and services
Voice remains the dominant application in Syria, with demand
for advanced data services still limited due to low Internet
penetration. Despite this, and with an eye to the future,
MTN Syria acquired an ISP licence during the year, introduced
enriched data offers and paved the way for full 3G services after
running a 3G trial project for the previous 18 months.
GPRS tariffs were sharply reduced during the year, while
promotions for SMS flat rates and various innovative services
targeting the youth were launched. We upgraded the billing
system to improve its efficiency and increase customer loyalty and also overhauled our customer contact centres to improve
customer service, enhance our ability to handle incoming call
traffic, increase productivity and reduce costs.
Distribution
Improved distribution remained a focus. We brought
10 new franchise customer service centres into operation
in geographically remote areas. MTN Syria also revised
commission schemes and introduced electronic prepaid
vouchers to the market, reaching a 38% penetration rate by the
end of December 2008.
People
Acknowledging the key competitive advantage that comes
from our people, MTN Syria continued to invest in employee
training during the year. More than four-fifths of all our
employees attended at least one training course aimed at
building competencies and capabilities. We also put in place a
clearly defined succession plan, identifying key leadership staff.
Regulatory environment
MTN Syria has a Build, Operate and Transfer (BOT) contract to
run its mobile business. We continue to engage with the Syrian
telecoms authorities to convert the BOT contract into a regular
mobile operator licence.
Due to promulgation of certain laws and regulations in 2008,
MTN Syria has been working to adjust its company by-laws and
board of directors in order to comply with all the new laws and
conditions.
As the Syrian financial markets have only recently started
liberalising, foreign exchange legislation to allow for the
purchase of foreign currency is therefore still limited, a situation
acknowledged by the Syrian authorities with whom we
continue to engage.
Outlook
Mobile penetration in Syria is around 38%, providing MTN Syria with
more opportunity to grow in a country of some 20 million people.
We recently raised our forecast for the potential mobile market size
to 13 million in five years’ time from a previous forecast of almost
12 million. Changes in the regulatory environment are expected
to further drive penetration in the years ahead. MTN Syria expects
to add some 400 000 new subscribers in 2009 and increase data’s
contribution to revenue due to the expected launch of commercial
3G services in Syria.
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MTN Sudan |
Launched September 2005, market share 28%, population
38,4 million, forecast market size in 2013 – 19 million,
shareholding 85%.
Overview
It was a difficult year for MTN Sudan in 2008, mainly as a result
of the regulator’s directive to disconnect more than 1,1 million
prepaid subscribers who had not registered their personal
details and exacerbated by internal operational challenges
in an environment of strong competition. Blended average
revenue per user declined to USD7 in December 2008 from
USD12 at the beginning of the year because of lower outgoing
minutes of use. Subscriber net additions during the year
dropped to 557 000 from 1 024 000 in 2007.
On a positive note, however, we noted significant improvements
in the final quarter, with an increased number of subscribers, net
additions and revenue. A new chief executive was appointed in
October and further senior management changes occurred in
the first quarter of 2009. Towards the end of the year, we regained
market share to 28%. However, our share of revenue still has to be
improved in line with subscriber share.
Market environment
Political instability continues to be a challenge in Sudan; poverty
is widespread and per capita income is low. However, with its
significant oil resources, the economic potential of Africa’s largest
country is considerable. Linked to this is the opportunity for growth
in the telecoms sector, where mobile penetration increased to just
23% in 2008 from 21% a year earlier. However, competition among
the three main mobile operators in a country of around 38 million
people is fierce due to the handset subsidisation and low tariffs of
the CDMA operator.
Infrastructure
The roll out of new infrastructure continued during the year,
particularly in southern Sudan. 424 base transceiver stations
were added to the network, bringing the total to 1 621.
MTN Sudan’s network now covers 45,3% of the population,
up from 42,8% at the end of 2007.
In November, MTN Sudan put a new intelligent network
platform into service, and also worked on implementing a swap
of vendor for the core network. This enables the operation to
offer the best technologies to its customers (like MTN Zone)
as well as allowing it to benefit from working on the same
platform as other MTN operations.
Products and services
To boost acquisitions and utilisation during the year, MTN Sudan
launched a series of marketing activities, including focusing on
cities outside the capital with low commercial coverage where
we launched the Y'ello Storm campaign of special offers. Towards
year-end we introduced "the 50% extra credit" campaign as well as
a promotion to encourage international calls by giving away four
free international minutes for every four international minutes
used. With the start up of the new intelligent network platform,
we prepared to launch dynamic tariffing with MTN Zone.
Distribution
MTN Sudan’s distributors have more than 8 500 points of sale
in the country. We have commenced work on revamping our
sales and distribution channels, with opportunities identified
beyond greater Khartoum, in southern Sudan and across rural areas. A key objective for 2009 is to increase our distribution
footprint significantly.
People
MTN Sudan implemented a new staff development and
succession plan during the year to attract and retain key talent,
and also revised remuneration to be in line with the market.
MTN Sudan has a crisis management plan in place to ensure
the safety and security of our personnel in the current unstable
political environment.
Regulatory environment
Regulation of the telecoms sector in Sudan is still evolving
and is possibly not always adhered to equally by all operators.
During the year we resolved an interconnect dispute with a
competitor and continued to work closely with the regulator
on what we believe to be anti-competitive pricing by other
operators of international calls to other Arab countries.
Outlook
We expect the size of the Sudanese telecoms market to grow
significantly in the next five years, to around 19 million from the
current 8,9 million. This will be driven by higher uptake in areas
outside the capital, Khartoum, where MTN Sudan continues to
roll-out infrastructure. We intend to grow our share of mobile
revenue by growing our subscriber base. We also plan to
launch 3G services shortly after our trial phase comes to an
end. In February 2009 we inaugurated a new mobile switching
centre in southern Sudan, underscoring our commitment to
extend network coverage all over this region.
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