Chairman’s statement
The intensive capital
investment programme of
recent years is designed to
stand the Group in good
stead in the years to come as
competition intensifies.
 |
Cyril Ramaphosa
Chairman |
Innovating and delivering
In its 15th year of operation, the MTN Group passed the 100 million
subscriber mark with a robust and resilient operational performance in the
majority of the countries in which it operates. This was made possible by
a firm adherence to our strategy, including investing heavily to extend the
quality, coverage and capacity of the communications network across the
21 markets in which we operate.
The intensive capital investment programme of recent years is
designed to stand the Group in good stead in the years to come as
competition intensifies and the world fully recovers, in the longer
term, from the economic malaise of 2008 and 2009.
Across the globe, millions of jobs were lost in 2009 as the world
economy contracted by an estimated 1,7%. Credit markets
tightened, limiting lending which would otherwise have
supported investment and growth.
With its continued commitment to its markets, a strong brand and
established value proposition, MTN was able to weather the storm.
But, understandably, it is not immune to a challenging economic
cycle, or to moves in commodity prices which remain key to the
health of many of the countries in which the Group operates.
Hard times encourage innovative thinking and MTN showed this
with its novel products and services in the midst of mounting
pressure on consumers’ disposable incomes, aggressive
competition and increased regulatory requirements. The Group’s
adoption in the year of a segmented approach to the market,
offering customers sector-specific products and services, proved
successful and was well received by subscribers. Along with
MTN Zone dynamic tariffing and MTN MobileMoney, as
well as other customised offerings, these assisted the Group
in maintaining or growing market share in almost all of its
jurisdictions. They also helped MTN Group win the “most
innovative brand in the telecoms sector” award in the Ask Afrika
Trust Barometer in September 2009.
For an organisation that generates most of its revenue in
currencies other than its reporting currency, the strength of
the South African rand also proved a considerable hurdle.
As a result, MTN Group reported its first drop in headline earnings
per share since inception, to 803,2 cents from 836,5 cents in 2008.
But, thanks to continued strong cash generation and the expectation
that capital expenditure has now peaked, the Group increased its
dividend to shareholders. This effective relaxation of MTN’s dividend
cover resulted in a payout to shareholders for 2009 of 192 cents a
share, from 181 cents for 2008.
Operating sustainability
Sustaining the performance of the MTN network and the mobile
market it serves is essential. This requires a reasonable and
predictable regulatory regime, to allow cash-generating mobile
companies to continue to invest in bridging the digital divide and
so stimulating economic growth.
Maintaining transparent and constructive relationships with those
it interacts with is an important MTN Group value. During 2009,
the Group stepped up its co-operation with regulators across
the footprint, as various new regulatory requirements (such as
SIM-card registration and managing mobile termination rates)
began to gain momentum in many markets. The Group also
worked to enhance its engagement with customers, employees
and the communities in which it operates.
The expansion of mobile telephony across the Middle East and
Africa has already had a significantly positive impact on the lives
of our customers, but it has the potential to have an even bigger
effect as better, more reliable communication encourages trade
and development. Mobile telephony’s applications in assisting
socioeconomic development are many – from facilitating internetbased
education and health, to helping disseminate various
essential services and information.
For MTN, sustainability is about ensuring sound practices are part
of its core business. In 2009, through the efforts of an improved
Group sustainability function, the focus on the environmental,
social and ethical issues that could pose an economic risk or
opportunity to MTN was heightened. Through ongoing board and
executive support and Group-led strategic planning, the Company
is in a better position to adapt to global imperatives and enhance
stakeholder value.
In 2009, MTN Uganda won the best solution for rural services
award at the AfricaCom Awards in Cape Town. This was for its
MTN Google SMS offering, developed in partnership with Google
and the Grameen Foundation, a non-profit organisation fighting
poverty. Among the services MTN Google SMS offers is Farmer’s
Friend, a searchable database with both agricultural advice and
targeted weather forecasts, and Google Trader, which matches
buyers and sellers of agricultural produce.
Apart from positive, direct benefits such as this, MTN also assists
communities on the ground through its significant corporate
social investment programme. It has a clear CSI mandate, which
is carried out through the MTN foundations already established in
the majority of its markets. Once a year, through the 21 Days of Yello
Care initiative, employees throughout the Group volunteer and
roll up their sleeves to help their local communities. The projects
range from planting trees, cleaning streets, mosques and facilities
for disadvantaged children to building recreational centres and
soccer fields and establishing vegetable gardens. For the second year running in 2009, employees of MTN Yemen won the Group’s
first prize for this initiative. Well done to you all.
In 2009, MTN launched a campaign to reduce deaths in Africa
from malaria, which is the number one killer of children under
the age of five on the continent. For maximum impact, the
Group teamed up with the Malaria Community – a coalition of
leading technical and advocacy groups. The aim is to help ensure
100% coverage and use of mosquito bed nets in malaria areas,
achievement of which stands to save more than four million lives
by 2015. This initiative is being rolled out in countries affected by
the mosquito-borne disease, including Ghana, Uganda, Zambia,
South Africa, Côte d’Ivoire, Cameroon, Botswana, Swaziland,
Congo-Brazzaville, Nigeria, Benin, Liberia, Guinea Conakry,
Guinea-Bissau and Rwanda.
Addressing environmental impacts
Recent studies have shown that information communications
technologies (ICTs) can have a significant impact in reducing
energy consumption and greenhouse gas emissions. A 2008
Global e-Sustainability Initiative report estimated that ICTs could
lessen emissions by up to 22% by 2020 through practices such as
smart logistics, smart buildings, a smart power grid and reducing
travel through videoconferencing and tele-work.
MTN recognises the enabling role it can play in helping the world
economy move to a lower-carbon environment. Reaffirming its
commitment to reducing the impact of climate change, the Group has signed the Copenhagen Communiqué on climate
change ahead of the United Nations climate change summit,
adding to the growing chorus calling for environmentally friendly
practices.
In 2009 the Group analysed its own carbon intensity, looking
at opportunities to reduce the impact of its business on the
environment and mitigate climate-change related risks. The
results indicate that MTN needs to accelerate its efforts to reduce
the carbon intensity and increase the energy efficiency of base
stations, data centres, large premises etc. MTN is proud of its
early efforts in this regard. The Group has assessed the viability of
alternative energy solutions to power base stations, including solar
and hydrogen fuel cell trials in Sudan and Swaziland, biogas pilots
in South Africa and operating solar-powered sites in Cameroon,
Nigeria and Rwanda, among others.
At Kleinaarpen in the Kalahari Desert of South Africa (an area
without access to the national power grid), MTN deployed an
80 metre tower on a base station that incorporates multiple
energy technologies, including solar, wind, fuel cells and lithiumion
batteries. The site, home to the Group’s tallest mast, provides
MTN with an opportunity to test “green” technology and provides
mobile coverage in a 50km radius to people in an area previously
without coverage. As the solar and wind generation capacity is far
in excess of the average consumption, MTN intends in future to
supply the local community with the surplus.
With a presence in Africa and the Middle East, MTN is acutely
aware of how vulnerable these markets are to the adverse impact
of climate change and is committed to the concept of people,
planet, profit and a positive legacy for generations to come.
Appreciating employees
MTN recognises the vital contribution of its employees (some
based in particularly difficult environments) and continues
the Group’s many endeavours to provide a rewarding work
environment. In 2009, MTN achieved a top 10 ranking in the
World’s Best 40 Global Companies survey by AT Kearney, a leading
management consulting firm. Other companies in the top 10
included the likes of Nintendo, Google and Apple. The survey was
compiled for BusinessWeek, an influential international business
publication. Awards such as this encourage us to do better,
challenging MTN to sustain and improve on this position.
The safety of MTN people everywhere is paramount. Many
countries in which the Group operates face political and social
challenges. In 2009, the MTN Group crisis operations centre was
opened in Johannesburg to provide support to all employees,
24-hours a day, seven days a week. The centre is an integrated
command, control, communications and information-relay facility
aimed at boosting the Group’s risk management capability;
flagging potential crises; providing control and appropriate
response measures during events on the ground. Supporting
the national emergency response teams in every country, it
endeavours to prevent any incident from becoming a crisis.
In 2009, MTN stepped up its fight against fraud, implementing
various improved fraud prevention and detection mechanisms,
which included the implementation of a Group-wide fraud
incident register, conducting fraud risk assessments in most
operations and the implementation of improved whistleblowing
mechanisms.
Corporate governance
Sound and thorough corporate governance is essential to ensure
business sustainability. MTN endeavours to make certain that it
complies fully with corporate governance best practice and with
the requirements of the King code. In line with the guidelines
on the ideal composition of the board of directors, three new
independent, non-executive directors were appointed, effective
January 2010: Dawn Marole, Peter Mageza and Alan Harper have
a broad range of expertise and experience and their positive
presence is welcomed.
Their appointments follow that of Nazir Patel, the new Group
finance director, to the board with effect from 27 November
2009. Nazir replaced Rob Nisbet, who resigned following
14 distinguished years of service as Group finance director. We
thank Rob for his important contribution and wish him well. We
welcome Nazir, who brings with him a wealth of knowledge from
across the globe.
I would like to thank all members of the board for their active
participation and wise counsel in 2009 and look forward to more
active debate and considered advice in the year ahead.
I would also like to congratulate management for the Group’s
robust performance in difficult times. Group president and
CEO Phuthuma Nhleko recently announced that he would not
be renewing his long-term contract of employment when it
ends on 30 June 2010. However, he has agreed to continue in his
current role until March 2011, to allow for a seamless handover
to his successor, who has yet to be appointed. On behalf of the
board, I would like to applaud Phuthuma for his outstanding
vision and leadership for the past eight years. Under his tenure,
MTN has grown into a leading emerging market success story
and expanded to become the number one provider of mobile
telecommunications services across Africa and the Middle East.
In 2009, Phuthuma won The Sunday Times Top 100 Business
Leader of the Year award, voted by his peers who are the CEOs
of the top 100 listed companies in South Africa. At the time, he
acknowledged that much of his success came from the talented
team around him. I believe it is this deep and broad skills set
among MTN senior management that will continue to underpin
the Group’s success. The board is confident in the leadership of
MTN and of its consistent strategy to consolidate and diversify its earnings base; leverage its significant footprint as well as strong
intellectual capacity; and to capitalise on the trend towards the
convergence of various technologies.
In 2002, it was Phuthuma who arranged and implemented
the BEE equity ownership programme for more than
3 000 MTN staff in South Africa, in an effort to rectify some of
the economic legacies of the country’s history. During 2009,
the scheme matured and the Group completed the unwinding
of Newshelf, the special purpose vehicle set up to facilitate the
deal. MTN remains committed to establishing another BEE equity
ownership programme in respect of its South African operations
when market conditions are conducive. It also continues to
pursue other initiatives, such as enterprise development and
skills training in South Africa and across its footprint to stimulate
local participation in the business. In 2009 MTN Zambia issued a
2,2% stake to a minority shareholder, diluting MTN’s stake to 97,8%.
Looking forward to 2010
As I sign off this report, excitement about the first 2010 FIFA
World Cup™ in Africa is reaching fever pitch. This will be the first
time in the tournament’s history that it is being held on African
soil, and South Africa wants all Africans to regard it as their own.
MTN’s global mobile sponsorship of the event is fitting given that
it is the pre-eminent African telecoms group and because football is watched by a significant percentage of its more than 100 million
subscribers. MTN is proud to operate in five of the six African
countries competing in the competition. As the first African
sponsor of the world’s largest sporting event, MTN is living up to
the promise of being a united and uniting force. It also displays
the Group’s “Can Do” approach and “think big” attitude, further
bolstering the brand and demonstrating our leadership.
It’s Africa’s time. Ke Nako.
Cyril Ramaphosa
Chairman
March 2010
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