Group chief operating officer’s report
In more than half of the
21 countries in which
MTN operates, mobile
penetration remained below
50% of the population in 2009,
indicative of the continued
opportunity for growth in the
years ahead.
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Sifiso Dabengwa
Group chief operating officer |
Sustaining the success of operations
The success of MTN Group’s operations in 2009 was characterised by a reliable
network, a compelling brand with attractive value propositions and extensive
and efficient distribution. All these factors were underpinned by teams of
inspired and motivated people.
Management believes 2009 was the Group’s peak capital
expenditure year and is pleased to report major successes – from
an execution perspective – in its ability to extend the network. As
an example, the roll out of an average 100 – 150 base transceiver
stations a month was easily attained in the bigger markets.
This strong momentum rapidly improved the capacity of the
various networks and ensured that MTN’s offering was superior
to that of its competitors in most countries. In turn, it enabled
more than 25 million new subscribers to join MTN, expanding the
Group’s overall representation in the market. This encouraging
picture was during a period of increased competition, including
price-based promotions, and as customer affordability in a more
depressed economic environment became increasingly important.
In more than half of the 21 countries in which MTN operates,
mobile penetration remained below 50% of the population in
2009, indicative of the continued opportunity for growth in the
years ahead.
With mounting competition and heightened demands from
regulators, sustaining the success of MTN Group’s operations now
lies, to a large extent, in achieving greater cost efficiencies and
economies of scale. In this pursuit, MTN continues to hone various
programmes to achieve excellence in the way operations are
run and Group-wide functions are managed. The adoption and
development of international best practice in all that MTN does
as well as advancing the Group’s work to optimise skills are also
central to MTN. It is gratifying to note good progress in this regard
in 2009.
The Group continued to post gains in its drive to standardise
and centralise many functions, making processes streamlined,
consistent and well understood across the organisation, and at the
same time contributing to cost cutting. These efforts also directly
and positively influenced the experience of customers dealing
with MTN.
So far, the focus of the operational efficiency drive has been on big
impact areas like the procurement and standardisation of network and
information technology equipment, consulting services and software
development. MTN is pleased to report that thanks to the centralised
Group procurement function, the cost of electronic equipment for the
network has dropped by close to 50% in the past three years.
This initiative, as well as the standardisation of IT infrastructure,
continues. So, too, does the implementation of best practice
guidelines throughout the Group. In 2009, such guidelines
were applied in relation to functions such as site build, network
management, the deployment of radio access networks and
electromagnetic field safety toolkits. Pilots of activity-based costing
were launched in Nigeria, Iran and Syria in an effort to ensure
understanding and management of costs.
Infrastructure sharing remained a priority. In every MTN market there
is an element of this, with the extent depending on – for example
– the age of the network in a particular country. Not only does the
Group reduce its capital and operational costs by owning or using
infrastructure and transmission in partnership with competitors (or
specialised infrastructure firms), it also reduces its impact on the
environment.
Related to infrastructure sharing is the contracting out of the
management of certain physical assets. In some countries – Iran
is one example – MTN already outsources the ownership and
management of infrastructure. The Group considers this desirable,
as it allows for a better depth of skills, as well as economies of scale,
and fits in with MTN’s endeavours to reduce costs and optimise its
assets.
Among the so-called green aspects of sharing network facilities
are the Group’s renewable energy efforts. As mentioned by the
chairman in his statement (on page 6), MTN is running a number
of pilot stations to test the feasibility of alternative power supplies
to provide energy for base stations and other facilities.
The new generation network, installed virtually throughout
MTN operations, is also already considerably more energy efficient
than its predecessor.
The distribution framework continued to evolve in the year,
widening the footprint in which MTN products are available and
increasingly involving third parties, to whom the Group endeavours
to structure the best trade partner proposition. With a strong focus
on specific, localised geographic areas, MTN products are easily
accessible to existing customers, as well as to potential subscribers.
Given that ultimately the customer experience determines the Group’s
success, MTN recently undertook an exercise to find out just what
makes its customers tick, in a survey that included interviewing 25 000
people across its footprint. This showed that even with the diverse
social, religious, racial and cultural groups in the 21 markets, the needs
of six broad segments are largely similar. The findings mean that through its customer segmentation model, MTN is now able to market
its products and services in a more effective and consistent manner
across its operations, greatly assisting business planning and in line
with its standardisation initiatives.
Aiming to deliver on the brand promise, MTN launched a number
of products to enhance the value proposition to customers
in 2009. MTN Zone, the dynamic tariffing tool first introduced in
some countries in 2008, was rolled out to many other markets
in the year. This helps the Group manage network capacity use
by offering discounted rates when network utilisation is low and
so support use during these off-peak times. By offering affordable
pricing to customers, it encourages more subscribers to sign up for
MTN services, keeps them loyal and limits churn.
The Group is also pleased with the initial response in select
markets to the launch of MTN MobileMoney – a simple, secure
and convenient way to send money, buy airtime and pay bills. The
extension of seamless roaming, known as MTN One World, to more
markets is also encouraging. This innovation allows customers to
make and receive calls across the MTN footprint at local rates and
without having to buy a new SIM card.
MTN launched a number of promotions linked to the Group’s
sponsorship of the 2010 FIFA World Cup South Africa™ in 2009. These
were particularly popular in jurisdictions such as Cameroon, Nigeria,
Ghana, Côte d’Ivoire and South Africa where the national football team
will participate in the event. And although the real revenue benefits will
not be realised immediately, MTN believes its exclusive global mobile
sponsorship is a real differentiator, bolstering the brand.
Since the acquisition of a number of internet service providers in
the past two to three years, MTN has been putting in place the
infrastructure – such as WiMax – needed to optimise the functioning
of these ISPs. The Group has also continued to invest in fibre roll out
in a number of countries, as well as in various new undersea cables,
which will provide it with the capacity to offer faster broadband
speeds at a lower cost. Among the most important submarine cable
investments are those in EASSy (Eastern Africa Submarine Cable
System), WACS (West Africa Cable System) and EIG (Europe India
Gateway), which are expected to come online from around mid-2010
to 2011. MTN Group also acquired capacity in SAT3/WASC/SAFE and
TEAMs (The East Africa Marine System), which are already operational.
The investment in the cables will ensure the Group operations are able
to provide high quality data and voice into the future. Finally, the roll
out of 3G networks, mainly in urban areas and in larger, more mature
operations, is providing not only data capability but also much needed
voice capacity.
All MTN’s endeavours are supported and driven by the expertise,
energy and enthusiasm of its people – its key competitive advantage.
In its second year of operation, the MTN Academy stepped up the
training of MTN employees everywhere, bolstering the Group’s skills
sets and focusing on developing people locally. This is particularly
important given the increased competition for talent across the
MTN footprint, and the heightened challenge of finding the right
calibre of employees in certain countries. There were numerous
management changes in 2009, most of which were the appointment
of MTN staff to other operations within the Group. Employee
empowerment with regards to standard processes and procedures
also fits in with efforts to drive economies of scale Group-wide.
In the pages that follow, the vice presidents of MTN’s three
operating regions give overviews for each of their regions, as
well as detailed reports on the performance of the five largest
operations in MTN’s universe.
Sifiso Dabengwa
Group chief operating officer
March 2010
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