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Group chief operating officer’s report
South and East Africa region
South Africa
West and Central Africa region
Nigeria
Ghana
Middle East and North Africa region
Iran
Syria

MTN Ghana

ARPU ($)
Subscribers(’000)
Net additions

ARPU ($) Subscribers(’000)

Net additions

Launched November 1996, market share 55%, population 24 million, forecast market size in 2014 – 22,5 million, shareholding 98%.

MTN Ghana revenue and expenses summary

      12 months to   12 months to      
      December 2009   December 2008   %  
      Rm   Rm   change  
  Airtime and subscription revenue   4 077   4 308   (5)  
  Interconnect revenue   1 145   1 172   (2)  
  Data and SMS   351   473   (26)  
  Connection revenue   38   61   (38)  
  Other   57   33   72  
  Total revenue   5 667   6 047   (6)  
  Direct network operating costs   519   468   11  
  Costs of handsets, SIMs and vouchers   194   143   36  
  Interconnect and roaming costs   646   845   (24)  
  Employee benefits and consulting costs   256   271   (6)  
  Selling, distribution and marketing costs   592   563   5  
  Other expenses (general and administration)   894   971   (8)  
  Total operating expenses   3 101   3 261   (5)  
  EBITDA   2 566   2 786   (8)  
  EBITDA margin   45,3%   46,1%   (0,8) pts  

Overview

Ghana is the most competitive market in which MTN operates, with five operators currently offering mobile telephony services, and a sixth due to start up soon. The fact that MTN Ghana was able to maintain market share at 55% in 2009 is testament to the Company’s superior product offering, outstanding employee performance and the strong MTN brand. This is backed by continued heavy capital investment to ensure the best network quality and capacity, as well as enhanced value propositions such as MTN Zone and MTN Mobile Money.

MTN Ghana grew its subscriber base by almost a quarter to eight million (four times the base when MTN took over the operation in 2006), helping to push mobile penetration in the important cocoa and gold exporter up to 61% of the population. It is pleasing to report that even with this strong growth in subscriber numbers, there was a significant improvement in measured customer satisfaction in the year.

Although local currency revenue increased by 25,1% for the period, ahead of subscriber growth, this translated into a 6,3% decline in revenue in rand terms to R5,7 billion due to a combination of rand strength in the second half of the year and weakness in the Ghanaian cedi, particularly in the first half of the year. Aggressive price offers from new competitors and deeper market penetration put pressure on average revenue per user (ARPU) in local currency terms. In dollar terms, the fall was exacerbated by the decline in the value of the cedi, resulting in a drop to USD8 a month from USD12 in 2008.

EBITDA margin narrowed only marginally to 45,3% from 46,1% despite numerous challenges. The weakness of the cedi had a major impact on operating expenses as many of the costs are denominated in euros or dollars. Direct network operating costs increased by 11%, mainly as a result of increased rentals from the 28% increase in BTS sites in operation in the year.

Market environment

Following closely contested elections, Ghana experienced a smooth transition of power to a new president in January 2009. The Ghanaian economy had a difficult start to the year, as the worldwide downturn translated into a decline in trade, foreign donor aid and remittances from the substantial number of overseas Ghanaian workers. This put further strain on the cedi currency, which lost nearly a third of its value to the dollar, pushing up inflation and keeping interest rates high. Customers had less disposable income and companies felt the effect of higher costs.

Later in the year, the cedi stabilised somewhat and inflation started to slow from peaks of around 20%. Against this tough economic backdrop, mobile telecoms operators also had to contend with fierce and growing competition as well as increased demands from the industry regulator.

Capex BTS roll out

Capex

BTS roll out

Infrastructure

In 2009, Ghana remained an important contributor to MTN Group capital expenditure, with some R2,6 billion invested in enhancing the overall quality, capacity and coverage of the network. The number of base transceiver stations increased by 30% with the roll out of 729 stations, bringing to more than 3 000 the total in operation. Positioning the business for increasing take-up of data services, MTN Ghana also brought on air 531 3G stations in the year. These investments meant that the Company added 10 new towns to its coverage and facilitated a sharp increase in data throughput on the network.

Some 660km of new fibre transmission routes were completed in the year: 605km of national routes and the rest in the metropolitan network. These national route cables provide capacity for transmission within Ghana, and also fit into the regional cross-border network connectivity requirement into Côte d’Ivoire and beyond, providing alternative routes to the international gateway for both countries.

To reduce its impact on the environment, as well as manage capital and operational costs, MTN Ghana continues to work toward greater sharing of fibre infrastructure with other mobile operators. It is pleased to report some important successes in this regard in 2009, with more sharing agreements expected to be sealed in 2010.

Products and services

MTN Ghana kept up its reputation for innovative product offerings, launching a number of new services in the year and optimising and building on the success of the 2008 introduction of dynamic tariffing through MTN Zone. This product continues to help differentiate MTN from its increasingly aggressive competitors and encourages on-network calls.

Among various robust product and service launches in 2009 were Voice SMS; Conference Call; Reserve your Number (allowing customers to choose their numbers) and the “Text Go to 2010” promotion and the “Rally Round the Flag” loyalty programme. The full commercial launch of MTN Mobile Money took place in the year, as well as a number of enhanced data offerings, including 3G mobile broadband and internet SIM launched on a prepaid platform. Ghanaians continued to take advantage of MTN Loaded’s many offerings, with music the most popular, resulting in over one million unique subscribers accessing this service.

MTN Ghana recorded an overall increase in data usage in the year, supported by the country-wide roll out of EDGE technology that began in June 2008 that allows customers to make data connections up to three times faster than via GPRS. In May 2009, MTN Ghana launched 3.5G UMTS services, leading to a sudden jump in subscribers using these services.

Distribution

In an effort to get closer to its customers, MTN Ghana increased its distribution footprint in the year. The number of MTN retail points of sale more than doubled to 210 000 from 98 000, with an extra focus on solid distribution in high-end outlets such as pharmacies, handset shops and exclusive dealer shops. The corporate customer base grew by a fifth thanks to key account management selling initiatives, supported by customer experience programmes implemented in conjunction with marketing.

In the second half of the year, the distribution structure was further geared up to support MTN Mobile Money services by acquiring more merchants and registration agents. Service activations were driven through the work of new event sales teams, as well as the nationwide deployment of about 2 000 “foot soldiers” and canvassers. These initiatives helped to secure MTN Ghana’s market leadership. So too did the use of performance-indicatorbased dealer commissions; investment to increase the visibility of MTN points of sales, as well as MTN Mobile Money’s enhanced distribution plan.

MTN Ghana also implemented a new tool for better measuring sales performance at the local level. This also helps the Company design relevant distribution interventions to improve performance and will be leveraged further as a key differentiator in 2010.

People

Ensuring MTN Ghana maintains an engaged employee base that translates into exemplary performance was a key priority in 2009, resulting in a sharp improvement in communication with staff in the year. This was effected through initiatives such as the introduction of a monthly in-house newsletter; the launch of a 24-hour help desk for employee queries; the “It All Adds Up” campaign to drive communication on total rewards; more interactive staff sessions, and, finally, the launch of The Innovation Hub project to provide competitive advantage by harnessing employee ideas for sustained business results.

Flowing from these initiatives, MTN Ghana is pleased to report an improvement in both the level of participation and the results of the recent Group culture audit. Some 96% of all employees participated in this important gauge of staff satisfaction, up 20 percentage points in the year, and the results were equally encouraging.

Recognising the importance of uplifting the community in which we operate, the MTN Ghana Foundation continued to invest primarily in education and health in 2009. Among key initiatives were projects to improve literacy and numeracy in the Northern Region of Ghana, support for the construction of new classrooms in the Western and Eastern Regions, as well as support in Accra for the Princess Marie Louise Children’s Hospital – the only specialist children’s hospital in the country.

Regulatory environment

During the year there was heightened interest in the telecoms industry from the Ghanaian authorities and the public, with increasing demands and expectations from the authorities on the country’s mobile operators. This followed the implementation of a new communications service tax of 6% of revenue in 2008 and the increase in the same year of regulatory fees to 1% of revenue.

Mobile operators also pay a rural development levy of 1% of revenue.

MTN Ghana continued to engage proactively with the regulatory authorities on various issues, including such things as the proposed implementation of GVG (global voice group), which will put additional charges on international traffic and is thus expected to lead to lower international mobile traffic volumes from Ghana. MTN Ghana is also gearing up to register subscribers’ personal details, as required by the regulator, in line with similar initiatives in other MTN markets.

Outlook

Among MTN Ghana’s key priorities in 2010 are to sustain the recent significant improvements in network performance, as well as increase the penetration and usage of MTN Mobile Money. Focus will also be given to concluding more infrastructuresharing agreements with other operators, thereby reducing the Company’s environmental footprint. In an effort to improve MTN Ghana’s broadband capacity, the Company will continue to work to secure approval for a landing station in the country for the WACS submarine cable.

On the regulatory front, the registration of customer data is due to commence in July 2010 when all new activations must be registered. The regulatory authorities require that the details of all existing subscribers be collected by the middle of 2011. Increased competition, with the entrance of the sixth mobile operator in Ghana, is likely to put pressure on service providers. However, the health of the economy is expected to improve as inflation and interest rates ease, and commercial oil production begins later in the year. Considering all these factors, MTN Ghana is targeting the addition of some 800 000 new customers to its network in 2010.