MTN Syria

Profit analysis

“Since its launch, MTN Syria’s customer relationship management has been a key differentiator, providing a competitive edge”

Launched June 2002

Market share 45%

Mobile penetration 50%

Population 21,8 million

Forecast market size in 2015 12,69 million

MTN shareholding 75%

Operational and financial performance

Attractive segmented customer value propositions, loyalty initiatives and improved brand perception helped MTN Syria increase subscriber numbers by 15% to 4,9 million in 2010, while maintaining its market share at 45%.

Despite the economy continuing to feel the effects of the global recession, harming consumers’ purchasing power, MTN Syria recorded net additions of 649 000. This helped support the increase in mobile penetration in the country of 21,8 million people to 50% of the population from 46% in 2009.

The highlight of the year was the signing in November of a memorandum of understanding with the Ministry of Telecommunications for the conversion of the build-operate-transfer (BOT) arrangement to a freehold mobile operators’ licence. This change, which is expected to be implemented in the first half of 2011, will give MTN Syria the confidence to invest more aggressively in its operations and product offering.

MTN Syria’s revenue in local currency expanded 10,4% in the year, mainly as a result of a 10% increase in airtime revenue and 9% growth in interconnection revenue. Increased data product offerings helped lift data revenue (including SMS revenue) 41% for the year, contributing 11% of total revenue.

With more subscribers in lower-usage segments, MTN Syria’s reported average revenue per user (ARPU) decreased USD2 to USD16 a month. In Syrian pounds, ARPU declined 8%. MTN Syria’s EBITDA margin increased 3,9 percentage points to 23,5% at the end of the period. This was largely because of a decrease in rent and utility costs resulting from a decline in maintenance and site insurance expenses. Transmission and maintenance costs also decreased following the adoption of lower pricing from the regulator. Commissions paid in the market declined, leading to a material reduction in distribution costs.

Because of the strong rand, MTN Syria reported a 2,5% drop in revenue in rand terms to R6,8 billion and a 14% increase in EBITDA to R1,6 billion at the end of December 2010.

Effective and efficient network and IT investments and upgrades

The delayed resolution of the conversion of the BOT arrangement to a standard mobile operator’s licence affected the roll out of network infrastructure in the year. Nevertheless, MTN Syria added 415 base transceiver stations (BTS), bringing the cumulative total at the end of the period to 3 912. Capital expenditure dropped to 6% of revenue (or R410 million) from 10% (or R748 million) the prior year.

Despite the reduced spending, the performance of the network improved because the operation completed its frequency plans and re-engineered radio transmission to ensure increased network quality and capacity. Now that the BOT issue is resolved, MTN Syria intends to increase the momentum of its roll out in the year ahead.

Ensuring the right products and value-added services

While providing basic voice services of appropriate quality remained MTN Syria’s primary objective, more effort was devoted in 2010 to support the introduction of innovative new content and solutions ahead of anticipated changes in the regulatory environment.

Among the numerous product launches and promotions in the year were various SMS and data bundles; the MTN Gold campaign (during which traffic received a boost from gold prize giveaways); and the 2010 FIFA World Cup™ ticket competition for subscribers. MTN also reduced the price by a quarter of prepaid SIM connections and extended the validity and reduced the price of most denominations of pay-as-yougo vouchers.

In line with government requirements, MTN Syria offered limited 3G services to customers, with internet access the main application. The company continued to work to position MTN Syria as a major internet service provider, with particular focus on solutions for the corporate market.

The company reported significant improvements in the key performance indicators of the MTN Syria customer contact centre in the year.

Efficient distribution and a good customer experience

Since its launch, MTN Syria’s customer relationship management has been a key differentiator, providing an edge over the competitor’s client services. This is thanks to the “one language” spoken with MTN subscribers, the customer-oriented approach and the focus on service. The real challenge – in terms of complexity of treatment – has always been the 561 906 postpaid subscribers who represent a third of the company’s revenue. To ensure the retention of these important customers, MTN Syria continues to work to improve their management, including the proper handling of complaints, requests and bad debts. All these require reliable systems and appropriate processes and procedures.

To service customers across all regions of the country, MTN Syria owns 33 customer centres and has another 18 which are franchised. Together, these centres log over 700 000 visits by customers a month.

Sustaining our success

The expansion of MTN Syria’s services means there is great demand for skilled employees, but the rapid growth in the telecoms industry in the region is exacerbating the shortfall in certain skill sets. MTN Syria continued to work to recruit competent Syrians living abroad and is pleased to report some success in the year in this regard.

The company benefited from the training provided by the regional MTN Academy, encouraging employees to share knowledge gained during courses at the academy in Dubai. In the year, MTN Syria carried out various activities focused on engaging with employees and motivating them, and retaining their skills. Among the most popular was an internal competition to attend games in South Africa during the 2010 FIFA World Cup™, sponsored by the Group.

MTN Syria understands the responsibility that comes with being a large company in Syria. It made good progress in its five-year project with the UN Development Programme on establishing the MTN Cancer Research Centre and also continued to contribute to various sports events, including the Discover Syria Rally, and a number of health and education programmes. Among these is the MTN Smart School Programme, where a computer laboratory with internet access is prepared, equipped and launched by MTN in collaboration with provincial education authorities. The first lab was launched in Homs on 1 December.

In recognition of its contribution to the community, MTN Syria won the private sector social responsibility award presented by the Junior Chamber International in recognition of its serious engagement and social involvement.

As part of its commitment to introduce the latest high-tech products and environment-friendly technology for its mobile network, MTN Syria signed an agreement with Ericsson in the year for the provision of Ericsson’s latest multi-standard base stations. MTN Syria will now deploy the RBS 6102 base station family, which consumes less power, within its radio network.

Engaging with the regulator

The regulatory environment in Syria continued to evolve, requiring proactive and wide-ranging engagement by the company with the authorities. In June, the president signed a new telecoms law and approved the formation of an organisation to oversee the industry. This is a first step towards the establishment of an independent regulator for the telecommunications industry.

After extensive negotiations with the government regarding the conversion of the BOT contract to a licence, the memorandum of understanding was signed, covering the scope of the new licence, which will likely have a 20-year lifespan, with an upfront fee payable in Syrian pounds and includes a 25% revenue share with the government plus a maximum fee of 1,5% of revenue for universal service funding.

Ahead of the change in the regulatory landscape from a heavily regulated one to one which is more open and competitive, MTN Syria did substantial preparatory work in the year on various issues, such as interconnect. A third mobile operator is expected to start operating in Syria in 2011.

Looking forward

MTN considers that the potential for strong growth in data is good, and continues to prepare for this new era.

Once it has secured a 20-year operating licence, MTN Syria will invest more in modernising the current infrastructure in terms of towers and the speed and quality of transmission. It will continue to transform the network from a legacy-based one to one based on internet protocol.

MTN Syria’s EBITDA margin is expected to increase in the medium to long term following the conversion of the BOT arrangement which currently has a 50% revenue share.

MTN Group has authorised capital expenditure of more than R1 billion for the Syrian operation in 2011 – more than double that committed in 2010. Much of this will be spent on IT systems and value-added services and the core network. This will allow for greater penetration in rural areas and the addition of an expected 600 000 new subscribers in the year.

With mobile penetration of just 50%, MTN forecasts that the Syrian mobile market will continue to grow. By 2015, it expects a market of 12,7 million subscribers from 10,9 million in 2010.