Khanyi Magubane The forceful thrust of South African cellphone network operator MTN into the global telecommunications arena has not only taken its competitors by surprise, but it has also proved that calculated risks do pay off. Following a slow start since its inception in 1994, MTN took off rapidly in 2002 with remarkable expansion into Africa and the Middle East. Bolstered by a new vision-driven Chief Executive Officer, Phutuma Nhleko, the network operator went into over-drive to not only reposition itself, but to set new trends.Under Nhleko’s direction, MTN has expanded aggressively into markets that are sometimes deemed volatile – but the risk has paid off. Now MTN operates in 21 countries in these two regions: Botswana, Cameroon, Cote d’Ivoire, Nigeria, Republic of Congo, Rwanda, South Africa, Swaziland, Uganda, Zambia, Afghanistan, Benin, Cyprus, Ghana, Guinea Bissau, Guinea Republic, Liberia, Sudan, Syria, Yemen and Iran. The MTN group has operations in 21 countries in Africa and the Middle East.Over the past six years the company’s share price has risen more than ten times in value since Nhleko was appointed. MTN is now worth an estimated R250-billion ($US32-billion), making it the sixth-biggest company listed on the Johannesburg Stock Exchange and putting it among the 10 largest mobile phone operators in the world.Setting up shop in developing countries has paid off in monetary terms for the company. For the year ending 31 December 2007, the group reported operating earnings of R31,8-billion ($4.08-billion) on revenue of R73, 1-billion ($9.34-billion), an operating margin of close to 45%.Fending off the bigger players Besides obtaining operating licenses in the different global regions, the group is also keen on making acquisitions in countries that it hopes to expand into. Nhleko’s acquisition plans include buying assets in Southeast Asia and Central America. Analysts are predicting that the company will also target Pakistan and India – both countries have low telephone penetration.The network’s main objective at the moment is to continue cementing its position as a global telecommunications player, in a bid to prevent the company from being swallowed up by bigger players. Speaking to Financial Mail, Nhleko said, “We do not have a ‘for sale’ sign up. But, being a publicly listed company, we can’t say if someone approached the company, the shareholders would necessarily be in agreement with management to sell or not to sell. Our job is to manage the company and grow the values until the shareholders tell us differently.” MTN’s success has attracted the attention of other international telecommunication companies in the industry. China Mobile, the world’s largest operator by subscriber number (it has an estimated 400 million users) is believed to be in serious talks with MTN. The talks allegedly started 18 months ago although both parties have been silent on the topic.The UK’s Vodafone, which currently holds 50% of Vodacom (MTN’s biggest competitor in South Africa), is believed to be cajoling the network into allowing it to buy a stake in its operations outside of South Africa. MTN has, however, denied this. As at 31 March 2006, MTN recorded more than 28 million subscribers across its operations, including those of the newly acquired Investcom LLC. In the last quarter of 2006, the network launched commercial operations in Iran, following the successful purchase of a 49% shareholding in Irancell. Growth has been so phenomenal that it is estimated that by the end of this year MTN will have more subscribers in Iran than South Africa.Since operations started in that country 18 months ago, the network operator now has nine million users. South Africa currently has 14,8-million users. With rapid expansion though comes the challenge to continually provide the infrastructure for an efficient service. To this end, MTN intends spending more than R30-billion this year alone on expanding its infrastructure and improving the quality of its coverage.The group has of late come under fire from regulatory bodies, especially in Nigeria, to improve the quality of its services or pay the fines. Nigeria is one of the network’s biggest markets. MTN Nigeria, one of four cell phone networks in the West African country, has been operating since 2001.During the period under review, MTN Nigeria aggressively focused on subscriber growth, supported by rapid network roll out amid keen competition in the market. As a result, the company significantly increased its subscriber base from 5,6 million to 8,4 million currently.In February 2008, in a bid to empower Nigerians, MTN South Africa reduced its stake in MTN Nigeria to 76,08%. Nigerian individuals and key institutions acquired a 9,45% interest in MTN Nigeria from MTN. The company said that it had sold 5,96% in MTN Nigeria as part of a US $594,5-million (R4.632-billion) private placement.The man taking MTN forwardPhutuma Nhleko first became involved with MTN by way of Worldwide Africa’s investment in Johnnic (now Avusa). Nhleko, along with top businessman Wiseman Nkuhlu, founded Worldwide in 1994 as one of the first black empowerment investment companies in South Africa. The company, of which Nhleko still remains a major shareholder, invests in various energy and technology companies across sub-Saharan Africa. Nhleko is described by industry insiders as driven and determined. Colleagues say he contemplates everything deeply and methodically but is not afraid to take risks once he’s weighed all his options and is certain of the move he is about to make. His deal-making skills were honed at Standard Bank, where he worked from 1990 until he started his own company in 1994 but his background is in engineering. He studied engineering at the University of Ohio in the US and also has an MBA from the University of Atlanta. Despite having achieved phenomenal success for MTN, Nhleko is reluctant to renew his contract when it expires in 2010, saying that by then the company will need someone younger and fresher with new ideas to take the company forward.Nhleko is not a one-man island at the company and works closely with a core group of seven:Rob Nisbet – Finance director. Nisbet is highly rated by analysts for the clear way he presents MTN’s financials.Sifiso Dabengwa – Chief Operating Officer. Since joining MTN in 1999, the Zimbabwe born Dabengwa has held a number of high profile posts within the company, including CEO of Nigerian operations.Karel Pieneer – Chief technology and information leader. He has been with the company since 1994 and is responsible for its technology choices.Santie Botha – Executive: Marketing. She joined the company in 2003, she oversees the groups’ multibillion rand marketing budget.Christian De Faria – Vice President: West and Central Africa. He joined the network operator in 2006, has a history of increasing turnover at XL, the largest mobile operator in Indonesia.Tim Lowry – MTN SA managing director and Vice President – South And East Africa. He comes with vast experience in the telecom industry. He has worked for a large number of European operators across the world.Jamal Ramadan – Vice President Middle East and Africa. He joined the company from Investcom and has experience heading up the IT departments of international telecommunication companies.Useful linksThe Empowerment Charter for the ICT SectorMTN South AfricaMTN globalDepartment of CommunicationsDo you have any queries or comments about this article? Email Khanyi Magubane at firstname.lastname@example.org
16 November 2012 As two of the strongest economies in Africa, co-operation between South Africa and Nigeria is pivotal to the growth of the continent – this is the message that came out of a dialogue co-hosted by the Financial Times (FT) and the Nigerian High Commission and supported by Brand South Africa. There was keen interest in the high-level event, and guests included the Nigerian High Commissioner Sunday Samuel Yusuf; director-general of South Africa’s tourism ministry Kingsley Makhubela; South Africa’s minister of arts and culture Paul Mashatile; Charlotte “Chichi” Maponya, chairperson of Brand South Africa; and Lindiwe Maseko, speaker of the Gauteng legislature. The purpose of the gathering was to discuss current and future trade and investment relations between the two countries, and to identify areas of opportunity for South African companies in Nigeria. Guests stood for a moment in respectful silence to honour victims of the heavy floods which have killed 363 Nigerians and displaced over two-million, before proceeding with the evening’s agenda. “South African companies first moved into Nigeria about 12 years ago,” said Nigerian Consul-General Okey Emuchay, “and they have thrived.” He named food manufacturer Tiger Brands, the Protea hospitality group, mobile provider MTN and retailer Shoprite as a few of those who have prospered. But there are many more opportunities available today, in four main markets – agriculture, oil and gas, infrastructure and power, and solid minerals or mining. The country is looking for creative ways to build its economy, said Emuchay, and South African companies should explore opportunities in the agriculture and manufacturing sectors, especially. “Tonight is the beginning of a mutually beneficial co-operation for South African companies and their Nigerian counterparts,” said Emuchay. “The Financial Times and Brand South Africa have given us this platform to start thinking afresh, and I envision this as becoming an annual event.”Growth hotspot “At a time when many developed countries are being downgraded,” said keynote speaker Olusegun Aganga, the Nigerian minister of trade and investment, “our country is being upgraded. We are seeing generally low growth and returns in the developed world, but the opposite tends to be true in developing nations. There has been a shift in the global economy.” Africa’s time has come, he said, and South Africa and Nigeria must work together to help the continent seize the moment. As one of the world’s fast-growing economies, Nigeria is an investor’s dream, with policies such as 100% repatriation of profits, 100% foreign ownership in all ventures except for oil and gas, and a liberal visa regime all designed to make it as easy as possible to do business. Aganga encouraged all African countries to look closer to home for trade and growth. “For more than 50 years Africa has exported its minerals and other precious resources to the developed world – those days should be over.” But there is more to be done – the continent must develop its industries. “Africa contributes just 3% to global trade, and 1% to manufacturing value-added services,” he said. “We are not industrialised, but we should be. Aid won’t get us very far in the global arena.” He described the financial crisis that has gripped many developed countries, including the Eurozone, as a “window of opportunity” for Africa.Areas of opportunity There are four important factors that investors consider – money, technical knowledge, a market, and raw materials. Capital and technology can be taken anywhere in the world, but raw materials and a market are immovable – and Nigeria has these two in abundance, said Aganga. “We have a vibrant population of 167-million people and estimates show that by 2070 we will be the third largest nation in the world, after China and India. The average age at the moment is 18.6 years, and there is a fast-growing middle class.” The country has sought-after minerals in commercially viable quantities, is the seventh largest crude oil producer in the world and is in the top 10 in terms of gas reserves. All these factors serve to make Nigeria a country that South African companies should buy into before the rest of the world knocks on the door, said Aganga. He named several specific areas of potential – they include agriculture and food processing, such as maize production and the processing of sugar cane to sugar. “Nigeria produces just 2% of all the sugar it consumes,” he said, “but South Africa is a renowned grower of sugar cane.” The textiles industry is another potentially lucrative area, with opportunities existing in the processing of leather to leather products, and cotton to fashionable designs. Such operations would boost job creation too. Mining and associated services such as the processing of iron ore into iron and steel, and bauxite into aluminium, hold good prospects, as does petrochemicals and its related industries of plastics, textiles and chemicals. “Nigeria has the potential to become the continent’s petrochemical hub,” Aganga said. South Africa is internationally known for its motor industry, which produces goods in vast quantities for domestic and international consumption, and Nigeria aspires to an equally healthy motor industry, said Aganga. Another area where South Africa leads is in its services sector, and Aganga lauded the country for its progress in this area, saying that Nigeria can learn from its southern counterpart. And as for the all-important question of whether such initiatives would succeed – “Just ask MTN,” said Aganga. “Ask Protea, ask Shoprite.” To make it even easier for South African businesses to set up shop in Nigeria, the visa process for businesspeople has been streamlined, and a company can be registered in 24 hours, said Aganga. “We extend the hand of friendship to South Africa – together let us transform our continent.” To finish off the evening, there was a panel discussion moderated by FT Southern Africa bureau chief Andrew England, and featuring Brand South Africa’s research manager Petrus de Kock, as well as Nigerian businessmen. “All 54 African countries together are a force to be reckoned with,” said Chichi Maponya, introducing the panel, “and we should be setting our own agenda.” Maponya felt that the two countries’ futures are “inextricably entwined”. The panel discussed the perceptions people from each country have about the other side, agreeing that South Africans should not be suspicious of Nigerians, and vice versa. Intra-African trade stands at 10% at the moment, they said – but getting it to even 20% within a reasonable amount of time will have a huge impact on continental growth. The panel also advised local businesses to stake their claim in the West African country before the rest of the world takes an interest, and expressed their commitment to doing business in a corruption-free-manner, to the applause of the audience. First published by MediaClubSouthAfrica.com – get free high-resolution photos and professional feature articles from Brand South Africa’s media service.