Africa is MTN’s puzzle

2012-03-11 10:00
Andile Ntingi and Thandeka Gqubule
MTN’s most desired markets – the Democratic Republic of Congo, Ethiopia, Angola and Libya – hold both the promise of future profit and the potential loss of shareholder value.

The telecommunications group will have to crack some of the most complex African markets if it is to expand its current 164.5 million subscribers in 21 African and Middle East nations.

Chief executive Sifiso Dabengwa said they were on the prowl for licences in Angola, Ethiopia and Africa’s newest and 54th state – South Sudan.

The group is bidding to acquire rival Vodacom’s 51% stake in Vodacom Congo after the latter had a fallout with its Congolese partner, Congolese Wireless Network.

It is also eyeing Libya where the Arab nation’s two mobile operators – previously controlled by Muammar Gaddafi’s two sons – could be up for grabs.

With a target of adding 20 million more subscribers over the next 12 months and a cash pile of R12 billion, MTN has the ability to acquire new licences. However, the markets the group is longing to infiltrate will require more political savvy than a mere cash injection.

MTN has R24.4 billion in authorised capital expenditure, according to financial director Nazir Patel, and there is plenty of leeway on the group’s balance sheet to fund its way through numerous growth paths.

Operating profits are up 22% and now sit at R39.2 billion. Headline earnings per share increased by 16% over the past year. MTN rose 3% on the back of the announcement of the results.

At the time of going to press, it was trading at R139.

Libya’s new governors, the National Transition Council (NTC), are believed to be open to foreign operators from their military allies, taking up equity stakes in the oil-rich nation’s only two mobile operators – Libyana and Al Madar.

Infrastructure has been destroyed and large capital outlays will be required in the reconstruction effort.

Entering Libya may prove vexing and stiff competition from European mobile operators, particularly the French companies.

Old MTN adversary Turkcell, Turkey’s largest mobile operator, which accuses the South African giant of bribing its way into Iran, is also courting Libya.

The Ethiopian market is alluring and virginal. The country in the Horn of Africa has recently demonstrated strong economic growth.

And with the second-lowest cellphone penetration on the continent, Ethiopia represents the greatest opportunity for subscriber growth. Only 7.7% of the population – about 82 million – has mobile subscription. MTN is also trying to enter South Sudan.

The president of that nation, Salva Kiir, has been lobbying the government of President Omar al-Bashir in the north to share control of the network that previously covered unified Sudan.

The south wanted to issue a mobile telecoms licence.

Dabengwa said that MTN this week sent an emissary to North and South Sudan to convince the governments that the licence the group held was for a unified nation.

He argues that since Sudan is divided into two, Khartoum, the north’s capital, must halve the amount paid for the country licence and share it with Juba, capital of the south.

And since Dabengwa hankers after the petrodollar-drenched Angolan market, many wonder how he will fox the Futungo – a complex web of influence and patronage made up of individuals and institutions close to President Eduardo dos Santos.

This network is reported to be presided over by Isabel dos Santos, the president’s daughter, who is already invested in the telecoms sector in Angola and Portugal.

The Angolan market is likely to be an ethical nightmare for Dabengwa because the Futungo operates informally and off-balance sheet transactions, and illicit dealings are reported to be rife.

Transparency International rates the nation at the bottom of its latest Corruption Perception Index.

“MTN has also indicated that it may pull out of Iran only if the South African government applied sanctions to the Islamic Republic, which is under pressure from Western powers like the US and the European Union to drop its nuclear energy programme.

“We will try to sell to somebody. It is a good business. We think there will be takers from countries such as Russia, India and China, which are not easily swayed by US pressure,” Dabengwa said.

“If we don’t get the value we are looking for, we may have to write down our investment.”

He couldn’t tell how much money his JSE-listed mobile group had sunk into Iran.