Can MTN ride the storm?

Comment and Analysis (Telecommunications, page 12 and 14) November 25/2008.

By Charles Benoni Okine

The continent of Africa has now become the centre of concentration for mobile telephony companies across the globe because of the tremendous opportunities that Africa presents in the telecom sector.
The liberalisation of the sector, the extension of services by multinational conglomerates and the active competition currently in place in the sector have all contributed to what analysts describe as the telecom revolution. Since the processes of liberalisation and privatisation have been taken into consideration by African countries such as Ghana, the telecommunication infrastructures have improved drastically. Against this background, many African governments have developed their telecommunication infrastructure by privatising their former state-owned enterprises and opening the flood gates for the global giants to enter and partake. This brings to chap focus, the sale of the 70 per cent shares in the Ghana Telecommunications Company (GhanaTelecom) to Vodafon and the entry of Zain and Globacom into Ghana this year after MTN, the present market leader and Millicom Ghana, operators of tiGO have dominated the market.
With more than 82 million mobile users, Africa has undoubtedly been the fastest-growing mobile market in the world particularly over the past five years with millions more waiting to join the fray.
According to the African Business Pages, Nigeria's mobile market for instance is growing at more than 100 per cent annually. In Ghana the penetration is at an average of 30 per cent.

The journey to MTN

Even before the competition within the sector began, Scancom Ghana Limited, entered the market to set up the first GSM mobile telephony business with a brand name spacefon. There already in existence Mobitel which was run by Millicom Ghana Limited but the difference between the two was that the later was analogue.
Spacefon was the brand for the elite because compared to the other, it was expensive to get hooked onto it. Even cell phones to get it connected was not cheap and even easy to come by.
The company in realising moves being made by others such as GhanaTelecom to enter the market and Millicom switching to GSM, intensified their marketing campaign to ensure that it did not only maintain its lead but also win more customers.
After a long term service, the hints dropped that Spacefon was going to go Areeba because the owners of the company had offloaded their shares. In the end the rumours were true and then another aggressive marketing strategy was adopted to sell the new brand name, Areeba, to the customers.
In less than three years, the ownership of the company changed hands again and this time to MTN for a whooping sum of about $5.5 billion.

Brief about MTN Group Limited is a leading provider of communications services, offering cellular network access and business solutions.
The MTN Group is listed on the JSE Securities Exchange South Africa (JSE) under the Industrial – Non-cyclical services – Telecommunications sector. The MTN Group reported revenue of R17.2 billion for the six-month period ended 30 September 2005.
To date, the MTN Group has invested over R23,4 billion in telecommunications infrastructure across the African continent.
In Ghana, MTN has over the past 12 years been the market leader and states categorically on its website that “As the leading telecommunications company, MTN is focused on providing excellent telecommunications services across the African continent. We believe that through access to communication comes economic empowerment.”
MTN has a wide variety of network services as well as segments. These are specially designed for different kinds of people to enhance their mobile experience.
MTN is a household name throughout much of Africa with a presence in 21 countries in African and the Middle East.
As part of its quest to give back to its customers, MTN Ghana has launched a foundation (MTN Ghana Foundation) which is driving its Corporate Social Responsibility Programs.

MTN survival so far.

MTN now controls more than 50 per cent of the market and it has a subscriber base of a little below seven million.
The company has managed to use branding and a combination of the Ps in the marketing mix namely Product, Price, Place and Promotion.
About the product, MTN has used that aspect of packaging as well as services as its tramp card to entice the market.
With the pricing, MTN has ensured that its brand is priced competitively. It studies what its competitors are doing and its able to price the brand to make it continuously attractive and cheaper.
With place, the distribution of MTN is everywhere, just as its slogan goes “MTN, everywhere you go” because the company has ensured that in every corner, the brand is visible. Its market coverage is wide and the response has not been in doubt.
When it comes to promotion, it is clear that MTN has a huge budget for it. Whether it is about sales promotion, advertising, publicity or public relations, MTN has ensured that it does not take those to chance.

MTN and its customers:

In spite of its aggression in ensuring that it maintains or even add more to its subscriber list, there has been major challenges experienced by the customers of MTN.
Jojo Sinaman an Polytechnic student described the network services of MTN as a pain. “I call and I here my voice, yet the credit runs at my expense although the one I call does not here me speak”.
Justina Ampadu-Nyarko, a graduate from the African University College also expressed concern about the network quality and described the service as one that does not reflect what she described as the “loudness of a network which is a market leader”.
Yayra Amedzro, Office manager of West African market Links, had these strong words for a network she has been using for more than 10 years. “Their services stinks. I have decided to change to one of the new networks coming; I am not going to add to it as others have done. I will switch outright”.
Others have their various ways of describing the network quality and services they receive from MTN although they are religiously hooked to it.
With all intense and purposes, these anomalies in the service provided should entice them to leave the network but MTN continuos to grow. In certain years, growth is slow but generally, the bottom line is, there is growth of some sort.
Analysts have expressed fear about the services provided by MTN and why the regulator is silent about what is happening. They believe that MTN has the capacity do better but was riding on the back of the inability of the regulator to raise the rod or the refusal of subscribers to quit the network for other competitors.

What are MTN competitors doing?

Presently, MTN to MTN are also aggressively using the marketing mix to gain grounds and also ensure that they capture a greater market share. These they have done in the past but have lacked the resources to match the financial clout of MTN.
With advertising, the competitors are also spending huge sums of money to ensure that they embarked on massive outdoor advertising campaigns while using the both the electronic and print media as well.
They have come up with new and innovative products to make their brands more attractive.
For instance, tiGO allows its customers to make calls throughout most of the day with just a text to deduct up to Gh¢1 and the same goes for those who want to use the text messaging. The prices of their sim cards are almost free just like the others but they set the pace to have their sim cards reduced drastically. tiGO presently is in the second position with a little over 2 million subscribers.
OneTouch is also in the fray doing its own thing. It also allows its customers to make calls and pay for only the first three minutes. It has free night calls from 11 pm until the next morning. Its drive in the advertising circles is also no ‘kids stuff’. Presently with Vodafon on board having acquired 70 per cent stake in the company, the market is expected to become more exciting.
As the new Chief Executive Officer of the company, Mr David Venn said “MTN has been able to capture the market because they had the resources to do what the others could not do”; But now we are here and we have what it takes to do even more than what put them where they are”. He said he believes in the staff of the company and was going all out”.
Zain and Globacom are yet to hit the market but they have also sent strong signals to the market that they are not in to joke. They all have plans to make international calls cost the same as the local calls as MTN has began with some selected countries such as Nigeria, Benin and Togo.
Another phenomenon in the market is the use of competitive-based pricing where the players use their prices based on the prices that competitors charge for similar products. The sale of the sim cards are a typical example.
Theuse of the product/market expansion grid where a portofolio-planning tool for identifying company growth oportunities through either market penetration, market development, product development and diversification is very rampant among the competitors.
The competitors are using all the grid. For instance with market development stretegies, competitors have always used increasing sales of their current market segments without changing their products. Here, they have open new market areas as a way of improving visibility and making access to their products easy for customers. They have used market development strategies where they develop new market segments for current company products. They have entered the rural areas to get at the least financially endowed and ensured that more of the youth and the aged get access to their products.
In the past, it was only MTN that reached almost every part of the country using all manner of marketing strategies and that has paid. It is agaisnt this background that the competitors are also trying to catch up.

Conclusion:

In spite of the odds, MTN believes that its operations is purely driven by five key values of Leadership, Innovation, Integrity, Relationships and Can-do, and insisted that it is poised to provide a variety of innovative, customer-focused products and services offering superior customer value propositions for the various market segments.
It also believes it is equipped with the right human expertise and technological know-how and will continue to excel to enable the organisation become the leading telecoms provider in emerging countries, Ghana inclusive.
It is evident from the continuos injection of huge sums of capital to add more cell sites and also put some mechanisms to improve the network service. This year, the company has spent almost $400 million on its expansion drive and as the Head of Corporate Affairs of MTN, Ms Mawuena Dumor always tells the media, “We are still spending because we are growing very fast”.
Competition in every industry is good because of the benefits there of not only for the players but more so for the clients of the players as well. Competition affords players to give off their best to either maintain their market share or increase it. Through competition, players within an industry are able to ensure that they give either good quality products or services, price well and also make themselves as visible as possible.
More than a decade ago, the generic name for the mobile telephony sector was Mobitel, the brand name for the analogue mobile phone service for Millicom Ghana Limited but today its undoubtedly MTN.
It has been proven that Mobile telephony has a positive and significant impact on economic growth, and this impact may be twice as large in developing countries as in developed countries.
That mobile phone use is growing faster in Africa than anywhere else shouldn't come as much of a surprise, given a moment's thought. Only 6 per cent of African citizens owned a mobile phone in 2004, so as prices drop (and low-cost phones made for the developing world come into the market), there's a huge potential market available. In Asia, North America and Europe, conversely, mobile phone use approaches saturation, so any remaining growth will be far slower as against that of Africa.
It will for MTN in the coming years but with its determination to continue to lead the market, it is clear that, whichever brand to take over might not have it easy.