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Sifiso Dabengwa – president & CEO, MTN Group

MTN confident SA market-share losses stemmed.

HILTON TARRANT: Mobile operator, MTN Group’s 2013 full-year results today show subscribers up 10% to 207.8m, revenue up 12% to R136.5bn, data revenue up 41%, headline earnings per share up 27% with the dividend for the full year up 25%. Sifiso Dabengwa is group chief executive and president of MTN. Sifiso, you are exposed to a number of currencies, given the different OPCOs that MTN Group manages, that’s counted against you in the past, not operationally, rather just the financial results, 2013 though you got some decent help though from the currency.

SIFISO DABENGWA: Ja that’s correct, some years we did have some very strong headwinds and yes during 2013 due to the depreciation of the rand against the US dollar we did get some benefit.

HILTON TARRANT: If you strip out those forex gains on an underlying organic constant currency basis did EBITDA grow?

SIFISO DABENGWA: In terms of revenue the growth was about 3% and at the EBITDA line about 1.6%.

HILTON TARRANT: You are addressing costs in the business and you talk about transforming your operating model, there have been some gains in procurement and centralising that and stripping out some of the inefficiencies there, as far as headcount is concerned are you reducing staff?

SIFISO DABENGWA: Yes, you’re right, we are looking across our overall cost structures, we’re looking at power, we’re looking at the cost of doing back office transactions, managed services and as part of that process it does have an impact on head count as well.

HILTON TARRANT: Have you taken staff out of the South African business?

SIFISO DABENGWA: Yes we have but again I must emphasise the issue is that we’re looking at efficiencies and it’s in looking for these efficiencies that there are certain activities that we either stop doing or we find other ways of sharing the costs associated with those activities.

HILTON TARRANT: Let’s talk about the competitive situation in South Africa, you were slow to react to some aggressive competition in the market. At the end of 2012 you had 20.9m subscribers in this country, you lost a fair amount in those first six months of last year, you have regained most of those, ending the year on 20.7m prepaid subscribers here in South Africa. Have you addressed the underlying issues to make sure that you are able to react quickly in future?

SIFISO DABENGWA: Yes, I’m quite comfortable that the underlying issues have been addressed and I guess at the end of the day the key issue for us is to make sure that we’re getting our fair share of net subscribers in all our markets.

HILTON TARRANT: The mobile termination rate issue here in South Africa, you have filed legal action against ICASA, take us through your thinking there, obviously some reticence I would imagine before making a decision to actually launch a legal challenge, is this a problem with procedure?

SIFISO DABENGWA: Look, I guess the key issues that one would like to raise is firstly we are not opposed to a reduction in MTRs but we have gone through this kind of process about four years ago where a glide path was established and it was implemented over a four-year period. I guess the key issue this time is one, we are asking for there to be transparency in terms of how they got to the numbers that they got to because we believe that the asymmetry that they’re proposing is quite unprecedented in that it is now much higher than where it used to be for reasons that we do not understand.

HILTON TARRANT: Staying with South Africa, data revenue growth up 22% in the year, smartphones now at 7.3m here in the country. The one launch that you did do towards the end of last year, the release of the MTN Steppa smartphone, this is a smartphone for R499 that translates to roughly US$40, $45, maybe $50, this is a game changer, are you taking this product and this idea beyond just South Africa?

SIFISO DABENGWA: That’s correct, we are testing it in South Africa and we are looking at rolling it out in all our other operations.

HILTON TARRANT: And the focus is from your side I guess to continue driving down the cost of handsets to…

SIFISO DABENGWA: That’s correct, the focus is to continue to look for devices below the $50 range with limited functionality smartphones because we believe that it is necessary to have those lower-cost devices in order for us to be able to drive data revenue.

HILTON TARRANT: What about enterprise, the combination with MTN, business and your business-facing mobile unit that was done a good couple of months ago, 18 months ago, has that started yielding traction?

SIFISO DABENGWA: Yes, it is yielding traction, it’s a bit slower than we expected but we’re quite satisfied with the growth. We have got a number of good contracts in that part of our business, so it’s starting from a very low base but we’re quite satisfied with the progress.

HILTON TARRANT: In Nigeria you did have Capex challenges previously, challenges with the network, you seem to have caught up there, the network performing a lot better and outperforming the KPIs given to you by the regulator.

SIFISO DABENGWA: We’ve done reasonably well as far as the rollout of the network is concerned, the challenges that we had early last year have almost disappeared. Unfortunately in terms of the regulator’s KPI measurements for January we seem not to have met some of the KPIs but we are challenging the KPIs that he has used because he has now digressed from the KPIs that we had agreed upon sometime last year. So that’s the process that’s taking place now.

HILTON TARRANT: Sifiso, if you look across the different OPCOs are you comfortable with where things are? Often you are obviously exposed to external or headwinds that are perhaps out of your control, macro headwinds for example, operationally are you comfortable with where you are?

SIFISO DABENGWA: No, operationally we’re comfortable with where we are, as you’d have noticed from our results in terms of local currency growth it’s in the higher single digits and into double digits in nearly all our operations. So operationally I think we’re in a good position.

HILTON TARRANT: The partnership with Rocket Internet signed last year, this takes you into a space that perhaps you haven’t really played in before, e-commerce, tell us about that partnership and what you are using that partnership to do?

SIFISO DABENGWA: Well, as we’ve indicated in the past we believe that the internet is the future and we are positioning ourselves to be able to provide services through the internet. So partnering with Rocket is the beginning of a process which will get us more and more involved in internet services. Rocket is primarily an
e-commerce player that has operations in South America, Europe and in Asia, and we’ve partnered for Africa and Middle East. So we see e-commerce as an important part of our business into the future.

HILTON TARRANT: Mobile Money, the growth in Uganda particularly continuing at pace, is that a localised phenomenon in East Africa or are you starting to see traction in your other markets where you operate?

SIFISO DABENGWA: We are starting to see traction, especially in West Africa, it’s just that we launched much later than East Africa. East Africa has generally been quite successful as far as Mobile Money is concerned in all the different countries and for a number of different operators but we are starting to see good traction in West Africa as well.

HILTON TARRANT: Just to close off with Sifiso, your Capex, your guidance for the full year 2014 it seems as though your network investment overall has plateaued, is that correct?

SIFISO DABENGWA: I think that’s a fair comment, I don’t think that we would see ourselves getting back to the R30bn level. I think we would see slight declines on a year on year basis forward.

HILTON TARRANT: Sifiso Dabengwa is group chief executive and president of MTN. 

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