South African telecom MTN last week released their 2019
results, with the Ugandan figures rebounding strongly from 2018, the envy of
any CEO in this trying economic environment.
Revenues were up 22.9% to sh1.54trillion from sh1.248
trillion in 2018. EBITDA (earnings before interest, tax, depreciation and
amortization) jumped 59% to sh725b from sh455b the previous year. Last year
revenues managed a 4.4% growth form the previous year. This was amazing growth
by any measure.
But all this paled in comparison to the growth in data
revenues. That subscribers spent about 70% more on data services in 2019 than
in 2018. To put this number in perspective it means that in under two years,
data revenues will double again. One can
expect growth to continue strongly as barely 3.4 million or a quarter of MTN
subscribers consume data services.
Those kind of growth numbers are an indication that the
business in Uganda is still in its growth stages. This leap was facilitated by
the increase in smart phone users who now account for one in five of MTN 13 million subscribers. And this is despite the alleged protest against the social media tax. In South Africa smart
phone penetration stands at above 80%.
But even more interesting was that revenues from fintech – a
lot of which is mobile money, grew 25% to sh382b from sh304b in 2018. The
previous fintech revenues grew 10.3%. Digital services also nearly doubled to
sh437b last year from sh230b the previous year.
"Voice revenues are fast coming to a plateau growing a relatively slow 3.4% despite a 12.2% growth in subscribers and a high average usage per person....
The telecom operator, which is only just recovering from a
tumultuous two years, in which its top managers were deported and the
start-stop-start again negotiations to renew their licenses seemed to have
drained the giant of its usual vibrancy, obviously still enjoys the confidence
of its subscribers.
Last year MTN boss Wim Vanhellputte was deported before
being reinstated as the company’s CEO. This was after the deportation of three
other top managers – chief marketing officer Olivier Prentout, manager sales
and distribution, Annie Tabura nd, Elsa Mussolini, the head of mobile money.
No official communication has gone out from government or
MTN but the finance ministry it was reported, confirmed that the South African
based firm had agreed to the $100m (sh380b) license fee demanded by government
and that has delayed the renewal of their license which expired in October
2018.
"People familiar with the proceedings say it is hard to justify the $100m license fee, a suggestion by an overzealous official who has since left his office...
The previous figure, $58m, which MTN seemed to have settled
on with the Uganda Communications Commission (UCC) had far sighted provisions
to ensure the sustainability of the industry.
It will be interesting to see what happens when rival
Airtel’s license negotiations come up for mention when their current license
runs out.
The mobile telephony industry is still relatively new and
its explosive growth in the last two decades has not allowed regulators to
catch their breath.
On the one hand do you allow them unfettered growth, with
the hope that the ripple effect across the industry and economy will more than
compensate for the perceived money left on the table? MTN paid $5m for its
Second Network Operator license when it entered the market in 1998.
Expectations were low at the time.
Or do regulators try to grab as much as they can at the
beginning before the operators become ungovernable behemoths, hoping too that
they don’t stymie the industry’s growth and innovation in the process? This is
a real concern because falling behind on Information and Communication
Technologies (ICT) is not something we should do knowingly.
The government seems to have gone for the latter.
That being said it’s a sector, with its crucial role in the
fourth industrial revolution (4IR), is set to drive economies and the Uganda
economy in particular in coming years.
MTN, serving as the industry bellwether we can see where the
action is going to be.
Voice is going to totter along, the technologically
challenged supporting that revenue stream. Industry experts had predicted years
ago that one day it will be an add on to data services, being given away free.
That day is fast approaching.
But in a country where 80% of the population is under 35, data services are going to catch up and far outpace voice revenues as this youthful population seek their information, education and entertainment online more and more. Especially as smartphones become less expensive and more widely available...
One outcome of the Corona Virus outbreak is that remote
working will become more of a reality and very attractive to businessmen for
whom it could mean major cost savings. The data needs for such a shift in
working will be enormous.
Fintech too is going to continue growing at prodigious
rates. Uganda is still far behind Kenya where mobile money is more a tool for
carrying out transactions than money transfer. They have almost totally become
a cashless society, their mobile phones doing all the buying and selling.
As an indicator of where the industry is going MTN’s results
are a good indicator.
