MTN reassures potential investors
Mobile firm MTN, with operations in Africa and the Middle East, is seeking to dispel fears that telecommunications companies in emerging markets are no longer attractive investments.
CE Phuthuma Nhleko this week said the mobile industry in developing countries should fare better than many other sectors during the economic downturn because people regarded communication as essential.
He said there had been an “overreaction” by investors against telecoms companies in emerging markets.
MTN has seen its shares fall 20% this year, partly because of investor fears that rising inflation in developing countries will prompt people to cut their mobile spending. Other companies have fared much worse.
For example, shares in Millicom, the mobile operator in Central and South America, Africa and Asia, have fallen 66% this year.
Millicom reported slowing revenue growth in the three months to September 30 because higher food prices meant some of its customers in Central America and Asia were spending less on telecoms.
Nhleko said mobile spending by MTN’s customers remained “resilient” in many markets. He highlighted how, using the industry performance measure of average revenue per user, customer spending had remained stable in 10 of its 21 markets between June and September, even though inflation was rising.
Although he did not rule out some reduced customer spending next year, Nhleko said: “I suspect the mobile industry, simply because this has become an almost essential service, will most probably not be as hard hit as other sectors.” He highlighted the potential for growth in MTN’s markets, given that, on average, only 30% of people own mobile phones. In the next two to three years, he said mobile ownership could increase to 50%.
MTN is grappling with rising competition in its African markets, where European mobile operators such as Vodafone and France Telecom are expanding.
But Nhleko said MTN was well- placed to cope with competition.
He highlighted how MTN was the number one or two mobile operator in most of its markets and had invested in networks that could provide good customer service. Nhleko predicted mergers between operators because some would struggle to survive in crowded markets.
Ghana has six operators using GSM mobile technology while Uganda has five.
MTN this year held talks about a possible merger with Reliance Communications, India’s second largest mobile operator. But the talks broke down, as did earlier discussions with Bharti Airtel, India’s largest mobile operator.
Nhleko said MTN was open minded about exploring further deals.
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