How MTN keeps Vodacom in check

MTN has outlined the state of the mobile operator market in South Africa during ICASA’s public hearings on the Mobile Mobile Broadband Services Inquiry discussion document.

In its presentation, MTN showed why its presence is so crucial to ensuring competition in the local mobile telecommunications market thanks to its national coverage.

This is despite it being in a radically different position to Vodacom, which has almost double the number of postpaid subscribers and therefore has much larger profits.

“MTN is in a radically different position to Vodacom,” MTN said. “Vodacom still dominates in the lucrative postpaid segment.”

The mobile operator pointed to the growth in subscribers over the past decade, showing that while its subscriber numbers are currently similar to what they were in 2012, Vodacom has seen substantial growth throughout this period.

Despite Vodacom’s greater profitability as a result of its greater subscriber numbers, MTN stressed the importance of its competitive network infrastructure.

The crucial second operator

MTN said that massive investment is required to roll out a mobile network with national coverage, and said this is the reason why there are only two national networks in South Africa.

“Massive investment is required on the order of R10 billion each year – this took 26 years of investment,” MTN said.

“It took tens of billions of rands to build a national network.”

The advent of MTN building a network that competes on a national level with Vodacom, however, makes it a crucial component of wholesale negotiations, acting as the second option or the other choice to keep Vodacom in check.

“Every wholesale deal requires a second option, otherwise it’s just you in a room with Vodacom, and guess who’s got the gun?” MTN said.

Having this second option allows mobile operators like Telkom and Cell C to reach more competitive roaming deals with Vodacom and MTN.

“Cell C, Telkom, smaller operators, and MVNOs can all offer national coverage by virtue of their roaming agreements with Vodacom and MTN,” the operator said.

The graphs below from MTN’s presentation at the public hearings detail its relative size to Vodacom and its competitive network coverage.

MTN vs Vodacom graphs

MTN ICASA slide 4

Now read: Cell C wants roaming discounts to compete with MVNOs

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How MTN keeps Vodacom in check