MTN: In SABMiller’s footsteps
MTN has a real shot at becoming one of the world’s biggest telecommunications operators, on a par with companies such as Vodafone and AT&T.
That’s the view of Kristoff Puelinckx, managing partner of emerging-markets telecom advisory firm Delta Partners. He says three pan-African and Middle Eastern operators have “separated themselves from the pack”, and have the potential to build businesses that straddle the globe. They are SA’s MTN, Etisalat of the United Arab Emirates, and Kuwait’s Zain Group.
Emerging-markets operators are in a race for scale. MTN has begun playing in a league with companies such as Russia’s VimpelCom, India’s Bharti Airtel and Mexico’s América Móvil.
Puelinckx says MTN has what it takes to become one of the world’s top five telecom companies. Details are still sketchy, but it looks likely that MTN will acquire a 74% equity stake in Reliance Communications, India’s second-largest mobile operator, in a cash and share deal.
The combined entity would have about 120m subscribers — 70m from MTN and 50m from Reliance.
MTN CEO Phuthuma Nhleko, who has said he would step down when his contract expires in June 2010, may still have more tricks up his sleeve, analysts feel. Given the speed with which MTN has absorbed its previous blockbuster acquisition, Investcom, Africa’s biggest cellular operator could digest Reliance fairly quickly and Nhleko could be ready to engineer an even bigger global deal before he leaves the company in 2010 (if he leaves then).
Puelinckx says emerging-markets giants such as MTN could eventually acquire telecom players in the developed world. “It’s possible for the bigger regional players to start buying out European operators such as KPN and Belgacom. For now, though, they prefer the high-growth emerging markets.”
Consolidation in global telecoms today can be compared with the financial services industry of 100 years ago, says Puelinckx. Today, there are 10 global financial institutions, complemented by regional and local banks. “Telecoms doesn’t have to be any different. They are both capital-intensive industries with millions of customers,” says Puelinckx.
Once the dust has settled, perhaps five or 10 years from now, there will be four or five mega telecom players worldwide. “Any company not controlled by a government is a potential takeover target,” Puelinckx says. “MTN could be a takeover target but it also has the potential, the balance sheet and the management to go all the way, to be one of the big global players.”
Denis Smit, MD of research firm BMI-TechKnowledge, likens MTN’s international expansion to SABMiller’s. He says no-one expected it to become one of the giants of global brewing. “MTN is following the same game plan.”
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