MTN goes tech: How data overtook voice revenue

Last Wednesday, Africa’s largest telecommunications company, MTN, took an important step towards its ambition of becoming a full-fledged technology company and the biggest digital platform on the continent by 2025, with the unveiling of a new logo.

The logo is coming ahead of a re-branding event set to take place on Monday, February 28, 2022.

While the new logo retained the iconic yellow colour, the oval-shaped blue background with a red accent was replaced with an oval MTN in black lettering. It is a logo that is supposed to communicate the company’s new transition – from telco to tech.

Anyone who has followed recent developments in the company would not be surprised MTN is making the transition formal. It has been long in coming with the recruitment of Adia Sowho, the former interim CEO of Thrive Agric and a well-known face in the tech ecosystem.

MTN has been on a strong push in recent years to diversify its business, pursuing new revenue streams in mobile data, technology, and related communications services to businesses, wholesale network services, fintech, and digital services.

MTN is also in the job market looking to recruit 150 digital experts to ensure it keeps pace with growing digital demand.

According to the company, the move ties with MTN Group’s 2025 ambition.

“We intend to lead the delivery of a bold new digital world and are therefore looking to expand our teams to ensure we keep challenging what we do to always do better,” said Tebogo Maenetja, chief of human resources at MTN South Africa.

Some of the roles MTN wants to fill include UX and UI designers; product owners; performance marketers; digital content specialists; eCommerce experts; full-stack developers; scrum masters, and business analysts.

Read also: MTN’s 2021 results in five numbers

The telco’s intensity is coming from impressive growth in the data business. In 2021, MTN reported active data subscribers growth of 5.3 percent year-on-year to 34.3 million compared to its voice business, which declined by 10.6 percent in the same year due to the regulatory restrictions on new SIM sales and activations.

The growth in active data subscribers also reflected in the revenue, which rose to 55.3 percent in 2021, maintaining an accelerated growth trajectory in the fourth quarter as it continues to accelerate the expansion of its 4G coverage, enhance the quality and capacity of the network to support increasing data traffic, and grow active data users. The company also saw an average megabit (MB) per user grow by 62.7 percent, enabling overall data traffic growth of 85.3 percent. The telco claims its 4G network now covers 70.3 percent of the population, up from 60.1 percent in December 2020.

Voice revenue was not so impressive as it grew by only 8.4 percent year-on-year in 2021. The company’s fintech business rose by 57.3 percent due to sustained growth in the use of Xtratime products and broader fintech services by users.

MTN also expanded its MoMo agent network, through a one distribution strategy, with the addition of over 374,000 registered agents, bringing the total number to approximately 770,000, up to 94.8 percent. The growth led to transaction volume rising by 167.0 percent to 137.5 million from an active user base of 9.4 million, up 102 percent.

Experts say that for most telecom operators like MTN the shift to becoming full-fledged technology companies is driven by current economic realities and the influx of new disruptors that have seen most incumbents struggle to maintain their market leadership. In some cases, the new disruptors have swallowed supposed big old players.

In a recent report, Mckinsey noted that even before the COVID-19 pandemic hit the world, telecom operators had been battling a decade-long disruption, one of which is the customer-back disruption led by digital natives such as Uber and Netflix. These digital natives set new standards for seamless online experiences that forced incumbents to redefine their interaction models.

There is also business-model disruption with technologies like artificial intelligence (AI), big data, and the internet of things rewriting the rules in service delivery and value-capture models. The telcos also faced the new-entrant disruption, which led to increased competition among traditional players as well as non-traditional players. This disruption has now shifted value toward technology-focused parts of the value chain.

“Most operators responded to these daunting challenges with a mix of efficiency measures, digitisation efforts, structural changes (such as network sharing), and productivity improvements,” the Mckinsey report noted. “In parallel, many expanded into new industries, such as TV and information and communications technology (ICT), to increase revenue streams. As demonstrated by pre-COVID-19 performance, though, that formula has been running out of steam.”

In the case of MTN, the disruptions drove the launch of new business verticals, most of which were aimed at increasing data consumption on the network. Generally, internet data consumption has been on the increase in Nigeria. The Nigerian Communication Commission (NCC) had in 2021 noted the huge demand for data.

“Nigerians are consuming in excess of 80,000 terabytes of data every month,” said Garba Umar Danbatta, executive vice-chairman, NCC, noting, “We have seen this trend for a while, with an increase in data usage associated with an increase in online activity.”

In Africa, Nigeria’s monthly data consumption of 80,000 terabytes (80m GB) is only surpassed by South Africa, which consumes about 269,000TB every month. Kenya and Ghana complete the four largest consumers, using 22,400TB and 8,100TB of monthly internet data, respectively.

With people consuming more data than calls, it is no surprise therefore that MTN is prioritising the former over the latter. Importantly, the company knows it needs to provide different services to ensure more people consume its data service.

In 2019 for instance, MTN launched its music streaming service, MusicTime, which it developed in partnership with Simfy Africa. The music streaming app, first introduced in South Africa in 2018, allows users to buy time on the service, data inclusive, as opposed to other streaming services that allow users to do a monthly subscription. However, the app is missing from the Play Store.

Other verticals launched by the company include Ayoba, MoMo, and recently a microinsurance service called AYo, which is already launched in Ghana, Uganda, and Zambia.

According to a BusinessDay report, AYo started out as a 50-50 partnership between MTN and Momentum Metropolitan Holdings (MMH). Over the past two years, MMH took its stake down to 25 percent before completely exiting the venture, leaving MTN as the sole owner.

“I believe part of what is driving the company’s decision is borne out of the fact that currently, they provide telecom support services that power Africa’s tech ecosystem,” noted Omosomi Omomia, a manager at KPMG. “MTN has over 277 million subscribers in over 20 African countries with Nigeria and South Africa being the largest market. Interestingly, MTN has business interests in tech but their core business revolves around providing telecom services such as voice and data services.”

Omomia said MTN would need to consolidate its different businesses into a single entity that could in no distant time begin to rival global tech companies like Amazon, Meta (formerly Facebook), Apple, and Alphabet’s Google.

MTN’s next big play is the launch of 5G in Nigeria. 5G even gives the company a massive advantage to grow its data market share. It is already among the companies in South Africa with the 5G licence and is deploying at speed.

In Nigeria, the company has already paid the $273 million licence fee and is waiting for the regulator NCC to make it official on February 24. It has also closed funding, which it plans to use to fund its infrastructure across the country.