MTN Group Boss speaks about the Telecom Industry Price Wars in Uganda
We believe that spending on telecommunications is still a priority to most consumers.
MTN Group boss Sifiso Dabengwa stopped over in Kampala to speak to the press. Roselynn Karatsi transcribed the interview.
Question: How has the economy and inflation affected your operations in Uganda?
It has to a certain extent negatively impacted on us as far as growth is concerned. But in terms of general economic conditions, we believe that spending on telecommunications is still a priority to most consumers. I do not believe that this has had a significantly negative performance. The price erosion has had a more negative impact.
Would it be fair for the market to expect that the escalating competition in the local market is eating into your profitability? I think it is a question of sustainability. No one is in business to sell a product at lower than their costs.
I do not think it is sustainable. It probably might have a negative impact on the industries over all.
When you say they are marketing below their costs, is this cost-effective?
I am just saying that I do not think it is sustainable to sell your products lower than your costs.
What do you envisage in the near future. We have seen all the other companies, apart from MTN, making losses for the last three years? We will always compete, but I guess the sustainability of the industry and of the different businesses is a function of their profitability. You cannot keep investing if you are not making profits. It is simple business logic.
Update us on plans to off load some of your share holding in the stock market? Listing is always an option for any business. It is something you have to analyse carefully. We review it over time.
You go to capital market for capital reasons not for regulatory reasons. Whether you raise debts or you go to capital markets. Listing is fundamentally a corporate finance decision.
Can you talk about the subscriber numbers?
We are quite happy with what we have been taking in terms of shell off of neat ends. We are quite comfortable with the way the business has been performing. Close to the first half of the year, we have 7.5 million on the network. We are happy.
What investment plans does the company have for Uganda in the coming year?
We always work on an annual budget. The budget for Uganda is slightly over $100m. That is still our plan. This is a well-capitalised business. We always try to make sure that from the funding point of view, we have a good mix of debt inequities in order to optimise the capital structure.
From the debate point of view, we make sure that the debt is in currency that we are earning our revenues.
What do you say about mobile money? Do you see a lot of concentration going into boosting its performance? We launched mobile money about two years ago. Uganda was one of the early launches.
As a service, we are satisfied. We believe there is a big opportunity to get a customer base onto some kind of platform that they can do financial services. We are looking forward to seeing it as our big part of business.
But at the moment, it has lots of issues and interruptions?
It is the technical issues. We are working on them. We and our technical partners are continuously reviewing how we can improve the reliability. It has been a reasonably good success, but like anything new, it has its technical limitations, which are continuously being worked on.
We are going through an upgrade process right now. We would like to see the revenues from the non-voice services going up by at least 30%.
How is inflation likely to impact revenue growth in 2011 ?
The issue basically would mean that for real growth, we would have to grow at least above inflation. Our dollar imported costs need to be limited because we do not increase our prices on an annual basis.
It means that effectively there are price deductions for the customer if you look over, say the 10-year period. The telecoms industry has been the most deflationary factor in the economy as a whole.
How are you coping with competition, has it affected your growth budgets?
If you look at the retail price per minute, the overall market and use of US currency, you are probably sitting in with two-and-a-half cents to three and a half cents per minute. That is on the lower end in the whole continent.
The issue is also to look at all the cost structures, whether they are significantly lower than your revenue. For the market to be sustainable with that kind of pricing, you have to ensure that the cost structures are at least 50% lower than your revenue per minute. That is how we intend to compete.
Monday, 29th August, 2011 The New Vision Newspaper