By Gugu Lourie
MTN has a bold plan to tap into the digital space in Africa and Middle East by diversifying revenue streams away from voice to suit its customers’ modern digital lifestyles.
However, MTN – Africa and Middle-East’s biggest mobile phone operator – is not likely to challenge Naspers – the multinational group of e-commerce platforms that owns stakes in China’s Tencent, India’s Flipkart and Russia’s Mail.ru.
But MTN might encroach on Naspers’ territory and pose a threat to other smaller players in the e-commerce and e-tailing industry.
That said, MTN obviously sees opportunities to tap into the digital space.
Like its rivals Vodacom, Millicom, Airtel Africa and Vodafone, MTN is seeking to redefine its role in the digital era as voice telephony revenues continue to dwindle.
It is focusing on providing digital lifestyle services such digital banks (mobile money), digital entertainment (video-on-demand), and my web: delivering services such as online shopping and locate services.
MTN is investing heavily in developing online ventures so that it can take advantage of opportunities in the digital space.
In that regard, MTN and Rocket Internet (Rocket) have formed a joint venture, Middle East Internet Holdings (MEIH), to develop internet businesses in the Middle East. MTN and Rocket are equal partners with a 50% shareholding each. MTN invested €120m in the joint venture.
MTN also has bought 33,3% stake of Africa Internet Holding (AIH) – a joint venture between Rocket Internet and Millicom International Cellular – for €168m. The aim is to develop online ventures across the fast-growing internet markets of Africa.
MTN Group CEO Sifiso Dabengwa says the rollout of digital services supported by Rocket partnership continues to be important.
Dabengwa says the mobile operator aims to leverage its brand, customer base, distribution network and payment solutions (mobile money) in the markets where both AIH and MTN are present to deliver a range of internet services including e-commerce retailing, as well as market place, taxi, travel, classified and food delivery services.
During its results presentation, MTN said the continued rollout of its mobile money and broader financial services remains a priority with the widening of its distribution platform.
The introduction of new products and services including micro lending, international remittances, retail payments and insurance will also be a priority.
“We continue to develop our digital offering through focusing on local content and working with other suppliers. Through our partnership with Rocket we now have a platform that facilitates easier rollout,” says Dabengwa.
MTN’s partnership with Rocket provides it with a strong base for future growth. In 2014 AIH launched 44 new operations across 23 markets in Africa while MEIH has 11 operations in various countries in the Middle East.
Furthermore, MTN’s strategy may benefit from how the mobile phone is transforming all the sectors of the economy in Africa and the Middle East.
This development may assist MTN in diversifying its revenue stream and create new customer base.
MTN, which is valued at more than R410bn, has enough cash to make e-commerce a new playground that has possibilities of creating shareholder value in the absence of big ticket acquisitions.