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It is time MTN South Africa learns to let go.

When MTN South Africa launched MTNFrontRow, in December 2014, the video-on-demand (VoD) service was billed as “a niche player” – but clearly it seems as if the platform hasn’t signed enough customers to write about.

A year later MTN rebranded the VoD service into VU, taking away some of its goodwill already built in the market at a time when the competition was hotting up and new players such as ShowMax and ONTAPtv, were launching new services.

The launch of Netflix was also imminent, which only occurred earlier last month and has already led to the demise of Vidi, a Times Media Group-owned VoD platform that is being transformed into “something else”.

For ShowMax, which is owned by Naspers, there is a bigger role to play in the VoD market as it is an adjacent market to MultiChoice’s pay TV market, which it has dominated for years.

The launch of ShowMax is part of a plan to defend DStv market. There is enough fire power from Naspers to propel ShowMax to compete head on with the US-based rival Netflix.

One wouldn’t be surprised that after 14 months of propping up MTN VU, the VoD platform for Africa’s largest mobile phone operator hasn’t earned any profit.

When asked to provide a commentary on the performance of MTN’s VU and an indication of how many customers it has signed so far, an MTN spokesperson said via email: “MTN is in a closed period and cannot publicly comment on price-sensitive information at this stage”.

All TechFinancials.co.za wanted to know was if the arrival of Netflix in South Africa has had a positive or negative impact on VU subscribers, if so how?

VU would not say if it had experienced any decline or increase in its subscribers since the arrival of the arrival of Netflix.

And of course, VU remained tight-lipped when asked if it was confident of still managing its niche market in the VoD space. Neither would VU reveal how many customers it signed up since it was established.

MTN VU encourages data consumption for MTN’s customers – but it’s a niche market that is fiercely contested. So far MTN has not demonstrated that it has enough expertise to play in that space.

It is conceivable that renaming the VoD service to VU was aimed at protecting the MTN brand.

Furthermore, MTN is the only South African telco behemoth that has ventured into this space.

At the time, many observers celebrated MTN’s move. Many felt that MTN had a first mover advantage to conquer the market and convince customers to subscribe to the VoD services.

But reality seems to be different to what many envisaged.

MTN may yet prove its detractors wrong by disclosing MTN’s VU numbers when it publishes its financial results in few weeks’ time.

Vodacom – South Africa’s biggest mobile phone operator – hasn’t developed its own VoD service and neither has the country’s biggest fixed-line telephone group, Telkom.

The likely scenario is that both Vodacom and Telkom are waiting for the competition to remove weaker rivals and then they will partner with tried and tested VoD operators to provide video streaming services to customers.

It is possible Cell C, the country’s third-biggest mobile phone operator was adopting a wait-and-see attitude before venturing into the VoD market.

That said, I think MTN must exit the VU market.

It is not MTNs core business and it can offer the same services through partnering with ShowMax, the same way Telkom has done.

I don’t know how much capital has been invested into MTN’s VU, but that corporate resources could be redirected into the core business of providing telephony and data to MTN South Africa’s customers.

I really don’t think that the costs that MTN will incur related to job cuts, accelerated depreciation and skills set from managers leading this project will have an impact on the South African telco.

It’s time for MTN South Africa to adjust its goals when it comes to VoD. MTN must not ignore the dangers of sinking cash into areas where returns might not be forthcoming.

5 COMMENTS

  1. I disagree that MTN should stop exploring OTT digital services. Controlling a network gives them a tremendous advantage over other players and the money it takes to start such services is very small with a company that size. My question is why is everyone so intent on subscription when all of the innovation is happening in data analytics and targeted advertising? It seems like that is the future in Africa.

    • It’s a very valid argument. It is innovate or die. They have to stay ahead of the curve and keep experimenting and they are in a great position to do it with their network and money.

  2. What’s with all the respect for Naspers in this article? Their stock is valued at below the value of their stake in Tencent, meaning they attribute Multichoice and Showmax with a negative value… Multichoice is yesterday’s model.

  3. I agree MTN has an advantage when it comes to its network and lets not glorify Naspers’ ShowMax the Gorrilla, but the article ask valid questions. At this point, the advantage seems not to be working in favour of MTN and its millions subscribers are not embracing its video on demand services. Is the subscription model failing them. please answer at MTN

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