Know your business rivals: Why MTN is recruiting bankers as executives

Under its durable chairman MTN has quietly wormed its way back into the hearts of critics. Now the South African-based mobile phone behemoth cannot be ignored. By Gugu Lourie

A few months ago, Phuthuma Nhleko came back to the helm of the troubled firm as an executive chairman with only one goal – to sort out the Nigeria fine debacle which culminated in the departure of then MTN CEO Sifiso Dabengwa.

Dabengwa resigned when MTN was slapped with a $5.2 billion fine by the Nigerian authorities for failing to register subscribers.

MTN’s biggest investor, state-owned fund manager the Public Investment Corporation (PIC), also questioned the role of the board led by Nhleko in events that led to the massive fine.

Nhleko stood firm amid murmurs of criticism over the protracted delay by the Nigerian authorities in finalising the size of the fine.

Furthermore, pressure for radical leadership changes seem to have hastened as MTN’s market value dropped. MTN lost its position as a biggest listed mobile phone operator to rival Vodacom.

Yet now the position seems to have drastically changed. MTN has agreed a settlement fee of $1.2 billion (330 billion naira) with the Nigerian authorities and has begun paying the fine.

Nhleko has rejigged the company’s board to bring in fresh blood. He will also stand down as chairman in two and a half years.

MTN shares have risen 7.52% in the past 30 days, giving it a R257 billion market cap versus Vodacom’s R242 billion market value.

Nhleko has also replaced top leadership and enticed former Vodafone Europe head Rob Shuter to be the CEO of the cellphone giant. He has also secured the services of Steve van Coller as MTN’s vice president of strategy and mergers and acquisitions. Van Coller is the current CEO: Corporate and Investment Banking at Barclays Africa and is a banker of note. Shuter is also an astute ex-banker after working for both Standard Bank and Nedbank.

These appointments signal a strategic shift for MTN.

They point to a move to tackle fintech head-on. Fintech, also known as Financial technology, is an economic industry composed of firms that use technology to make financial services more efficient.

It is likely that MTN could aggressively pursue the fintech strategy by acquiring start-ups, which are also on the radar screens of the banking firms. To exemplify, Rainfin – a Cape Town-based P2P (peer-to-peer) platform which is the largest in South Africa and focuses on SMEs – is lending more than one million rand per day and is backed by Barclays.

South Africa’s popular Snapscan – a cashless, cardless payment app – is backed by Standard Bank.

The mushrooming of new and successful fintech companies on the African continent can be directly linked to innovations that meet the needs of historically under-serviced market – the unbanked.

A move to provide a new suite of banking alternatives would enable MTN to ignite its network with financial content and justified its investment in expensive infrastructure networks.

Both van Coller, the incoming-chief boss of strategy and M&A, and big boss, in-waiting ,

Shuter could emulate Nhleko’s previous success record of making MTN the biggest mobile operator in Africa and Middle East after he snapped up strategic assets and invested in so-called risky markets such as Iran and Nigeria.

A deal to buy Barclays Africa assets would also make sense

Both have a great opportunity to help MTN conquer the fintech market with their vast banking skills.

They could pull a coup if are prepared to be shrewd dealmakers.

Imagine, MTN led by Shuter and Van Coller, making a bold bid to buy Barclays Africa assets.

It might seem far-fetched and ridiculous – but an MTN bank with operations in 14 African countries including Nigeria, Ghana and Egypt would shake up both the cellular and financial services industries.

If this were to happen, MTN would be miles ahead of its new rivals – the banks.

Such a move would be regarded as a direct challenge to Africa’s financial services sector. Such a bold step will help MTN recoup the more than R80 billion in market value that vanished when it was fined by Nigeria in December 2015.

However, there is nothing new in the convergence of banking and cellular solutions. The cellphone is already functioning as a virtual bank.

MTN has been playing a big role in ensuring that those excluded from the banking sector across the African continent have access to cash or credit equivalents.

MTN operates in one of the largest areas of unbanked and under-banked people in the world, making a bid for Barclays Africa a compelling opportunity.

MTN’s mobile money solution enables 34 million people across its Africa operations to perform money transfers, make utility payments, pay for bus and public transport services, purchase airtime, buy micro insurance, pay school fees and television subscriptions, make bank deposits, pay for fuel, etc.

MTN’s mobile money service proves the mobile phone operator is capable of providing financial content to its customers.

If such a deal was to be made, Barclays Africa assets owned by MTN would fast-track the mobile phone operator’s fintech strategy. It would be a perfect fit given MTN’s ecommerce commitments.

It would also enable MTN to move beyond commodity voice services and differentiate its

products, which could assist it to attract and retain more customers.

MTN could then compete for millennial customers with the banks. The assets of Barclays Africa would help enhance trust among fintech startups that partner with MTN.

MTN has proven itself in the past on integrating bigger assets. In 2006, MTN spent $5.5 billion (R81.2 billion) to buy Dubai-listed Investcom in a deal that helped the South African-based telco to be the biggest mobile operator in Africa and the Middle East.

So will MTN ever consider buying Barclays Africa assets or any other bank in the continent?

We will only find out when Shuter and van Coller have settled at MTN.

An alternative would be for MTN to build its own fintech solutions, however, this would be very costly, besides the trend is for fintech startups to partner with banks rather than telcos.

Shuter and van Coller and the entire new management team at MTN could also surprise the market with other innovative moves to reinvigorate the mobile operator.

But if both of them use their banking experience to challenge the financial services sector through fintech strategy – maybe MTN will once again be the biggest mobile phone operator in Africa and Middle East.

If that happens the Nigerian debacle could be the dropped call that gave the mobile phone company time to recharge.