MTN is Winning War for Digital Services

by Gugu Lourie

MTN’s aggressive push into delivering digital services, such as lifestyle and mobile financial services solutions, continued to pay off in the year to end December 2016, according to the mobile phone operators’ full year results published this morning.

Africa and the Middle East biggest mobile phone operator reported on Thursday that in the year to end-December 2016 it recorded a 44.2% growth in digital services revenue.

The telco said its Mobile Money service accounts for 20,2% of total digital revenue.

The number of MTN Mobile Money customers rose by 18,4% to 41 million, supported by a strong performance from MTN Ghana and MTN Benin.

MTN Mobile Money revenue increased by 50,7%* to R2.8 billion off the 2015 base.

While MTN Games Club, MTN’s premium gaming proposition, grew significantly in the three largest markets (South Africa, Nigeria and Iran) and is now active in nine markets with a total of 5,4 million subscribers.

“We continued to be a leading distributor of digital music in Africa: our music streaming product recorded 4 million paying subscribers,” MTN informed investors on Thursday.

A tug-of-war for consumers’ loyalty

Everyone in the telecoms industry knows that the way people are using their mobile phone services has changed significantly over the past several years. Every year more and more people move from simple voice/SMS services to digital services such as the popular mobile money in Africa, e-commerce, digital music, etc.

This change pushes the mobile phone industry to adopt new business model(s) and become digital service providers.

So far, MTN seems to be winning the battle for the consumer in the digital space across Africa.

As part of its plans to retain and attract new customers, MTN is extending its mobile services across Africa.

In the year to end-December 2016, MTN launched MoKash, an extension to the MTN Mobile Money wallet, in Uganda and  Zambia, where there are over 1,5 million registered customers.

The company said loans are financed by its lending partner, the Commercial Bank of Africa (CBA).  MTN’s role is to market, originate and disburse the loans and collect the loan repayments using its Mobile Money.

After launching in Uganda in August 2016, over 140 000 loans were disbursed in the month of December 2016.

“We are planning further pilots in Rwanda, Ivory Coast and Ghana,” said MTN on Thursday.

In the year to end-December 2016, MTN had about 74 000 active MTN Mobile Money financial services agents in Uganda.  It’s Ayo, a joint venture with MMI Holdings Limited, soft launched two mobile micro-lending products in Uganda in the year.

Tough times for e-commerce business, hit by Nigerian economy

However, Jumia (the unified brand of MTN’s e-commerce joint ventures AIH) and MEIH, experienced slower growth in the Africa business largely on the back of Nigeria’s slowing economy.

In the year, Jumia recorded about 3,2 million customers, 5,9 million transactions and 2,8 million leads on its classifieds business, which expanded to eight new countries. MEIH, made up of seven companies in the Middle East, had about 600 000 customers and 3,3 million transactions during the period.

MTN’s Iran Internet Group (IIG), an Iranian e-commerce business that has become the largest business of its kind in Iran, gained strong momentum.

Zoodfood, a restaurant delivery service app,rose by 400% in 2016 to achieve 85% market share.

Snapp, a taxi hailing app with 85% market share, and an average of about 150 000 rides a day. It is the largest e-commerce company in Iran by revenue, despite being active only in Tehran.

The company said it is currently expanding the services to other cities in Iran.

Bamilo, Iran’s largest online mall and marketplace, grew 60% in the fourth quarter of 2016. It has over 250 000 stock keeping units and hosts 1 500 merchants with online stores.

The TravelStart business, in which MTN acquired a 39,2% indirect interest through Amadeus, recorded 560 000 bookings from 800 000 clients during the period.

MTN expects new revenue streams, particularly digital services, to increase their contribution over the next 18 months, supported by a more focused approach and the process initiated to establish an advanced analytics unit.

“We expect our e-commerce joint ventures with AIH, MEIH and IIG to continue strong growth in customers and revenue, with improving unit economies. While AIH and  MEIH are expected to be impacted by a slowing economy and the associated volatility of currencies in Nigeria and Egypt, IIG is expected to benefit from improving GDP growth,” the company said.

But MTN has a long way to catch-up with Africa’s e-commerce behemoth Naspers, which continues to dominate the global e-commerce market with its investment in fast-growing start-ups.

That said, MTN seems to be far ahead of its competitors such as Vodacom, Airtel, Millicom, etc, in delivering digital services across Africa and the Middle East.