MTN to cut down value added services in Nigeria

MTN to cut down value added services in Nigeria

MTN to cut down value added services in Nigeria

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MTN Group is cutting down its value added services and partners supporting the offerings in Nigeria, owners of the largest mobile phone company in the country have hinted.

Rob Shuter, President and CEO of MTN Group, the South African mobile phone group that owns MTN Nigeria says an undisclosed number of VAS offerings and local partners will be affected, following an internal review process.

He did not provide details of the planned VAS and partner cuts but admits that MTN Nigeria has also come under local regulatory pressure over its VAS services.

The MTN boss says the mobile phone group recorded a “solid” first quarter 2017 in two of its key markets, Nigeria and South Africa, also sees the two Ds: Data and Digital Adoption as “really the big demographic opportunity that lies ahead of us.”

Though MTN Nigeria has an exclusive pact with Diamond Bank to drive its Mobile Money service, the mobile phone company is still interested in becoming a key driver of the service under an operator-led policy environment, Shuter says.  

 

Market share of mobile operators in Nigeria
Market share of mobile operators in Nigeria

Though MTN Nigeria has an exclusive pact with Diamond Bank to drive its Mobile Money service, the mobile phone company is still interested in becoming a key driver of the service under an operator-led policy environment, Shuter says.

Meanwhile, MTN Nigeria expects that the weeding of its VAS offerings will take a hit on the company’s revenue over the next three quarters, but the company expects a rebound after that, according to the MTN Group CEO.

“I think it is in the value added market that this is the part of our digital that has grown very quickly. We have a lot of partners and service providers. And so it has become an increasingly complex area for our customers also to keep track of which services they subscribe for, whether they want to discontinue or start again services. It has created a lot of load on our contact centre with customers wanting to make these changes”, Shuter says.

Meanwhile, MTN Nigeria expects that the weeding of its VAS offerings will take a hit on the company’s revenue over the next three quarters, but the company expects a rebound after that, according to the MTN Group CEO.

MTN Nigeria now offers a value added service that allows subscribers get electricity and pay with airtime from their MTN mobile phone
MTN Nigeria now offers a value added service that allows subscribers get electricity and pay with airtime from their MTN mobile phone

The MTN Group CEO said that its local business unit, MTN Nigeria, has come under pressure from the industry regulator “to take a central role in making sure that we have a viable and sustainable value added service business but also one that is customer friendly.”

The planned shutdown of the affected VAS offerings should be expected following a review carried out by the mobile phone company in its Nigeria business unit.

“So we’ve done a comprehensive review of that and the result is that there will be services that will be discontinued. We will reduce the number of partners on the system. And this is going to put some pressure on the VAS revenue in the shorter term, I would say over the next three quarters, but over time once we’ve got that on a more stable footing I think there is definitely still growth in that part of the business”, according to Shuter.

According to MTN Nigeria website, its current inventory of VAS services include Music+, a digital music service that gives you instant access to loads of songs; CallerTunez, which offers MTN subscribers the ability to personalize their ring back tone; MTN Game+ its gaming service for Java and Android phones and MTN CallerFeel, a service that allows users express themselves through short messages that will appear on their callers phone screen when they call the subscriber’s line. The mobile phone company also offers a value added service that allows subscribers get electricity and pay with airtime from their MTN mobile phone.

For MTN Group, the strategy moving forward is to leverage its market scale across its operational footprints in Nigeria and over 20 other countries to drive growth.

“So we continue to roll out infrastructure particularly in the digital service adoption. I think in Nigeria we’re committed to the market and we are committed to putting infrastructure in. So what becomes problematic is access to Dollars in the market. Now as you know there is a third currency window which I think should ease things. And generally we have been buying these Dollars above the official exchange rate which puts pressure on capex and opex going forward, but the situation in a broad sense is manageable and by investing through the cycle will help us as the macro improves.”

 

Internet subscribers in Nigeria
Internet subscribers in Nigeria

Shuter remains bullish about this when he says that, “I think the first thing is we are great believers in market scale. I think this is what has determined to a large extent the success of operators around the world, scale and ability to deploy networks, build a brand, have a base you can cross-sell to, have a meaningful distribution, economies of scale in efficiencies and opex. So this is I think the first and most important thing. I think over time of course it is possible to leverage cross-market scale.”

On the data side, MTN hopes to maintain its leadership by rolling out more infrastructure for adoption of digital services.

“So we continue to roll out infrastructure particularly in the digital service adoption. I think in Nigeria we’re committed to the market and we are committed to putting infrastructure in. So what becomes problematic is access to Dollars in the market. Now as you know there is a third currency window which I think should ease things. And generally we have been buying these Dollars above the official exchange rate which puts pressure on capex and opex going forward, but the situation in a broad sense is manageable and by investing through the cycle will help us as the macro improves”, he adds.

Commenting on the Nigerian mobile money terrain, where a bank-led, rather than mobile-led policy environment prevails, Shuter believes it is still works in progress for mobile operators to lead the charge.

“I think on the mobile money side there are no new developments there. The regulatory position is as is and we will continue to motivate how a better balance between a mobile-led bank-led environment for the adoption of mobile money. Again that is a work in progress”, Shuter says.

Also commenting, Nik Kershaw, Investor Relations Executive at MTN Group said the company is recording encouraging performance despite stiffer local competition in Nigeria.

“I think in Nigeria the recent performance has been pretty encouraging particularly when you look at the leading indicators, the commercial indicators we would look at, recharging, data bundle sales, relative network performance in the big metros, Lagos etc. You know the competitors are there and they are commercially active.

“And for sure we are pretty much the only ones putting a decent level of investment in. I don’t think there have been any major pricing moves during the quarter. Of course in that environment all tariff changes are submitted to the regulator and there is quite some lead time before you see them in the market. Data pricing for the larger bundles is really low. But how we’ve been trading is encouraging”, Kershaw says.

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