When MTN managed to get a foothold in Nigeria, it expected good business but could not have imagined it would become the country’s largest listed company in two decades. R. Roy charts MTN’s meteoric rise.
One year after MTN opened its mobile phone operation in Nigeria in 2001, it reported it had reached a milestone – with just over 500,000 subscribers on its network. Nearly two decades later, it has nearly 70m subscribers.
The early teams at MTN, originally called M-Cell, admitted that early projections in both South Africa and in other markets, particularly Nigeria, were well off- target as no one had any idea what the size of the market would be for the new technology.
The story of MTN’s evolution from a good idea into a multibillion-dollar company in less than two decades is the stuff of corporate legend. In a short 20 years, it has become one of Africa’s top multinational companies in an industry that has revolutionised the African continent and beyond.
MTN’s biggest market
Nigeria is MTN’s biggest market, accounting for nearly a third of its annual core profit.
After seeing spectacular growth in South Africa in its early years, the company started expanding into other African markets in 1998, starting with Rwanda, Uganda and Swaziland.
But Nigeria was considered the big prize right from the start, given its population size, then estimated at 160m, and the poor state of its limited landline infrastructure and services.
It had tried several times to get a foothold in Nigeria from 1998, before it finally succeeded in 2001, when it won one of four licences auctioned as part of the deregulation of the telecoms sector by then President, Olusegun Obasanjo.
Original estimates of the prospective market were ridiculously conservative. The initial five-year prediction was 10m subscribers; it ended up being 32m.
The size of informal markets in Nigeria, and elsewhere in Africa, foxed the forecasters who tended to rely on official statistics from the IMF, World Bank and the like to inform business plans.
Ethiopia also on MTN’s radar
Many years later, sub-Saharan Africa is still the fastest growing region for mobile phones, according to industry body GSMA. Penetration is skyrocketing as technology becomes more widespread and less expensive.
It predicts a compounded annual growth rate (CAGR) of 4.6% and an additional 167m subscribers by 2025. This will take the total subscriber base to just over 600m – 50% of Africa’s population – with Nigeria and Ethiopia recording the fastest growth rates.
Ethiopia is on MTN’s radar, presenting the company with a new frontier of expansion, says newly appointed Group CEO, Ralph Mupita. He says the group is preparing to bid for two licences up for grabs for a stake in Ethio Telecom, the government monopoly, which has about 45m subscribers.
The MTN Group is to offload its businesses in Iran, Syria, Yemen and Afghanistan to focus on Africa.
Staying the course in Nigeria
Over the years, MTN has ploughed billions of dollars of investment into Nigeria to keep up with ever-growing demand. In 2020, it announced a three-year capital investment programme of $1.6bn to strengthen and expand its network and operations in the country.
The company has committed to expanding the 4G network from the existing 40% coverage. The Nigeria Communications Commission is still developing a 5G policy for the country. MTN has also got the nod from the central bank to move into the digital financial services space.
The company is staying the course despite a rocky ride with the authorities in the past few years over allegations of tax dodging and irregular repatriation of dividends more than a decade ago. These issues have been resolved through negotiation and dispute resolution over time, although analysts believe the perceived harassment of one of Nigeria’s biggest investors has tainted the country’s investment brand.
Part of the settlement of the record $5.1bn fine levied by the government for MTN’s failure to disconnect users with unregistered SIM cards, in violation of an official directive, involved the company undertaking a long-promised listing on the Nigerian Stock Exchange.
MTN opted to do so by way of a “listing by introduction“, which disappointed many Nigerians hoping to get a slice of the telecoms giant. Nigerian investors hold about 20% of its shares, with MTN retaining 78.8%, and other investors holding 1.8%.
Mupita says the aim is to bring this figure closer to 35%, with an IPO planned for when the market, battered by all-time low oil prices and Covid-19 lockdowns, is stronger.