MTN Threatens to Hike Tariff If…

MTN Group Ltd., Africa’s biggest phone operator, has threatened to hike its tariff if Nigeria’s government made its licence conditions more stringent as its licence expires in 2016.

Andrew Bing, chief financial officer of MTN Nigeria told Bloomberg that “Tougher rules, tougher regulations, greater demands ultimately will impact price, the more you charge up front or the more you demand over a period of time. Well, somebody has to pay for it. Ultimately, the subscribers are the people who will have to pay.”

“It’s bigger than the power sector combined; it’s bigger than the cement industry, but they get away with everything,” said Bing, 49, who will go on sabbatical leave from the company at the end of this month. “Yet everybody wants a piece of us.”

The Nigerian Communications Commission (NCC) had in February fined the three biggest mobile operators, including MTN, for the quality of their service and prohibited them from selling new SIM cards in March, the first time the punishment was imposed along with a financial penalty.

Omobola Johnson, communication technology minister,  had said in a February interview that Nigeria would probably revalue the Johannesburg-based company’s phone spectrum and would push to have improving service and infrastructure written into the contracts,

With a population of about 170 million, Nigeria had 167 million mobile-phone subscriptions as of

February 2013, according to the Nigerian Communications Commission and with many subscribers owning more than one phone, it is estimated that user numbers will probably grow to more than 200 million in 2017, according to a London-based research company, Informal Telecoms & Media. 

Michael Ikpoki, CEO, MTN Nigeria said that prices of MTN’s services have come down in the past three years in Nigeria,  adding that the company had spent about $5 billion to $6 billion in expanding capacity in the past three years.

Nigeria’s regulators have to allow phone companies to make “decent margins” or it will negatively affect investment, said Ikpoki.

“We are already operating under fairly stringent conditions,” Ikpoki said. “I don’t know what can be tougher than this.”

MTN has fallen 1.9 per cent this year in Johannesburg and closed Monday at 212.85 rand, giving it a market value of 398.7 billion rand ($37.9 billion).

The company struggles with power supply and cuts to its fiber-optic network, making it a challenge to meet the regulators’ standards.

Hundreds of cuts are made a week to MTN’s cables in the country due to negligence as roads are constructed or dug up, as well as malicious damage, said Bing.

Last year, MTN spent about N34 billion ($214 million) on diesel to power its base stations across the country due to a lack of regular electricity in Nigeria, said Ikpoki.

The government of President Goodluck Jonathan sold 15 state-owned power generation and distribution companies last year and is spending $3.5 billion to boost transmission capacity this year by 50 percent from 4,000 megawatts, less than a 10th of South Africa’s full capacity.

“We are very concerned and very keen to see that the whole power privatisation actually succeeds because it’s going to be really, really good for our business,” Ikpoki said.

MTN is looking to grow revenue from data as the use of smartphones, tablets and TV’s increases in Africa’s most populous nation to offset a slowdown in the growth in subscription numbers.

While users in Nigeria, MTN’s biggest market, rose only “marginally” to 57.2 million in the quarter ended March 31, data revenue in local currency rose 21 per cent. At the end of last year, 15 per cent of MTN Nigeria’s revenue came from data, said Ikpoki.

“Voice is getting cheaper and people are now using more data,” said Bing. “Will it ever overtake? It probably will, but it’s going to be a long way, because a lot of people in this country still haven’t made a phone call.”