M-Cell says it has reason to be pleased with its interim financial results released yesterday, which show a slight but better than expected rise in headline earnings as it under-spent in Nigeria and its SA operations performed well.
M-Cell owns 100% of MTN. Its other holding, satellite company Orbicom, contributed less than R50 million in revenue.
SA remains the vast bulk of MTN`s business and despite a good financial performance, M-Cell CEO Paul Edwards had to reassure analysts that the company could continue penetrating the market.
MTN saw its average revenue per user (ARPU) drop to R219 in the period, down by half from what it was in 1997. The average MTN subscriber now uses only 162 minutes of airtime per month, after a sharp dip since the introduction of prepaid services.
Edwards says ARPUs are expected to stabilise internationally as new services are introduced, and MTN has similar plans.
"We are focusing on our high value customers to extract more revenue from them," he says. "If we can keep our incremental costs below our incremental revenue, we can keep penetrating down into the market."
Prepaid subscriber numbers grew by 36% in the period while contracts grew by 21%. Prepaid clients now outnumber contract users three to one.
Edwards says MTN outperformed Vodacom in signing on new contract customers in the six months and expects to be less affected by the ARPU crunch because of it.
Cell C and the SNO
Despite the recent and successful launch of Cell C, MTN is not particularly worried about the competitive landscape and says it will not be rushed into a response.
"We have found that the bottom end [of the prepaid market] is not particularly loyal and will chase the best deal," says Edwards. "We expect Cell C to find this."
While happy to give up its lowest value customers, the company says it will launch new prepaid products in the very near future, although it refused to reveal any details.
"You will have to wait and see what our response will be," says Edwards, promising only that it will be a considered response and will avoid price competition.
With the absence of number portability, he expects contract subscribers to remain loyal.
Bidding for the second national operator (SNO) licence to compete with Telkom remains a "key area of focus", Edwards says. The company says no decision will be made before the invitation to apply for the licence is issued and the terms of the licence are fully understood. Edwards adds that there has been no political pressure on the company to bid and the decision will be based on business considerations.
Data and non-human subscribers
M-Cell says it is very optimistic about the future of its South African business, with the Telecommunications Amendment Bill virtually finalised, access to the 1800MHz spectrum virtually guaranteed and the promise that Cell C will grow the market, to the benefit of all.
But with an estimated 20% of the SA population now using cellphones, it is looking at services other than voice for growth.
Despite only about 3% of local revenue coming from data services, Edwards says it is starting to show strong growth.
MTN is to launch general packet radio system (GPRS) services early in 2002, while Cell C is expected to launch the same services later in the year.
"We believe the businessmen in this country will want that kind of access," says Edwards, singing the praises of always-on connections.
Also expected to grow are the number of "non-human" subscribers - cellular sets used for telemetry.
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