SA’s top brands Vodacom, MTN see limited COVID-19 impact

While the COVID-19 pandemic has disrupted several industries in SA, the telecoms sector has weathered the storm as a result of increased demand for mobile data services.

Since the COVID-19-induced lockdown was imposed in SA, the telecommunications sector has been deemed an “essential service” because of the critical role it plays.

As the COVID-19 pandemic continues to disrupt businesses in SA, a new report says telecommunications companies MTN and Vodacom are among the top brands in South Africa.

The Brand Finance South Africa 50 2020 report notes that as the COVID-19 pandemic wreaks havoc on global and national economies, South Africa’s top 50 most valuable brands could lose up to 15% of their brand value cumulatively; a drop of over R65 billion compared to the original valuation date of 1 January 2020.

Brand Finance assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1 January 2020. Based on this impact on enterprise value, it estimated the likely impact on brand value for each sector.

The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the level of brand value loss observed for each sector in the first quarter of 2020.

The report notes the coronavirus will have a limited impact on the telecoms sector just as other sectors, like food, among others.

According to the report, telco giant MTN retained the title of SA’s most valuable brand despite recording a 2% brand value loss to R49.4 billion.

It notes that over the last year, Africa’s largest mobile operator celebrated solid profits and impressive subscriber growth, which currently stands at over 250 million across 23 countries.

“We are pleased to be appearing at the top of the list again,” says MTN Group president and CEO Rob Shuter.

“But what is more important is that we’ve made progress year-on-year, in particular in the brand strength index scores.”

Commenting on the impact of the pandemic on the MTN brand, Jacqui O’Sullivan, executive for corporate affairs, says the mobile operator is in a closed period until the release of its interim results, and cannot provide further details on its financial position.

“Although most businesses around the world are experiencing hardship during the pandemic, MTN operations and products continued to attract customers despite disruptions due to national lockdown,” she says.

“For example, over the past three months, MTN has witnessed an increase in data consumption both on prepaid customers and postpaid customers, including Supersonic customers. Data traffic has more than doubled from last year, mainly due to businesses and work going digital. COVID-19 is a major accelerator for digital acceleration and we have taken a leading position in this ‘new normal’, leveraging the exceptional quality network we have invested in so heavily over the past four years.”

Brand Finance says despite being touted as one of South Africa’s greatest corporate success stories, the MTN brand has been hitting the global headlines recently and has been placed under increased scrutiny following allegations that it paid bribes to militant Islamist groups in Afghanistan.

It points out this is not the first time the brand has come under the microscope – most notably its 2015 Nigerian fine – and MTN will, once again, rely on its strong brand and its far-reaching market share to maintain its position as SA’s most valuable brand.

The firm notes that as with all big telcos globally, MTN is being squeezed from all sides as over-the-top messaging apps like WhatsApp are impacting voice and SMS revenue, and challenger brands offer comparable data services at below-market rates, leading to fierce price competition and decreasing margins.

However, it says, COVID-19 may be an opportunity for telecoms brands to reverse their fortunes, as Brand Finance predicts a limited overall impact to the sector and even potential for growth as demand surges.

In addition to measuring overall brand value, Brand Finance evaluates the relative strength of brands, based on factors such as marketing investment, customer familiarity, staff satisfaction and corporate reputation.

According to these criteria, Vodacom (down 9% to R30.3 billion) is the strongest brand in South Africa, with a Brand Strength Index score of 89.5 out of 100 and a corresponding AAA brand strength rating.

Brand Finance’s global brand monitor study showcased a clear improvement in Vodacom’s brand investment metrics – place, price, products and promotion, says the company, adding that all of which were considerably stronger than main rival MTN.

A Vodacom spokesperson tells ITWeb: “Vodacom is a proud African brand that has consistently connected its customers to a better future through a reliable network, great value and innovations over the years that have enabled everyone to be part of the digital economy.”

The spokesperson says Vodacom accelerated network investment by over half a billion rand during the national state of disaster to accommodate the surge in demand for services.

“We also simultaneously dropped monthly data bundle prices, providing customers with R2.7 billion in savings this financial year. Vodacom continues to seek ways in which we can help mitigate the impact of the COVID-19 pandemic, as well as facilitate South Africa’s recovery through the services we provide.

“An example of one of the many partnerships we’ve entered into during the pandemic is the Virtual Doctor Consult Service partnership with Discovery, where we provide free virtual doctor consultations to any customers who may be experiencing COVID-19 symptoms.”

Brand Finance says Vodacom committed to a 34% price cut in its data services following an agreement with the Competition Commission, after criticism that it was exploiting its market dominance.

This price cut is no doubt going to bolster the brand’s already burgeoning subscriber base, which is currently growing on average by a staggering 67 000 a day.

Brand Finance says Vodacom is working with the nation’s health department to send COVID-19 alerts to its 44 million customers. Furthermore, it notes, the brand is providing subscribers with free access to premium health and education Web sites.

Says Jeremy Sampson, managing director of Brand Finance Africa: “2020 has marked yet another troubled year for the South African economy as it continues to contract at an alarming rate and the far-reaching and debilitating COVID-19 pandemic has exacerbated this deterioration further.

“Now, more than ever, the economy will rely on the strength of home-grown brands to support the nation’s efforts on home soil and abroad to try and pull South Africa out of the slump that has engulfed the nation for the last decade.”

David Haigh, CEO of Brand Finance, comments: “South Africa as a country and Africa as a continent remain huge opportunities for brand managers.

“However, the next six months or so will be crucial. With so much uncertainty in the world, and in particular concerns about the potential damage to both the populations and economies of emerging countries, we could be in for a rough ride before things improve. Brands that survive these challenging times can expect a bright future.”