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Annual Report : MTN South Africa   Next : MTN Nigeria
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Review of operations - Contents

MTN South Africa


  South Africa financial results*

15 507
17 628
5 009
6 018
2 877
3 408

  Market information

  Population (million)
  Mobile penetration (%)
  Mobile market share (%)
  Number of mobile operators

  Operational information

  Prepaid/postpaid mix (%)

  Note: Financial data reflects 100% of the operation
*Includes MTN Network Solutions
Total subscribers

MTN South Africa


Launched in 1994, MTN South Africa is the second-largest of three mobile network operators in South Africa and is renowned for network excellence and product innovation. During the year, 3G and Blackberry were introduced and MTN Network Solutions became a wholly owned subsidiary, better positioning MTN in the evolving data services market.

Buoyed by a strong economy, subscriber growth continued to exceed expectations and in the period, MTN South Africa increased its prepaid subscriber base by 30% to 8,6 million, and its postpaid base by 19% to 1,6 million. MTN now has 10,2 million of South Africa’s 30 million mobile subscribers – a penetration rate of 62%.

Market share decreased during the period to 35%. Competitive tariffs and attractive packages slowed the traditional rate of decline in blended ARPU to R169 per subscriber. Prepaid ARPU for the nine months ended 31 December 2005 was R93 compared to R97 for the 12 months in the previous financial year, the decrease being due to the deeper penetration of the addressable market. Postpaid ARPU decreased by 6% to R541. In line with the decrease in ARPU, average minutes of use (MOU) declined from 140 minutes to 129 minutes. During the period under review, MTN South Africa restructured its operating model into three business units focusing on the consumer, corporate and reseller markets supported by a shared service model. The restructure is designed to meet the needs of a changing market, regulatory developments and a new competitive landscape with a focus on customer centricity.


MTN’s corporate governance philosophy, the composition of the Board of directors, Board structures and risk management activities are detailed on page 95.


Although not directly comparable to the previous financial year, capital expenditure on the network for the period was up from R1,7 billion to R2,3 billion. MTN already covers more than 94% of the population. The network roll out was therefore mainly for capacity expansion, upgrades to cater for continued rapid subscriber growth and commensurate network traffic, and the ongoing 3G and EDGE network roll out. The new 3G network, which was installed in the record time of four months, currently consists of 431 base stations in metropolitan areas and roll out will continue to increase coverage.


Competition in the South African market remains fierce as international operators establish and consolidate their presence. This competition is expected to intensify as deregulation of the telecommunications sector continues. Marketing activities are therefore paramount in protecting market share.


MTN South Africa continued to innovate and evolve its products in response to technology changes and market needs; decreasing both prepaid and postpaid tariffs during the nine-month period. The timeous launch of 3G in June complemented the Blackberry offering and provided MTN South Africa with a competitive product suite. On a more fundamental level, there were improvements in the call-persecond prepaid offer combined with a R15 voucher, enabling the company to serve more customers at lower cost and establishing a critical foundation for subscriber growth.

MTN South Africa also launched the mobile bank MTN Banking and with MTN Network Solutions, a tierone ISP, the company is establishing a strong position in the data and value-added services arena. Data revenue amounts to almost 8,2% of total revenue, excluding handsets. Approximately 87% of this revenue remains SMS based.


MTN South Africa sells its product through 70 000 formal and informal outlets and achieved the market share lead in formal retail chains. To secure alternative distribution channels, mCharge was launched although the impact of electronic recharge vouchers is limited by the entrenched existing network of virtual distribution. MTN South Africa continues to develop new channels to market as part of the strong rural and emerging market focus, including a renewed emphasis on community payphones.

MTN South Africa currently has 17 service centres, across nine provinces, and is building another to enhance the footprint of its premier service delivery vehicle to its consumers. These centres are companyowned and operated and offer subscribers the full range of MTN products and services, resolving most customer queries on site and immediately.


The South African telecommunications sector has been undergoing structural changes for some time. Further to the liberalisation measures and proposed convergence regulations announced and reported early in 2005, the Electronic Communications Bill (previously the Convergence Bill) will have the effect of replacing current technology class licences with service class licences.

Mobile number portability is expected to be introduced in the second half of 2006 and will intensify the current competitive market. Revisions to the proposed Credit Bill may require MTN to amend subscriber agreements to meet the requirements of the bill.

In addition, the proposed Interception and Monitoring Bill will affect the operational requirement for selling cellular services to customers by mandating a register of identity documents for each SIM card sold.

The dti has recently published BEE codes of good practice and the ICT charter will only be concluded after the finalisation of the dti code. MTN South Africa is already well positioned to meet key targets contained in the draft ICT charter.


MTN South Africa’s BEE spend for the period was R1,2 billion, representing a third of total spend and exceeding the target of R750 million. For the coming year, a target of R1,3 billion (21% of total spend) has been set.

Blended ARPU
As part of the corporate restructuring process, MTN South Africa concentrated on entrenching a culture to support business growth in a changing environment. Some 100 senior managers attended the Leader Academy which included five highintensity sessions with a globally renowned panel of experts.

Recognition campaigns for employees who typify MTN brand values were well supported and comprehensive induction programmes, highlighting the MTN vision, mission and fundamental business philosophy, were held for all new staff members.

MTN South Africa provides numerous support services for its staff including financial fitness programmes, individual well-being initiatives and trade shows at the company’s premises. Product and service training, experiential training and operational training courses are tailored to individual requirements.

MTN South Africa actively assists employees in the prevention and treatment of HIV/AIDS by providing:
– Anti retroviral (ARV) treatment through the company medical aid;
– Professional counselling for HIV-positive employees and their families;
– Disability pensions for employees unable to work;Cumulative capital expenditure
– HIV/AIDS awareness campaigns; and
– Voluntary testing and free prophylactics.


MTN South Africa operates two major call centres: the number 808 services postpaid customers and 173 prepaid customers. The postpaid call centre has over 200 agents managing 2,7 million calls monthly, while the prepaid call centre has some 500 agents managing 32,8 million calls monthly. In addition to service-related call centres, MTN South Africa operates a directory enquiries service with over 110 agents managing 6,4 million calls per month.


As part of its sustainability strategy, MTN South Africa complies with local environmental legislation in its environmental management plan and strives to address environmental issues as they arise. These can include issues as simple as leaves falling from a mast blocking a consumer’s gutter, to more complex issues such as regulatory procedures for installing new infrastructure.


The MTN Foundation has been in existence for four years and during 2005 was integrated into MTN South Africa. A budget of up to 1% of after-tax profits, is allocated to the Foundation each year to ensure meaningful funding of supported activities. Particular focus is placed on social matters of importance in the South African context.

The MTN Foundation supports the establishment of ICT business centres in rural communities. These centres provide telecommunications, computing infrastructure and training to disadvantaged communities. Eighteen centres were completed in 2005 with training provided to over 550 rural women entrepreneurs. The MTN Foundation also supports schools connectivity and 40 schools were equipped with personal computers and internet services in 2005.

The MTN ScienCentres are places of learning for young South Africans. Here they can conduct scientific experiments first-hand and observe results that demonstrate the rules of physics in an entertaining way. Numerous initiatives and exhibitions are conducted through the MTN ScienCentre.

Given the gravity of HIV/AIDS in South African society, the Foundation supports numerous initiatives addressing the pandemic. Siyayinqoba Beat It: HIV/AIDS is an MTN Foundation-sponsored television programme flighted twice a week. Additionally, ongoing workshops titled Dedelingoma, are held for community workers and the MTN Foundation was instrumental in the Sport Heroes Walk Against HIV and AIDS held in November and December 2005.