MTN warns lower call rates to hit revenue
Reuters & I-Net Bridge
Cape Town - Africa's biggest mobile operator, MTN Group [JSE:MTN] said it expects lower mobile termination rates to cut 9% from its revenue next year.
MTN hopes to compensate for the lost revenue by boosting its market share and data services, Karel Pienaar, MD for MTN South Africa, told Reuters on the sidelines of an African telecoms conference.
"We will see an impact; this year we've seen a 9% decrease in revenues from MTR (mobile termination rates) and we will see a similar decrease next year," he said.
The cutting of fees cellphone companies charge to handle calls from other providers is likely to hit earnings at domestic carriers.
MTN's rival Vodacom said this week the lower rates had an R800m impact on its first-half revenue.
MTN has also joined the growing chorus of operators singing the praises of the smartphone as a growth driver in the local telecoms industry.
Pienaar told the AfricaCom conference: "Smartphones will drive growth. Smarthphones will account for 60% of total handsets shipped into South Africa by 2014."
Pienaar's comments follow those of Vodacom CEO Pieter Uys earlier this week.
Announcing the group's first-half results, Uys said smartphones would drive demand for mobile data. He said that 20% of all new handsets sold by the group were smartphones.
Pienaar pointed to a "paradigm shift" in how people were using handsets.
"Mobile operators need to claim back the power of the SIM in providing multi-point offerings."
He added it was important to continue to focus on quality of speed, coverage and latency to retain customers in the face of rising competition.
"Latency is a key driver; it will unlock experience for the customer, to get them to use more data services."
Pienaar said the industry would see more sharing infrastructure deals, "not only sharing of base towers, but fibre-optics".
He noted that of the group's 6 600 sites, more than 2 500 were shared with partners.
"It's the only way to bring costs down," he said. On data revenue, Pienaar said: "It's a volume game."
He also pointed to growth opportunities in the lower end and rural segments for the group.
Well MTN has changed there contracts from 120min free on weekends to 86min free anytime per month. My account is higher than what it has ever been - From an average amount of R350.00 my account is in the range of R700.00 now and I do not use my contract any differently - I am too scared to even make a call!!!
Surely the lower interconnect rates between the companies can not result in a drop of revenue for all the cell phone companies? If MTN loses the revenue someone else eg. Cell C must save on the cost? And also they keep on talking about the impact on revenue but what about the saving in cost paid over to other networks? Please can someone comment / clarify on this
Yeah, last year MTN could pull the double billing stunt, wonder what it will do this year. Luckily, it won't impact me anymore, I moved my data accounts away :) You lost a lot of money sir. If only you took some remedial measures, but no.
Thank heavens I will be gone form MTN (after 15 years and with 4 contracts) by mid January as I believe they will find any excuse and some way to fleece their clients.
Cant wait to move as I do not trust them at all
Given the obscene profits this totally immoral industry makes, my heart bleeds for them!
If data is a volume game, why not bring the prices down?
@ MR. G
You quite right Mr G. If you read the article carefully, they only talk about the reduction in their revenue, which would be their income. No mention is made of the "bottom line" effects. No co-incidence there. It would not only be a reduction in costs for other service providers but for themselves too as they don't have to pay Cell C or Vodacom.
Ex MTN Client
Mmm it has been 1year since I gave up on you data services and inaccurate billing and the competitors is excellent while you are still Pathetic. Because MTN decided that Africa is more important than home so we will screw the South Africans and they will stuck with us. Wrong move because what works for Escom and Hellcom does not work for you because we still have a choice. Hope you go under and have to leave for Africa. That is Ayoba
Ofcourse revenue should decline,they have short and killed consumers with interconnection rates for a long time now..personally i expected this reduction at all cost.All cellphone companies projected revenue should be cut drastically becos they are not supposed to be that high......A fair competition becomes tight, a company with a well planned strategy will win the hearts of consumers,.....
MTN billing systems have improved drastically and the company is now more customer focused than they used to be. I moved from Vodacom to MTN and I'm now even more happier.
Hey ME, I noticed the same thing and warned our company about it too as they need renew all our contracts.
It was a clever accounting trick by MTN and taking more monies from the customer.
I see they only talk percentages, how much profit does MTN make in a year? So this means they now only make R100 million profit instead of R120 million?
Seems like they can cut the call rates with another 80%
Well hey, I got myself a chinese phone that pops in 2 sim cards. One Vodacom(R1.40 to all mobiles) and one of 8.ta (R0.65 to landlines). and a main smartphone with MTN(prepaid data) in it. win win baby, haha
@MR G: The interconnect rate cuts do affect both MTN and VC's bottom line. They both currently make a large profit (somewhere over the billion mark if I remember correctly) from interconnect fees. This is largely due to the significant differential between mobile and fixed-line interconnect rates.
So despite the fact that the volume of calls to and from a particular network tend to balance each other out, they make a profit because Telkom pays them more than they pay Telkom. So they will make less profit, and Telkom will largely be the beneficiary.
Having said that, it is a revenue stream that should never have been so high in the first place - so they should just sit down and shut up. Vodacom saying that they're cutting costs elsewhere to compensate for this rate cut is especially worrying - what costs are they cutting?
Vodacom, MTN and Telkom are going to have to catch a serious wake up soon - or they will begin to lose their market shares to players who are actually willing to compete.