Expert Speak
MTN on Africa telecom landscape and future prospects
Market consolidation expected to drive better pricing; data/mobile money significant opportunities
We hosted a conference call with Mr. Nik Kershaw (Investor Relations, MTN Group) to gain
perspective on the telecom market scenario and future outlook for Africa
Competitive intensity seems to be easing across most African markets. Consolidation phase
has begun and is likely to continue over the next 1-2 years given that most of these markets
cannot support more than two viable operators
Pricing environment is improving, driven by ongoing consolidation, with tariffs across most
markets exhibiting deceleration in the rate of decline and even improving in absolute terms
in some of the specific markets like Uganda.
Data and mobile banking remain significant opportunities given the current under penetration.
25 March 2014
Sector: Telecom
MTN has withstood significant increase in competition over past several years:
During
the past several years, there was big step-up in competition due to significant
investments in the African telecom market which was perceived to be the last
underpenetrated growth market in the global context. As a result, the African continent
currently has more than 100 wireless service providers in operation, with some markets
like Ghana having as many as 6 operators competing in a country with ~25 million
population. MTN has withstood the increase in competitive intensity and remains a
leader in majority of the 15 African markets it operates in. In Nigeria, MTN is estimated
to have ~50% subscriber market share and ~55% revenue market share. MTN believes
that its market share has remained stable in Nigeria, its biggest market, with Etisalat
likely gaining share from Globacom and Airtel.
Mr Nik Kershaw
Investor Relations, MTN Group
Launched in 1994, MTN
Group is a leading
emerging markets mobile
operator which is at the
forefront of the
technological changes
sweeping the world. MTN's
advanced communications
networks connect more
than 203.8 million people
in 22 countries across
Africa and the Middle East.
Consolidation phase has begun; to continue over next 1-2 years:
In most African markets (except large markets
like Nigeria), operators other than No1 or No2 are not viable, making them potential acquisition candidates.
Consolidation phase has already begun, e.g. Bharti's acquisition of Warid in Uganda and Orange deciding to exit
from countries in Africa where it is not No1 or No2. Five years forward, there is an expectation of a bigger
presence of a few large operators across Africa.
Deceleration in the rate of tariff decline across markets:
Africa tariffs are expected to remain relatively high
given low elasticity and high cost structure in the African markets. Many markets are seeing bottoming out of
tariffs. For example, in Ghana, operators saw revenue growth slowing down due to tariff wars two years ago but
revenue growth is back with tariffs stabilizing. Similar trends are being witnessed across markets, with easing
tariff pressures supporting better revenue growth for operators.
Significant data and mobile banking opportunity given the lack of alternative infrastructure:
In some of the
developed countries of Europe, ~85% of the data consumed on mobile device is offloaded on to a Wi-Fi network.
However due to the lack of fixed line infrastructure in most of the African markets, majority of the data access is
through the mobile networks. The lack of banking infrastructure and customer's ability to furnish ID's & documents
also gives mobile banking a significant growth opportunity in Africa. Large operators are better positioned for
providing these services.
Regulators' major focus is Quality of Service (QoS):
Incumbent operators in Nigeria were fined recently for not
meeting the Quality of Service standards. Operators are in talks with the Nigerian regulator regarding the standards
and want the regulator to consider barriers such as lack of availability of continuous power and diesel supply for
meeting the standards. Operators also expect some decline in the mobile termination rates which might partially
dilute the advantage from on-net traffic for incumbents.
Shobhit Khare
(Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428
1
Investors are advised to refer through disclosures made at the end of the Research Report.

Expert Speak
Mobile cellular penetration trend (%)
Bharti Africa: Subscriber Trend and Subscriber growth
Source: ITU World Telecommunication/ICT Indicators database
Source: Company
Bharti Africa: Average Revenue per User (ARPU)
Bharti Africa: Minutes of Usage (MoU) and Average Revenue
per Minute (ARPM) trend
Bharti Africa: Total network traffic and traffic growth
Bharti Africa: Number of Network sites
Bharti Africa: Revenue and Revenue growth
Bharti Africa: EBITDA and EBITDA margin
25 March 2014
Source: Company, MOSL
2

Expert Speak
Bharti Africa: Net income and Net income margin
Bharti Africa: Capex and Capex/Sales
Source: Company, MOSL
Africa Wireless: Peer Comparison (USD b)
CY09/FY10
MTN
Revenue
EBITDA
PAT
Vodacom
Revenue
EBITDA
PAT
Airtel Africa
Revenue
EBITDA
PAT
14.0
5.8
2.1
7.5
2.5
0.5
CY10/FY11
15.7
6.5
2.3
8.5
2.9
1.1
3.5
0.9
-0.5
CY11/FY12
16.8
7.5
3.3
9.0
3.1
1.4
4.1
1.1
-0.3
CY12/FY13
14.8
6.4
2.9
8.2
3.0
1.6
CY13/FY14(E)
14.1
6.2
3.2
7.0
2.9
1.3
4.4
4.5
1.2
1.2
-0.4
-0.5
Source: Company
Bharti Africa: Country wise financials
Shareholding (%)
FY12
FY13
Africa Subsidiaries
Burkina Faso
Chad
Congo B
DRC
Gabon
Ghana
Kenya
Madagascar
Malawi
Niger
Nigeria
Sierra Leone
Tanzania
Uganda
Zambia*
Seychells
Total - Bharti Africa
100
100
90
99
90
75
100
100
100
90
66
100
60
100
96
100
-
100
100
90
99
90
75
100
100
100
90
79
100
60
100
96
100
-
Turnover (INR b)
FY12
FY13
7.5
5.1
8.8
18.3
14.2
8.4
6.9
4.2
7.6
7.9
67.0
3.0
11.6
5.2
18.8
0.8
196
9.9
6.6
10.9
21.6
15.3
12.4
9.6
4.8
3.8
9.6
81.6
4.4
14.3
7.7
17.1
1.0
231
PAT (INRb)
FY12
FY13
1.1
1.9
-1.2
-0.6
-1.0
-0.6
-3.5
-1.9
4.2
2.3
-3.5
-4.2
-4.4
-4.6
-0.3
-0.2
1.1
-1.5
0.6
1.3
-6.0
-6.2
1.1
1.2
-2.9
-1.5
-1.6
-1.8
3.0
1.9
0.2
0.1
-13.0
-14.3
Source: Company
3
25 March 2014

Expert Speak
Nigeria: GSM operators QoS KPI's (Jan 2014)
Operator
CSSR (%)
DCR (%)
SDCONG (%)
TCHCONG (%)
Airtel
96.99
0.84
0.40
0.79
Etisalat
99.2
0.55
0.10
0.27
MTN
96.85
1.21
0.17
0.55
GLO
96.89
1.19
0.58
0.79
Target
98.00
1.00
0.20
2.00
CSSR - CALL SET-UP SUCCESS RATE; DCR - DROP CALL RATE; TCH_CONG - TRAFFIC CHANNEL CONGESTION
SDCCH - STAND ALONE DEDICATED CONTROL CHANNEL CONGESTION
Source: Nigerian Communications Commission (NCC) website
Trend of Subscriber market share in Nigeria (%)
Operator
Mar'11
MTN Nigeria Communication
48
Globacom Limited
24
Airtel
19
EMTS Limited
8
Jun'11 Sept'11 Dec'11 Mar'12 Jun'12 Sept'12 Dec'12 Mar'13 Jun'13 Sept'13 Dec'13
49
47
46
45
44
44
43
45
47
47
45
23
23
22
22
22
21
22
21
21
20
21
19
20
20
20
20
20
21
21
18
19
20
10
11
12
13
13
13
14
13
13
13
14
Source: Nigerian Communications Commission (NCC) website
25 March 2014
4

Expert Speak
N O T E S
25 March 2014
5

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