Has Dabengwa led MTN astray?

2014-05-04 15:00

There was a time when MTN was well known for entering risky markets and being rewarded handsomely for it.

Under former group CEO Phuthuma Nhleko, MTN increased its presence to 22 countries across the Middle East and Africa, taking any controversies in its stride.

One was the acquisition of a licence in Iran, where competitor Turkcell alleged foul?play. Turkcell took the matter to court and when it failed in the US, it filed the complaint in South African courts.

Under Nhleko, MTN’s subscriber base grew from 4.8?million to 141.6?million between 2002 and 2010, with the biggest markets being Nigeria and South Africa.

But since current CEO Sifiso Dabengwa took over in April 2011, there has been little talk of major acquisitions or market expansion, with only a mention of an application for a licence in the southeast Asian country Myanmar, which was eventually awarded to Norwegian company Telenor and Qatar-based Ooredoo.

MTN has also been struggling in South Africa, one of its key markets, and reported it had lost more than 820?000 subscribers in the first three months of the year – bringing subscriber numbers to 24.9?million.

According to MTN’s annual reports, by December 2012 market share in South Africa was 38%.

That dropped to 34.6% by December last year.

These figures, and its lack of merger and acquisition activity, have raised the question of whether MTN is losing its ability to grow.

In addition, the return of Nhleko as chairperson just two years after he stepped down as CEO has also raised eyebrows, with some commentators believing he has returned to steer MTN back on to a growth path.

“The environments in which MTN competes under Dabengwa versus Nhleko are very different, therefore, it is difficult to compare them,” said Dobek Pater, an analyst at Africa Analysis.

“Under Nhleko, MTN was very much in an expansion phase in the Middle East and Africa, and the South African market was in a growth phase, heading towards maturity. Under Dabengwa, the SA market is mature and greenfields opportunities across Middle East and Africa are very limited.

Mervin Miemoukanda, an analyst at International Data Corporation, said: “It is quite a difficult one as the competitive landscape and regulatory environment has changed significantly in South Africa and across its flagship markets.

“I think each of them has had a different mandate from the board. I believe Nhleko’s mandate was to grow MTN locally and expand to other territories. I think he did very well. Dabengwa’s mandate is to sustain the company.”

One analyst, who preferred to remain anonymous, said Dabengwa has also faced various challenges in territories such as Syria, where there is conflict; and Iran, where there are sanctions from the West.

There are also regulatory problems in Nigeria and South Africa.

“All these market dynamics make Dabengwa’s role very challenging,” the analyst said.

While share price movements under Dabengwa have been volatile, shareholders who hung in there are smiling.

MTN’s share price stumbled in April 2012, reaching a low of below R130. It has since recovered and is currently at more than R210.

Dividends to shareholders have also been generous, with an increase from 503c a share last year to 665c a share this year.

MTN will hold its AGM later this month.

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