After nearly a year in corporate limbo, foundering in uncertainty created by a record regulatory fine, MTN, Africa’s largest telecoms company, looks ready to turn the corner with a future in financial services.
The embattled Johannesburg-based company revealed this week it had poached Vodafone’s Rob Shuter, 48, to join as chief executive, along with other senior executive appointments.
Shuter’s appointment came after MTN settled a months-long $5.2 billion fine dispute with the Nigerian government for unregistered SIM cards. After months of twists and turns, the phone company negotiated to pay $1.7 billion.
Currently chief executive of Vodafone’s Europe cluster, Shuter has had previous long experience in the South African banking industry. He was a former head of investment banking at Standard Bank and managing director at Nedbank’s retail banking unit division.
His banking experience will likely be seen as one way to pursue the multi-billion dollar opportunity in financial inclusion. With 168 million subscribers on the continent, few African companies have MTN’s scale of customer relationships.
Voice, and then data, have become commoditized services in the last few years, cutting into profit margins and growth projections for African telcos. While their counterparts in advanced economies have benefited from the rapid rise of mobile video, gaming and social media as drivers of heavy network use, many African telcos are looking to innovate around essential services to grow and retain customers.
With only 34% of Africans having a bank account and opportunities abounding in payment services, these telcos are looking to financial technology as a way to grow future profits. A report by the Boston Consulting Group estimates that mobile financial services in Africa is a $1.5 billion market opportunity that has even greater growth potential by tapping into an unserved market.
“In their core business the growth from subscriber acquisition is slowing down and competition is intensifying, rapidly driven by operating companies trying to grow through acquisition from competitors as well as increasing regulatory pressure, putting pressure on margins in their traditional business,” Hans Kuipers, a partner with the consulting group, told Quartz.
To be sure, MTN Mobile Money is already a key part of the operator’s business across the continent. While Kenya’s Safaricom’s mobile money platform M-Pesa has won international plaudits and recognition, MTN, with less fanfare, has built a network of some 34.7 million Mobile Money subscribers as of last year in 15 countries. For example at MTN Uganda, Mobile Money is the fastest growing sector of the business. Its 3.5 million Mobile Money customers generated 17.2% of its revenue last year.
Shuter will no doubt be looking to build on that opportunity in larger markets like Nigeria. Though his current employer Vodafone, which has a stake in Safaricom, has previously tried to launch M-Pesa in South Africa without success.
For now MTN is officially staying mum on what the new boss will do. “In terms of strategy from the new CEO, he’ll have to clarify what our new focus will be,” said MTN spokesman Chris Maroleng.
In Africa, the lines between mobile and banking sectors are blurring faster than in the rest of the world. Many banks are already flocking to the mobile money industry and the success of Kenya’s Safaricom signals just how lucrative it can be when a mobile operator becomes a financial services provider.
“MTN has a good understanding of the mobile side of the business, if they get someone who has a very good understanding of the banking and financial sectors, especially retail, that would make it easier for them to converge the different sectors,” said Sibonginkosi Nyanga, an analyst with Momentum S.P. Reid Securities.
MTN needed an experienced executive to lead it across two continents and a major region (Africa, Asia and the Middle East) and 232 million customers said analysts. MTN’s Maroleng said Shuter was identified as the best candidate after an “extensive global search.”
But all the moving parts and complexity of its network have also made it slow to act in a fast changing industry, says Arthur Goldstuck, an analyst with World Wide Worx, a South African technology consultancy. MTN’s reaction to ‘over the top’ services like Facebook, WeChat and Whatsapp—which an MTN executive basically called a freeloader—has been lumbering and uncompetitive, according to Goldstuck.
“It’s been like a massive aircraft carrier with all these different country components on it but as a whole was too big to steer in different directions,” Goldstuck told CNBC Africa. “They’ve got to be open to a more nimble strategy and the ability to move more quickly and to shift their strategies in changing areas.”
If MTN was grooming a new leader from within the company, the record fine from Nigerian authorities and CEO Sifiso Dabengwa’s subsequent exit may have caught them off guard, said Nyanga. Still, judging by the recovery of MTN’s share price at the news of Shuter’s appointment, the market may well welcome a new face. “I think the market is willing to give him a chance,” said Nyanga.