EDITORIAL: MTN retreat could cause its advance
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A sharper focus on its home continent could be just what MTN needs to reclaim its position as Africa’s second most valuable mobile phone company.
The company, Africa’s biggest mobile phone operator by subscribers, unveiled plans last week to withdraw from the Middle East, rightly scaling back its ambitions to become one of the major players in emerging markets.
Outgoing CEO Rob Shuter follows in the footsteps of companies such as Standard Bank, which has been reversing a strategy to turn itself into a top emerging-markets lender after entering markets such as Russia and Argentina.
Bar the Covid-19 impact, which is widely accepted as a black swan event, Standard Bank CEO Sim Tshabalala’s pivot back to Africa is paying off. In the 2019 financial year, the leadership team at Africa’s biggest lender by assets held up operations outside its home market as the bright growth spot.
The region delivered a more than 50% jump in headline earnings, which was more than 13 times the rate of growth at home, where it makes about 70% of its sales. Headline earnings is the widely used measure of company performance that strips out one-off, non-trading items.
Sure, the Covid-19 economic contagion will crush these numbers for Standard Bank when it reports its half-year results later this month, but no market, including at home, is safe.
It makes sense for MTN to refine its strategy and pull the plug on markets that have proven more trouble than they are worth. Until last week it seemed committed to its emerging-market strategy, and few would have thought it was about to exit Iran, its third-largest market.
The company makes just more than 4% of its R64.1bn annual core profit — or earnings before interest, tax, depreciation and amortisation (ebitda) — in the Middle East, a region that comprises conflict-ridden countries such as Yemen, Iran, Syria and Afghanistan.
But the cost of operating in these countries has been enormous, especially for shareholders. Shares in MTN, valued at about R117bn, have dropped more than three-quarters from their peak in 2014, wiping off tens of billions of equity.
Legal battles
With a market cap of R177bn, Kenyan rival Safaricom is now behind Morocco’s Itissalat Al Maghrib and Vodacom as Africa’s third-biggest mobile telecom group despite MTN boasting more than seven times more users.
Furthermore, legal battles in the Middle East have not only tested the commercial logic of keeping ...
The company, Africa’s biggest mobile phone operator by subscribers, unveiled plans last week to withdraw from the Middle East, rightly scaling back its ambitions to become one of the major players in emerging markets.
Outgoing CEO Rob Shuter follows in the footsteps of companies such as Standard Bank, which has been reversing a strategy to turn itself into a top emerging-markets lender after entering markets such as Russia and Argentina.
Bar the Covid-19 impact, which is widely accepted as a black swan event, Standard Bank CEO Sim Tshabalala’s pivot back to Africa is paying off. In the 2019 financial year, the leadership team at Africa’s biggest lender by assets held up operations outside its home market as the bright growth spot.
The region delivered a more than 50% jump in headline earnings, which was more than 13 times the rate of growth at home, where it makes about 70% of its sales. Headline earnings is the widely used measure of company performance that strips out one-off, non-trading items.
Sure, the Covid-19 economic contagion will crush these numbers for Standard Bank when it reports its half-year results later this month, but no market, including at home, is safe.
It makes sense for MTN to refine its strategy and pull the plug on markets that have proven more trouble than they are worth. Until last week it seemed committed to its emerging-market strategy, and few would have thought it was about to exit Iran, its third-largest market.
The company makes just more than 4% of its R64.1bn annual core profit — or earnings before interest, tax, depreciation and amortisation (ebitda) — in the Middle East, a region that comprises conflict-ridden countries such as Yemen, Iran, Syria and Afghanistan.
But the cost of operating in these countries has been enormous, especially for shareholders. Shares in MTN, valued at about R117bn, have dropped more than three-quarters from their peak in 2014, wiping off tens of billions of equity.
Legal battles
With a market cap of R177bn, Kenyan rival Safaricom is now behind Morocco’s Itissalat Al Maghrib and Vodacom as Africa’s third-biggest mobile telecom group despite MTN boasting more than seven times more users.
Furthermore, legal battles in the Middle East have not only tested the commercial logic of keeping ...
