MTN's R1bn MNP pay-off in South Africa

Mergers, Acquisitions and Financial Results

MTN Business expects 30% of its entire revenue to come from government spend in the near future, and is looking to mobile number portability (MNP) as a way to achieve this.

According to MTN Business, government is one of the largest ICT spenders in SA, with its entire annual ICT expenditure totalling about R16 billion per year.

The MTN unit says it is set to make its first billion rand in revenue government porting within the next 24 months, having already ported about 10,000 government workers to its network since the inception of MNP in November 2006.

MTN Business national sales manager for government Muzi Dlamini says, while MNP has proved to be a damp squib for most cellular operators in the consumer space, MTN is exploiting it to grab a slice of the high-end government market.

“This year, we are starting to see a return on investment,” says Dlamini, explaining that the company's involvement as technology sponsor of the first two State IT Agency (SITA) GovTech conferences, in 2006 and 2007, gave it the opportunity to canvass government clients.

“MTN was late coming into the government space and all government employees already had phones.”

He explains that Vodacom's first-to-market dominance simply gave it the upper hand. “MNP was a survival strategy for MTN and chasing it became a determined effort. MNP has proved to be the single largest factor in ensuring MTN's success in winning new government business.”

As to its value proposition, Dlamini says MTN offers customised solutions for its state clients, as well as a strategy to grow staff numbers in response to an expanding client base, to offer a steady level of service. However, he would not be drawn on specifics of MTN's government offerings, such as details of government-specific packages or contracts.

MTN Business' drive has culminated in a number of significant ”wins” since 2006, including SITA (3 000 ports in 2008), the Department of Transport and Works (900 ports in 2007), the City of Johannesburg (2 700 ports in 2007), and the Department of Land Affairs (2 600 ports in 2008).

Other deals include the Department of Science and Technology, Ekurhuleni Metro, Pikitup, the Office of the Public Protector, and the Department of Justice and Constitutional Development.

Dlamini is confident MTN Business will realise its government revenue target of R1 billion within the next two years. This includes the total number of connections multiplied by the average revenue per user, and excluding additional possible revenue resulting from areas such as value-added services, upgrades, infrastructure, VPN, APN and bandwidth.

MNP was not as successful as expected in the consumer space, with the 2007 Mobility Study (a year after the introduction of MNP) indicating only 10% of consumers across all networks were willing to port.

While MTN's MNP drive would imply lost revenue for other cellular providers, Vodacom, Cell C and Virgin Mobile would not comment on their MNP gains and losses at the time of publication.

Number Portability Company GM Clive Fagan would not confirm MTN's claimed porting successes, but says MNP has been progressing “steadily” since inception. “We port about 12,000 to 15,000 people a month,” he says, but explains he is not mandated to disclose the winners and losers in this process.

He says the main inhibitor to porting remains contract lock-ins, while the motivators are difficult to pinpoint, as the differentiation between operators, in his opinion, is “much of a muchness – there are no huge cost differentiators”.