WHEN MTN issues its results for the year ending March 2004 next week, it should report a small, but increasingly healthy, profit from its operations in Cameroon.
The west African country tucked quietly beneath its far more frenetic neighbour, Nigeria, has so far contributed only fractionally to MTN`s operations. But it is proving a nice little earner after a management reshuffle, an overhaul of the network infrastructure that MTN bought into, and major marketing efforts to paint the country yellow with MTN`s corporate colours.
For the six months ending September last year, MTN Cameroon posted a revenue of R492m and a profit of R96m. That made it MTN`s third most important country after SA and Nigeria.
Its profits vindicated MTN`s unusual decision to acquire an existing network rather than enter a country in its preferred method of starting from scratch.
This was also the first time MTN had entered a Frenchspeaking country, which also presented some barriers, but the results next week should show that all obstacles have been cleared and that MTN has a rich opportunity to make headway.
MTN really had no choice. It was outbid for Cameroon`s second cellular licence by its French rival Orange. The only other way to acquire a licence was to buy up Camtel Mobile, the loss-making cellular arm of the state-owned monopoly operator Camtel.
MTN paid $83m for Camtel Mobile in 2000 when the network had 6000 subscribers, many of whom did not pay their bills, said Ron Allard, the CEO of MTN Cameroon. "We have changed everything since we have been here, so it was a high price to pay. Camtel Mobile has been turned into an aggressive, competitive machine. I`m not saying it was a mess, but we needed to solidify the financial structure and become more commercial."
MTN owns 70% of the business, with 30% held by a local partner, Broadband Communication. So far it has invested $208m in the network, and now spends about $30m a year on network expansions. Its network already covers all 10 provinces and 68% of the population, and its current goal is to reach towns with 50000 or more inhabitants.
At this stage, cellphones are confined to a rich elite, reaching just 6,1% of the 16,5-million population. MTN estimates that the overall subscriber base will hit 2,6-million in time, or 16% of the population. But it has dramatically underestimated the take-up in most other countries it has entered, and Cameroon may be no exception. However, first the prices must fall. Neither network subsidises the cost of handsets, so users must pay about R540 for a run-of-the-mill model.
Even so, Cameroon has 1,2million subscribers, of which MTN claims 54%. Each spends an average of $23 a month, and MTN alone is signing up 10000 new users each month.
Allard admits the operators are under pressure to cap their tariffs. "There is pressure from the regulator and the prime minister`s office to do what we can to help more people communicate and we are doing our utmost to reduce our costs. But we also have obligations to meet as a corporation with shareholders, bearing in mind that if you are investing $30m a year you have to cover those costs. It`s hard to explain to consumers why it`s costing them 250c (R3) a minute to make a call when they don`t see the $200m investment behind it."
Jean Louis Beh Mengue, director-general of the regulatory authority, Agence de Regulation des Telecommunications, agrees that he is leaning on the operators to cut their fees. "We must be sure the tariffs of these companies can be paid by the users, taking into account the level of wealth in our country," he said. "We`re benchmarking against other countries that are comparable to Cameroon to see if our fees are too high, to make sure the prices are not exploiting the users."
Cameroon`s fees were at the high end of the scale, he said, although they were falling year-onyear as the customer base increased . "We are seen in a bad light by the operators for trying to cap their prices and we are seen badly by consumers for not bringing down the prices quickly enough, but we have to make sure the operators remain profitable and get a return on the investment they are expected to make. That means we can`t force their prices to be too low."
While MTN battled to turn around Camtel Mobile, the state of the national operator is now playing in its favour. The government has long been trying to privatise Camtel, and has awarded a third cellular licence to Camtel to sweeten the deal, yet it has failed to attract any serious interest.
Anyone now wanting to compete against MTN and Orange can only do so by taking over Camtel and that is not seen as an overly attractive option.
"Camtel must be privatised and two or three years ago some companies wanted to buy it, but in the end nobody was retained," said the regulatory authority`s Beh Mengue. "Now they are trying to rehabilitate the network to make it better so the company which buys it has good equipment. It has been given two years to make that a reality."
That leaves MTN and Orange smiling. "The state of that operation is such that I can`t see them selling it any time soon," said Allard. "And because the third cellular licence is tied to it, I can`t see a third licence any time soon |
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