MTN sees turning point for voice revenue

MTN South Africa believes the long decline in voice revenue is finally nearing a turning point, offering the operator relief from one of the biggest structural pressures on its core business as it shifts its focus to data, digital services and home connectivity.

MTN voice penetration in South Africa was historically far higher than in many of its African markets, leaving the operator more exposed to the erosion of traditional calling revenue.

CEO Ferdi Moolman said the country’s voice revenue declines are beginning to stabilise after years of customers migrating to data-based communications. “I do think voice has reached the inflection point in South Africa. We’ve probably reached a point where voice is bottoming out,” he said in an interview.

He said South Africa differs from most MTN markets because a larger share of customers traditionally relied on voice services. That left MTN and rival Vodacom with more legacy voice revenue at risk than competitors such as Telkom, whose mobile business was less dependent on voice.

The company said voice revenue declined by 10.2% in the half year, as consumers increasingly migrate from out-of-bundle usage to bundled offers and pure data use, as well as adopt VoIP (voice over internet protocol) and digital messaging platforms in place of traditional voice services.

While voice continues to decline as consumers adopt messaging platforms and internet-based calling, Moolman is not ready to write off the category entirely.

He believes MTN still has opportunities to improve voice quality and customer experience rather than treating voice as a commodity product. “I’m still personally quite passionate about voice. There is still work we can do on voice quality,” he said.

The company expects a recovery in its prepaid business as it restructures its customer base to focus on quality customers and reduce dependence on airtime credit.

Moolman said MTN had consciously reduced its exposure to its “Extra Time” airtime advance product after becoming concerned that some prepaid customers were accumulating unaffordable levels of debt.

At one point, MTN’s airtime advance exposure reached as much as R800m. The company has since reduced that to between R400m and R500m while improving repayment rates.

Moolman said the recovery rate on airtime advances had improved from around 50% to more than 70%. The broader objective, he said, is to prioritise quality customers.

He said operators have flooded the market with SIM cards despite South Africa’s population of about 60-million people. MTN alone was previously distributing about 90-million prepaid SIM cards a year, while industry-wide volumes could reach between 200-million and 300-million annually.

The company believes much of that activity generates unsustainable revenue and raises concerns about the quality of customer registration data in the market. Many South Africans have multiple SIM cards. As a result, MTN has introduced stricter controls around prepaid customer acquisition and SIM registration.

Among the measures is a limit of 10 SIM cards per customer registration, while dormant SIM cards that are not activated within 30 days must be re-registered.