Tuesday, May 5, 2015

Why MTN can afford not to give a hoot (*if it wanted to)

Promoting MTN marathon 2013 with former CMO Ernst Fonternel

Every now and then, customers of MTN Uganda take to social media their complaints of the bad service that the company provides. The last social media field day happened towards the end of last year under the hash tag #occupyMTN. The complaints touched a wide spectrum of short comings in its service delivery like customers being charged double for transactions and of course slow internet. 

As usual, the company issued a statement in which it claimed to have fixed the problem and reimbursed customers who had erroneously been double charged while processing a transaction. Believable though it seemed, I suspected it was nothing more than a PR stunt intended to calm people down.

Indeed in the weeks that followed, customers were at it again. I personally was neither able to withdraw mobile money nor purchase data bundles or get through to customer care for that matter(I am sure you can relate with my frustration). 

I made a funny tweet about it and that's about all I could do about the situation. If it was in the cards for me, I would gladly go with the other guys but I need my phone number and the other telecos are probably just as bad or even worse to a certain degree. 

But despite the ‘questionable’ service and negative publicity, figures indicated strong numbers for MTN last year. Which begs the question of why people are still so loyal to a network they claim to hate so much, in turn has given the network a competitive edge over its customers and competition.

Hopefully this article will paint a picture of why, 'big business' can afford to sit back, relax and provide a shitty service (*if it really wanted to).

Uganda Telecom's costly fumble

In 1977, Uganda moved away from the regional shared services model in which Kenya, Uganda and Tanzania collectively provided communication services, to establishing the Uganda Posts and Telecommunications Corporation (UPTC), a state-owned monopoly providing telecommunications.

After the passage of the communications act in 1997, UPTCL was divided into four entities among them; Uganda Telecom. By this time Celtel was the only other telecommunications operator that had received an operating license by 1993 and started operations in 1995. At the time, Celtel had already attracted close to 5,000 customers in the urban corridors of Kampala, Entebbe and Jinja.

The minister of Works, Housing and Communications at the time went further to sign a 15-year long none competitive close for the fixed line business to protect Uganda telecom’s monopoly. But that was the fumble itself.
Uganda Telecom did not realize that the future of communication was not in fixed lines but rather mobile. It was not until after MTN set up shop to give Celtel a run for it’s money that Uganda Telelcom finally realized its mistake but, it was already too  late, the two foreign companies had already dominated the mobile market and the rest is history.

it is arguable that, had Uganda Telecom moved fast enough to introduce mobile services to attract an initial critical mass, it is possible that a widely used state telecom service would translate into more value for money for customers and a wider tax base for government coffers.
But because Uganda Telecom failed to capture a sizable market share, customers prefer to stay on MTN to avoid the exorbitant inter-network connection tariffs. Which explains why, despite recent out rage over the 

Xenophobic attacks in South Africa, Ugandans cannot afford to boycott South African 

products because our home grown brands do not have the skill and financial muscle to go 

go against foreign 'big business'

The MTN brand is in a good position

MTN is leading in subscriber base with 10 million customers. A search through my phone book will reveal that 90% of my local contacts are on the network, which makes calls in the long run cheaper. Switching networks will not only cost me my phone number that I have had for the past 10 years, but my mobile expenditure will increase as well as a result of inter-network tariffs.

MTN interim financial results for the six months ended 30 June 2014, revealed that the company's year-on-year revenue growth stood at 6.8% and data revenue grew by 54.7%! In Telecommunication revenue mathematics, one data user is equivalent to 8 voice subscribers. Which means contrary to what peeps on Twitter think, MTN is growing it's data uptake.
MTN also recorded 28.5 million Mobile Money transactions per month.

Airtel is disadvantaged financially due to the acquisition of Warid last year and I suspect it spent a good chuck of ad revenue promoting Trace Music star which I imagine did not yield much in return of investment . Acquisitions can be messy business.

Orange was acquired by Africel, indicating its operations were not as profitable.

Lap Green, Uganda telecom’s holding company has been going through major restructuring to make up for the lost time incurred during the Libyan civil war in 2012, which saw temporary seizure of their 69% stake by the government of Uganda as part of sanctions against the regime of former leader, Muammar al-Qadhafi.

New kids on the block, Smart telecom and now Vodacom do not stand a chance against MTN’s total investment over the past 16 years into infrastructure, people and marketing.

In the end, it becomes apparent that even though we hate to admit it, that MTN did its home work. Touche.

The Celtel Paradox and the two of the less evils

When Celtel had a monopoly in the mobile cellular business, the service was considered a luxury and for the affluent class because of the exorbitant initial costs of buying a phone and the monthly service fee. It was considered elitist.

I remember watching an old MTN ad when the company had just launched, where an office man stopped by his usual shoe shiner station. As the shoe shiner worked to make the boss’ shoes spotless, the boss was busy bragging about his conquests in the corporate world. When all of a sudden a phone rung. Delighted as ever, the boss reached into his brief case to take the call. To his surprise, it wasn't his phone ringing. The shoe shiner, almost as though having forgotten he owned a phone, opened his equipment box to pick up his call. Which stunned the boss, seeing that his shoe shiner owned a phone.

Through lucrative advertising, MTN was able to position itself as the people’s network of choice, as opposed to Celtel that was perceived as oppressive. MTN was the first network to drop the service fee charge, which made the maintenance of a phone line on their network possible for many people who were not able to afford owning a phone line prior to this due to the monthly service charges.

Many years later, it’s ironic that now MTN is seen as the oppressive and elitist network that Celtel once was. It further does not help the situation that Celtel was later acquired by Zain which sold out to Airtel who in turn bought out Warid telecom.

Airtel’s inconsistent brand history has had serious implications on the network’s reputation and brand image which has translated into more leverage of brand equity for MTN. As proof every year MTN attracts 20,000 runners to its Kampala marathon that it has been running for the past decade, indicating its popularity, thus giving it an upper hand in the Telco business.

So in the end you can see why I am stuck on the MTN network. Thanks UTL.

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