MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK
MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK

Enzo Scarcella, chief operating officer of MTN South Africa, goes to bed at night with one figure on his mind: 5.6%.

It's the figure MTN is going to have to match or surpass to gain ground on Vodacom. The 5.6% is Vodacom's service revenue growth - which excludes revenue from selling devices - a number Scarcella is committed to surpassing. MTN's service revenue growth is 1.9%.

The numbers are not strictly comparable, as Vodacom's financial year is to March 31 2017 and MTN's to December 31 2016, but they do show the gap.

South Africa and Nigeria make up two-thirds of the MTN Group's revenue, but the picture has not been bright in recent years. The focus had been on Nigeria, as its economy was spurred on by the oil price. But the fall in commodity prices, coupled with the hefty fine MTN had to pay the Nigerian government, hit this operation hard and has put pressure on the South African business to perform.

Scarcella said he was optimistic about the growth potential of the company he joined last year, along with CEO Rob Shuter.

"I think Vodacom over the past three, four years have squeezed a lot of value out by being very good. Their path to growth is a lot harder because they have done the hard stuff. I think we have upside, I really do."

Infrastructure investment

In the past two years MTN has invested heavily in infrastructure in South Africa to improve its network. Scarcella said this had paid off, helping erode Vodacom's competitive advantage. This week, MTN approved capital expenditure to improve analytical engines - which send SMS prompts to users to buy data bundles, for example - to improve its sales.

One analyst, who could not be named due to company policy, said MTN was in a difficult position because it was playing catch-up with Vodacom.

The instability of management at MTN over the past 10 years had hurt it. "Telecommunications companies are in a very tough spot, with the economy the way it is."

There are big gaps between the competitors. Scarcella said Vodacom had more stores, and they were better located - which gives it 50% to 60% more post-paid points than MTN where customers can buy a contract.

He also admitted that Vodacom has access to cheaper devices thanks to parent company Vodafone, and there is a perception that its infrastructure offers better reception.

Scarcella attributed MTN's shortcomings to its lack of adaptability. "As the industry has gone from being voice-driven to being data and voice, we have probably been a little slow off the mark, as it has gone from being an acquisition [of customers] business to being a retention and value-creation [business]."

To fix the problems, MTN is looking inside and outside the group. From its Ugandan business it has brought senior executive Mapula Bodibe to boost the prepaid segment, and Nico Jacobs, former chief operating officer at McDonald's South Africa, will join MTN this month to focus on stores and franchises.

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