From the Group President and CEO

Overview

Any period of economic uncertainty tests the strategic vision of an organisation and exposes the robustness – or otherwise – of its business models. While the MTN Group did not escape its share of challenges during the economic downturn, it continued its strong operational performance across the Middle East and Africa.

Our strategic agenda is to be the leader in telecommunications in emerging markets

With the majority of the Group’s earnings sourced in markets outside South Africa, any adverse moves in the currencies of those markets compared to the currency in which it reports its results – the rand – have a substantial negative impact on the Group’s financial results.

The Group continued to execute major infrastructure roll out projects, which substantially enhances the quality of the network. This also facilitates growth in subscriber numbers.

MTN maintained or grew its market share in most of its jurisdictions, although average revenue per user (ARPU) per month declined across most operations. This is not unusual as ARPUs typically drop as more people at the lower end of the income spectrum are able to own a mobile. However, MTN believes there is still significant growth to be had across its footprint and the demographics of the markets also support this.

While working to reduce capital and operational costs, the Group also continues to find new ways to augment growth in revenues and offer customers more features such as data, money transfers and value-added services.

Strategic Agenda

MTN’s strategy is built on the following three pillars:

• consolidation and diversification;
• leveraging our footprint and intellectual capacity; and
• convergence and operational evolution.

Consolidation and diversification

MTN believes that consolidation in the sector will continue. The success and sustainability of mobile communication operations in the face of growing competition will be determined by:

• achieving better economies of scale; and
• spreading earnings and risks over more markets.

When considering any transaction MTN thoroughly evaluates it, to ensure that it is a good fit and is in the interest of shareholders. We continue to identify meaningful transactions and our comparatively low level of gearing enables us to consider potential acquisitions with confidence regarding the Group’s ability to finance such transactions.

Leveraging MTN’s footprint and intellectual capacity

MTN has established itself as a truly global brand and our strategy is to leverage the brand and widespread presence to achieve sustained growth and more operational efficiencies. One of the ways in which the Group has done this is by securing more competitive pricing from vendors.

Another important objective is the standardisation of IT architecture as well as to continue to pursue opportunities to unlock value from its enhanced network capabilities.

Over the years, MTN has built up a strong core of valuable skills, experience and passion in its team of staff. This intellectual capacity can be leveraged to facilitate increased knowledge share and skills transfer across the business and providing staff with opportunities for growth.

Convergence and operational evolution

Mobile operators will increasingly be required to provide seamless internet-based connectivity and services. MTN has already done the groundwork by:

• upgrading the GSM network to one based on internet protocol;
• securing WiMax licences and establishing services using this technology;
• rolling out the most modern fibre transmission facilities;
• securing significant bandwidth on high-capacity submarine cables;
• purchasing 3G licences and ISPs; and
• establishing its own ISPs.

To support the convergence of technologies, MTN has worked to evolve its product offering and together with strategic partners, our markets will gain access to a host of globally popular products including music, sports, games, entertainment, news and much more.

The evolution of the business model is expected to take coverage infrastructure from a fully owned network basis to an outsource-based or infrastructure sharing model. This will provide the Group with additional avenues to carry international voice and data traffic and lead to a reduction in costs as well as an improvement in the service quality.

Prospects

Competition across our footprint is likely to continue to increase but MTN has ambitious goals and significant opportunities. With careful planning and wise decision-making, the Group can continue to achieve good growth.

There will be continued investment in fibre and cable to service its evolving voice and data requirements and MTN is still pursuing opportunities for infrastructure sharing. Within a dynamic environment, MTN will continue to strive for sustained or improved profitability.

In South Africa, MTN is still committed to the implementation of its BEE transaction.

Signs of the increased momentum towards real convergence are evident with Smartphones, among other products, becoming increasingly important. This exciting new phase in mobile telephony is really about enabling other sectors to function more efficiently and effectively and MTN believes that the industry in Africa is going to take the lead.

Appreciation and closing I would like to applaud MTN’s employees for the enthusiasm with which they live MTN’s shared values of leadership, integrity, innovation, relationships and a “Can Do” attitude. I would also like to thank our customers and the communities in which we operate for constantly demanding the best value proposition in the market from MTN. A note of thanks goes to our suppliers, as well as the regulators with whom we engage. We look forward to working together to achieve further growth in this dynamic industry.