MTN’s five years to 2022 BRIGHT strategy explained

You have probably seen an MTN advert or you are an MTN customer? Do you know the MTN game plan? What does it mean to you as a customer or stakeholder?

We took a few minutes to explore the MTN 5-year strategy, 2018 to 2022, to examine choices made, where to focus, and how to win. As a technology player, MTN reduced the planning period to just 5 years to underscore the everchanging telecoms environment. Take note that we know the confidentiality of companies’ strategic plans. This article is based on the MTN Group BRIGHT strategy briefing to shareholders which is published on the man group website. We are not (yet) MTN Group strategy consultants nor MTN Uganda strategy execution partners.

MTN has made a deliberate decision to win in the chosen markets. In 2018, MTN adopted the BRIGHT strategy to spur growth under the eight key pillars of focus – best customer experience, returns, and efficiency focus ignite commercial performance, growth through data and digital, hearts and minds of employees, and technology excellence. For effective execution, MTN developed specific targets per pillar to monitor performance.

By 2022, MTN aspires to:

B – best customer experience

1. The lead market in NPS, net promoter score, for improved customer loyalty.
2. Reduce monthly churn – reduce the number of people leaving the MTN network and subscribing to another network e.g. reduce the number of customers who drop their MTN cards in preference to Airtel.
3. Achieve the best brand in markets. MTN wants to remain as a top brand associated with innovation, social and environmental impact investment, and winning causes that transform communities. In Uganda, MTN has always championed Women in Business, Innovations, and ICT in schools. The company also has an MTN foundation which is funded by 1% of the MTN annual profits.

MTN has set out to revamp the customer experience and always be on the customer’s side. In Uganda, we have seen a lot of initiatives aimed at driving customer loyalty. Many of my friends have called concerned that MTN staff keeps calling them to change their SIM cards from 3G to 4G. They seek guidance on whether they should proceed and upgrade their SIM cards notwithstanding the political climate Uganda is in currently. They fear that could be a strategy for the government to tap into their communication. My answers have always been it is ok, you upgrade. If the state wants to tap into and you are a person of interest, the state will always achieve what they want. Since you don’t have anything to hide, upgrade enjoy a great 4G experience.

R – returns and efficiency focus

1. Improve ROIC, return on invested capital. MTN plans to take the bar higher in improving the return on capital. Telecoms are capital intensive businesses. MTN has embraced outsourcing network investment and maintenance to focus on technology, customer service, and people.
2. Report top-quartile TSR, total shareholder return – MTN plans to increase the total amount returned to investors. That way, it becomes attractive for equity or capital injection, which gives a multiplier effect as the company then has enough money to invest in new technologies. MTN has embraced an open approach to innovation and opened her APIs to innovators to create an ecosystem of apps and solutions to leverage on mobile money, which many see as the future game-changer of finance.
3. Increase AFCF yield, the Adjusted Free Cash Flow (AFCF) is a key measure for telecoms, and MTN plans to increase the free cash flow yield above the industry average for improved working capital.
4. Improve EBITDA margin, Earning Before Interest, Tax, Depreciation, and Amortization margin. To win, telecoms must focus on cost-cutting through efficient operations.  Traditionally, telecoms have a high-cost structure. And aspiring to improve the EBITDA margin is a great step to winning.

To win, MTN plans to leverage its existing scale and customer goodwill to win. Going forward, the focus is on cash flows and capital allocation based on return based. For this reason, the decision to divest from the Middle East market is informed by the need to put the dollar to where it generates the most profits. Africa has been and is still MTN’s best market. It makes sense to deepen market penetration even in the existing markets by offering better services through technology upgrades. The use of cheap capital remains a priority. MTN plans to save for re-investment.

I – ignite commercial performance,

1. Grow subscribers to 300 million. In telecoms, just like in any business, big numbers mean more revenue. An average telecom with 10 million subscribers makes about Ugx. 5 billion daily or the US $ 1.4m. Increasing numbers is a top priority for any telecom. To this end, MTN Group plans to grow subscriber numbers, while increasing retention.
2. Grow market share. Bigger market share means lower interconnect fees and so many other attendant factors. Telecoms what to control a big market in terms of the number of subscribers, as this gives overall long term benefits.
3. Ensure stable voice revenue. In telecoms, one of the key parameters that are tracked religiously is average revenue per user (ARPU). This is computed by diving total revenue with the total number of subscribers. The lower the ARPU, the lower the class of customers or poor mobile value-added services to leverage. As telecoms prepare for the possible introduction of mobile number portability (the ability of any subscriber to any network to use the services of any telecom provider in the market), means the battle shall go to the mobile value-added services as a retention strategy.  Growing voice revenue may be a good indicator of an active user. However, the real meat for telecoms is data revenue growth driven by other value services customers adore like mobile money, music, and video downloads. We expect more investments by telecoms in streaming services as well as partnering with streaming companies like Netflix, Apple, etc to increase data usage.
4. Grow enterprise and wholesale revenue. MTN is launching wholesale business models for various products and services. This is a new sales model to spur growth. For long, the company has focused on retail. To achieve this, MTN has developed packages for specific segments like SMEs, large businesses, and other similar offerings. Automating these offerings to make it easy for customer order fulfillment and service delivery would be a real gamechanger for MTN.

G – growth through data and digital,

1. Achieve 200 million data subscribers. As explained above, numbers mean everything. Telecoms make more from enabling Internet access by selling ‘data’ to users. To this end, various internet bundles are available on the market. In Uganda, MTN introduced the ‘work from home bundle’, that goes for about US $1 or Ugx. 3500 and runs from 9 a.m to 5 p.m. This bundle has been popular. Customers get 1 GB of data between that period. If you finish the allocated 1 GB before the day end, you must load another. If you don’t complete the 1 GB by the day end, you lose everything. This kind of pricing and data bundle offers helps telecoms realize revenue instantly.  For example out of the 10 million subscribers, if 1 million subscribed to the daily work from the home bundle, that represents revenue of US $1m – just like that. And never mind, sometimes you could subscribe, and the network goes off for the whole day, but it is difficult to get a refund!
2. Achieve 100 million digital subscriptions, including 60 million for MTN Mobile Money. MTN continues to deepen innovations around mobile money. Growth in subscriptions provides sustainable growth.

To make the above happen, MTN is positioning as a media and entertainment gateway. A lot of initiatives and projects are underway. MTN launched the music app. Plans are underway to introduce the MTN prime, a TV channel with curated videos and local movies to facilitate access to the great content on demand. Other than going into movie productions like what Apple and Nextflix do, MTN plans to partner with leading local producers to allow subscribers to access their art at a low cost. This will give a win-win position for all involved.

Most important, MTN plans to scale up mobile financial services. In Nigeria, MTN obtained a license to operate micro-financial services from the financial regulators. We see the same thing happening in other markets in which it operates. These developments will make the market interesting. The future is bright indeed.

H – hearts and minds of employees, and

1. Lead market in employee NPS. The net promoter score – measures the loyalty of the company’s customer relationships. In this context, MTN uses this indicator to measure employee satisfaction and loyalty to the brand in terms of customer satisfaction.
2. Improve employee engagement – develop a high-performance culture and talent.
3. Enhance reputation – by managing the reputation of the brand.
4. Ensure effective risk and compliance practices. Set up risk management, transparency, and governance processes across the board.

It is not easy to win people’s hearts and minds. But it can be done with deliberate focus. MTN plans to be an employer of choice through attracting and retaining the best talent, as well as create a culture of excellence. Since 2018, MTN Uganda for example has been offering generous incentives to long-servicing staff interested in moving on to start new challenges. This was intended to break an old culture and a mentality of “we are the people who made this company.” Going forward, new people have been recruited and immersed in the new MTN culture where technology and agility are the drivers of change.

T – technology excellence

1. Lead market in network NPS.  MTN wants to be known as a network of choice. In telecoms, patrons or subscribers want a reliable network, not that one which drops the network in the middle of a zoom call. You know the feeling it gives – suddenly the presenter goes off-line, and the rest are left stranded. This calls for a network upgrade. Strategic partnerships with top network providers and service support are likely to happen as the group.
2. Increase the efficiency of customer-facing systems. MTN is harmonizing capital expenditure planning across the group to improve return on investment and optimize shareholder value.
3. Increase population coverage. The company is scaling up the network through strategic partnerships. A lot of the MTN network expansion work has been outsourced to partners like Huawei. This has given the company the much-needed peace of mind to focus on what they know best: customers experience management.
4. Improve network quality. A lot of digital transformation is taking place. The starting point has been investment in the digital core –the required infrastructure and capabilities to win. Then roll out of solutions that respond to the needs of the respective markets.

The strategy is making choices to win. In the six pillars, MTN Group has made distinct choices, if well-executed, growth is possible. In this COVID-19 era, winners must be agile and embrace innovation. One of the challenges of MTN has been slowed decision making and the inability to see telecom business as an ecosystem of sorts that creates a platform for the rest to leverage on. These are some of the issues that must continuously be fixed to win.

As they say, a strategic plan document is a commodity. Execution is an art.

We will update you when the strategic execution period ends.

References: MTNN-Q1-2019-local-analyst-presentation

Copyright Mustapha B Mugisa, 2020. All rights reserved.