Investing In Africa

MTN: Investing in Africa

Around the 1980's mobile telephones started showing up for commercial use. They were analog style, cumbersome and expensive to purchase. In the 1990's digital technology was born and mobile phones became readily available to everyone and less expensive than the previous ten years. By 1998 over 30% of the world population within the areas of Europe, Asia, and North America had mobile telephones.

With this type of usage of mobile telephones, Mobile Telephone Network plc (MTN) was born in 1993 attempting to earn their share in the South Africa market for mobile telephones. By 1999 MTN had over 1.3 million subscribes in South Africa. MTN is only one of three in the southern hemisphere to receive the ISO 9001 Certification for Highly Qualified Service. MTN is also one of only two mobile phone operator services in South Africa. The competition is a company called Vodacom.

A meeting was held in Johannesburg in 1999 to decide if MTN should go global. Globalization refers to markets and production. Globalization also refers to the merging of separate national markets into one global marketplace. Most global markets products are now industrial goods and materials that serve a universal need the world over. As companies grow beyond domestic to international areas they bring many of the assets that served them well. Such as the product, operating and marketing strategies, and brand name. With this in mind MTN's key issues to be discussed included:

 Should MTN attempt additional foreign entries?

 How should MTN assess the eleven countries open for bid in the next year? Along with which countries are the more promising?

 What should MTN do to prepare for successful international growth?

MTN, in late 1999, was already in the process of securing a license in Nigeria. After securing the license, MTN planned to go live in Nigeria in a 6 month period. 20 to 30 expatriates had already been selected and were prepared to begin roll-out of business and services as soon as the license was in place. There were a number of reasons for the urgency of this operation. The population of 129 million plus, this was a single license for MTN, Nigeria has a costal port attracting new ventures and Nigeria has a great amount of natural resources, which would indicate that the country has much growth potential, regardless of the corruption in government at the present time. Phone services could possibly be the trigger to help that country and that economy explode.

A SWOT analysis will show the strengths, weaknesses, opportunities and threats of MTN as they are related to MTN moving into market globalization.

STRENGTHS:

* MTN has had success in all it's current ventures domestically and with a few countries in Africa as well.

* MTN has competed for licenses and been the corporation to win the bid for licenses against larger corporations

* MTN has the technical expertise to start up new services and support those services

* MTN has established excellent training practices and become aligned with ISO 9001.

* MTN has been able to supply services consistently under less than ideal circumstances

* MTN has been very profitable in its initial ventures.

WEAKNESSES:

* MTN must be able to retain current employees, while training new employees. While other competitors are attempting to recruit.

* MTN must control all costs to insure international success.

* MTN must choose countries which are more likely to succeed, based on barriers of language, culture, economics and geography.

* MTN must be able to assess quickly a country's rules of engagement and respond appropriately.

OPPORTUNITIES:

* Other countries of Africa are virtually an open market where MTN will be the first phone system there.

* MTN can establish brand loyalty from the first phone having reliable and economical services.

* As MTN successfully establishes their corporate reputation in each country, it makes entry into the next country much easier.

THREATS:

* Each new country entered will present new challenges of entry such as different languages, tribal laws or politics, and local geography.

* Difficulties with installation and maintenance of new stations and equipment.

* Unknown quantities of resources may be depleted with each country added, over and above the normal or planned

cost of the project.

* MTN must train enough people to provide services and be able to retain those individuals.

* Competitors may undercut pricing to gain market share.

Following Nigeria the countries that MTN are interested in are Cameroon, Ethiopia, Gabon, Ghana, Kenya, Malawi, Mauritius, Mozambique, Senegal, Zambia, and Zimbabwe. MTN's first key issue holds many facets in determining entry into the other foreign countries. The main areas of concern include, but certainly not limited to, cost, culture and ethics.

Cost

To determine if a country will be profitable in the long run, MTN must review all benefits, costs and risks involved. The eleven African countries MTN's is investigating are considered to have a relatively small economic market because of their low living standards and small purchasing power.

However, 6 of the 11 countries, Gabon, Mauritius, Senegal, Cameroon, Mozambique and Ghana, are on a coast or have a costal port. Geography in these countries insures they have markets and access to export goods through out the world. Telephone services would only help that type of industry take hold.

The other 5 countries, Ethiopia, Kenya, Malawi, Zambia and Zimbabwe, are either directly connected to South Africa physically, or are connected with a country that has already been in MTN