Price hikes loom as MTN sheds Eskom

MTN will temporarily halt building new network sites and rolling out 5G to focus on installing back-up power, with the costs resulting in higher data and voice prices for consumers. 

“We are building infrastructure to enable us to self-provision” electricity, MTN SA CEO Charles Molapisi said in an interview this week.  

The company's capital expenditure for this year is R9bn, with about R1.5bn to R2bn of that expected to go towards its “network resilience programme”, which includes installing solar power, batteries, generators and circuit breakers at its base stations to ensure uninterrupted network availability during load-shedding. 

There was an 8,8% decline in voice revenue in the year to December as load-shedding affected network availability and some business functions that hampered customers’ ability to recharge and upgrade their packages.

MTN has called in American Tower Corporation, which owns and manages wireless infrastructure, and Chinese firm Huawei to help achieve its aim to be off grid at most sites. 

New York Listed IHS Towers, which completed the acquisition of MTN SA towers for R6.4bn last July, will also play a key role in the programme. Each company will be allocated thousands of sites to focus on. 

“We brought in partners to help close the gap and accelerate the resilience,” said Molapisi. 

By the end of February, 3,253 sites had been upgraded, and a further 3,606 sites are still to be upgraded. The target is to complete the process by the end of May, enabling significant improvement in network availability in the second half of the year, MTN said in its financial results. 

Molapisi said 5G network rollout plans will not be completely stopped and are reviewed on a monthly basis, as network projects are “fluid”. 

MTN has about 1.2-million customers connected to the 5G network. “There is an increased adoption of 5G, though we can't quickly ramp up the coverage this year as we wanted to.”

In the year to December, MTN SA increased total customer numbers by 1.5-million, taking the total to 36.5-million.

Molapisi sees the company’s network resilience project as an opportunity for job creation and training. IHS Towers in Nigeria employs 30,000 people, runs 17,000 sites with 90% off the national electricity grid, and provides 99.7% network availability. 

“We are now building our network that way. To do that we are working with and mobilising small businesses in the engineering space, and young people who can be trained to work with some of our partners.”

MTN wants to recruit electrical engineers expert in implementing alternative energy sources at cellphone network sites from countries such as Nigeria and Ethiopia to help with the transition and will apply for special visa dispensation. 

Molapisi said recruits from outside South Africa would help transfer skills to locals. 

For consumers, the increased costs the company is incurring to ensure connectivity will result in higher prices. MTN has already increased prices for its contract packages.

Molapisi said prices will be increased but “we will be practical on how we price so that we don't squeeze the lower end of the market”.

High inflation and interest rates weigh on consumers’ disposable income, especially those in lower-income brackets. This shows in changes in airtime and data buying patterns, said Molapisi. Customers are downgrading to lower data packages and recharging at lower amounts.

Molapisi said the company would look at introducing different bundles to cater for the change in consumption. 

He said MTN SA was also facing challenges such as currency devaluation and forex losses as some of its debt is in foreign currency, and inflation on materials while traffic on its network continues to rise, requiring continuous investment. 

“If we don't pass [on] some of these costs it will become difficult for the sustainability of the business. We have to take the price up,” he said.

Although MTN will increase some prices, Molapisi said the telecoms sector has over the years reduced the overall price of data by 30%. 

“We have perpetually been bringing prices down and at some point we must look at how sustainable this will be.”