History - Competitors - Regulation

the Nigeria Communications Commission Act establishing the Nigerian Communications Commission to regulate the telecoms industry " NITEL 3state monopoly incumbent 3 1 telephone to 440 people 1993 " NCC inaugurated - starts issuing licences for various services including provisionof payphone services, community telephone services 2000 " National Telecoms Policy 3 short & medium termobjectives to promote ICT 2003 " Privatisation process of NITEL commences -NITEL & M-Tel separation 2001 " DML auction 3licences granted at US$285 mill each to MTN and V-Mobile; M-Tel/NITEL 9s licence reserved " GSM services start in August 2001 2002 " SNO carrier licence 8auction 9 3Globacom granted licence at US$200 mill " Long distance carrier licences 3NEPSKOM & MTS 1 st Wireless " Regional Fixed Wireless Access Licences auction 325 cos awarded 50 licences 2006 " End of DML 8exclusivity 9period; introduction of Unified Licensing Regime " NITEL & M-TEL sold to TRANSCORP 7 Telecommunications Environment: Regulation and Market Structure " Nigerian Communications Commission (NCC) is the sector regulator 3 managed by a board of seven commissioners " Ministry of Communications exercises responsibility for broad policy formulation in the sector " Competition Commission proposed to manage anti-competitive behaviourin the Nigerian economy (yet to be passed into law) " 1 st national carrier (NITEL) is being set for privatisation " 2 nd national carrier (Globacom) is deploying fibreoptic backbone on specific routes " Mobile operators in operation include MTN, Celtel(V-mobile), Globacom, and Mtel(mobile arm of NITEL) " Long distance operators: SEPSKOM licencerevoked, MTS and three other new licenceesyet to commence operations " Fixed lincences: 109 fixed national/regional/community/local exchange operators 3only 13 in operation Regulatory structure Market structure 8 Telecommunications Environment: Competition 3Sept 06 Celtel Operating date -2001 as EconetWireless - rebrandedto Vodacomin Feb 2004 - rebrandedto V mobile in July 2004 - In Q2-2006 acquired by MTC/Celtelwith launch of Celtelbrand in September 2006 5.993m Motorola, Huawei, Ericsson Coverage411 towns Shareholders 65% CeltelInt 9l and 35% Local Shareholdings Subscriber (estimate) Suppliers Source: subscriber Numbers 3MTC H3 Reported; Coverage 3MTN Marketing Estimate 9 Telecommunications Environment: Competition 3Sept 06 Globacom Operating date -August 2003 -Second National Carrier from 2003 6.400m Alcatel, Siemens Coverage563 Towns Shareholders 100% Local shareholdings Subscriber (estimate) Suppliers Source: Subscriber & Coverage 3MTN Marketing Estimate 10 Telecommunications Environment: Competition 3Sept 06 Mtel Operating date -Licensed in February 2001 but became operational in March 2002 0.534m Motorola, ZTE and Ericssion Coverage144 Towns Shareholders Formerly owned by NITEL/Federal Government. Now Transcorp (75% holding). Subscriber (estimate) Suppliers Source: Subscriber & Coverage 3MTN Marketing Estimate 11 Telecommunications Environment: Competition 3Sept 06 Nitel Operating date Established in Dec.<br><br> 1984 and began operations in Jan. 1985 0.439m Siemens, Huawei, Ericssion Coverage Nationwide Shareholders Formerly owned by NITEL/Federal Government. Now Transcorp (75% holding).<br><br> Subscriber (estimate) Suppliers Source: Subscriber & Coverage 3NCC Reported and Global Insight database 12 Telecommunications Environment: Competition 3Sept 06 PTO Operating date A number of PTO 9s commercial in Nigeria with biggest Starcomms/ Multilinks/ Intercellular / etc 1.124m Huawei, Motorola, Nortel Coverage Depended on PTO 9s license (national / regional license) Shareholders Various local and foreign shareholders Subscriber (estimate) Suppliers Source: Subscriber & Coverage 3NCC Reported 13 MTN Nigeria: License, Shareholding and Operational Structure Ownership MTN International 382% Nigerian Partners -15% IFC 33% Operational dates Licensed: February 9, 2001 Operational: August 8, 2001 Capital Investment Total Amount: Just under N400 billion Digital Microwave Transmission (Y 9elloBahn) spans over 4,500km Fibre Optics Cabling, covering over 3,500km, total cost of aboutN13 billion ($100m) 2,426 BTS 32,398 Fixed and 28 Mobile Sites 578 Local Governments (LG) 374% of total LG in Nigeria 534,000 2 km 358% of Nigeria Landmass 95m inhabitants 381% of total population Coverage 14 MTN Nigeria: Operational structure 15 MTN Nigeria: Subscribers and ARPU History " Commentary " As at Sept 06, MTNN has 10.376m subscribers with a YTD ARPU of N2,372 (US$18) " MTNN is currently the market leader with ~45% share of the telecoms market in Nigeria " With the rebrand cMoving You Ahead dand the introduction of Xtra Product Plans MTNN has seen a positive impact on subscriber growth. Subscribers/ARPU Notes 1. Effective April 2005, MTNN implemented 90 day activity revenue generating base from previous used 30 day activity 2.MTNG changed financial year end from March to December, effective 2005 3.2006 represent quarterly ARPU realised Subscribers v Av.<br><br> ARPU 0.331.092.095.568.379.049.6410.38 N 9,362 N7,519 N6,936 N5,163 N2,843 N2,395 N2,364 N2,356 - 2 4 6 8 10 12 Mar-02Mar-03Mar-04Mar-05Dec-05Mar-06Jun-06Sep-06 Millions - 2 4 6 8 10 Thousands Subscribers Av. ARPU Market size of 35-39m subscribers by 2010 16 MTN Nigeria: Infrastructure Commentary " 2, 426 BTS 9s(at Sept 06 3incl28 mobile sites) and 41 MSC 9s " Geographic area = 534, 013 sqkm, 85% of landmass covered " Local governments covered = 578 of 777 " Population under coverage ~95m, ~70% of population " Completion of Y 9elloBahn, the company 9s digital microwave transmission backbone spanning over 4,500km at a cost of just under N400b. " Substantial completion of Blaze, currently 2,500km of live fibreoptic, which at completion will span 3,500km at a total cost of $100m.<br><br> " Investing in power solutions MTN well positioned for unified licenceopportunities 17 MTN Nigeria: Distribution " Service centres 3MTN owned " Connect stores 3third party owned " Retail outlets focused on service delivery " Contributes 1% of sales Wholesale channel Retail channel " Registered distributors 167 from 230 " Sub dealers 10,000 " Sub subdealers 30,000 " Retail points/hawkers 50,000 " Contributes 99% of sales Significant depth in channels 18 MTN Nigeria: Distribution Guu Jalingo Suleja Bida Kontagora MTN Nigeria Distribution Locations MTN Mapping Location Service Centres Connect StoresDealers Dealer Branches West77120250 East31360155 North284673 Total1228226478 MTN Call Centre SELFCAREYes IVRYes E-CareYes E-BillingYes Selfcare PortalYes USSDYes OtherYes Other Service(s) Connect stores Service Centres Call Centre Retail Mapping "Both service centres and connect stores are sparsely spread round the country "All service centres and connect stores have been concentrated only in major towns and cities. "Limited customer care retention opportunities 19 MTN Nigeria: Product Commentary " On 22 nd of September 2006, MTNN launched the XtraProduct Plans (Extraordinary Product Range) for both the contract and prepaid market 3a value proposition targeted at 5 prepaid segments and 2 contract segment " XtraProduct Plans, effectively reduced average call charges with ~20% as part of strategic repositioning to: " Improved value proposition " Improve customer perception and loyalty " Protect and expand market share " Support acquisition and retention strategy " Leverage market position " Increased traffic " Increased subscriber numbers may dilute ARPU Well timed repositioning& 20 MTN Nigeria: Key financial information Income statement 6 months ended [ZAR] million June 2006 Sep 2005 % change Revenue 6 3955 870 9 EBITDA 3 5903 063 17 EBITDA % 56%52%2 Profit after taxation 2 3172 02814 Commentary A focus on network rollout and cost saving initiatives resulted in strong margins but decreasing market share for the H1 period. This was not a conscious trade off as the market still has a lot of growth and MTN is positive about the opportunities this presents.<br><br> Consequently the end of Q3 marked the beginning of refocusing on brand, products and services as the market becomes increasingly competitive. 21 MTN Nigeria: Key Financial Information 3Tax holiday " MTN Nigeria awarded 5 year tax holiday through Pioneer Status effective 1 Apr 02 " Considerations on expiry of Pioneer Status " Deferred tax asset: During tax holiday deferred tax asset accumulated, to be released once MTN Nigeria becomes tax paying entity " Investment allowances: Investment allowances can be utilised reducing effective tax charge on expiry of Pioneer Status " Commencement provisions: Certain commencement provisions will apply increasing effective tax charge " Education levy: Education levy of 2% calculated on profits pre allowances, increasing effective tax charge Expected trends in effective tax rates % 0% 25% 50% 75% 1234 Accounting tax rate Dec-10 Dec-08 Dec-09 Dec-07 22 MTN Nigeria: Key Financial Information - Financing (As at Sept. 06) Foreign Facilities Facility 1 Lender: Standard Corporate Merchant Bank (SCMB) Facility: N5.4 billion Term: Long term, biannual payments & linked to LIBOR Lender: International Finance Corporation (IFC) Facility: N7.9 billion Term: Long term, biannual payments & linked to LIBOR Facility 2 Facility 3 Lender: Development Finance Institutions (DFI) Facility: N3.4 billion Term: Long term, biannual payments & linked to LIBOR Local Facility Lender: Consortium of Local Banks Facility: N49.1 billion Term: Long term, commercial tradeablepapers, linked to an average 90-day NIBOR and annual repayments 2007 311.<br><br> Facility 4 23 MTN Nigeria: Opportunities and Challenges " Unified licencepresents corporate and retail opportunities " Transmission and backbone way ahead of competitors, quality network " Ability to capitaliseon market share, visibility now increasing " Strong growth still evident " Ability to leverage brand (recent improvement due to repositioning) " MTN affiliation " Products " Brand " Best practice " Regional footprint \x2 Opportunities Challenges " Continued network challenges in certain areas (eastern region) incluptime, quality. " Infrastructure 3Power, roads and security " Election in 2007 " Interconnect -bad debts " High import duties : 24 MTN Nigeria Foundation OBJECTIVES: Health " To alleviate the health challenges facing the country through partnerships. " To contribute to the national awareness campaign on HIV/AIDS.<br><br> Education " Bridging the knowledge and digital divide " Enhance educational infrastructure development " Provision of educational resources for effective learning Economic empowerment " Improving the economy by empowering Nigerians through: " Skills acquisition, training, micro-financing, capacity building, " Establishment of businesses, provision of shelter 25 MTN Foundation Projects - The University of Lagos Reference Library 3 cBefore d 26 MTN Foundation project - cA Transformation d cBridging the Knowledge and Digital Divide d The MTN Foundation UniversitiesConnect Library at the University of Lagos 27 MTN Foundation Projects - cProvision of Shelter d 3A Prototype House MTN Foundation-Habitat for Humanity Low Cost Housing project New Karu, NasarawaState. 28 MTN Foundation Projects - cEmpowering Women d 3 Phone Ladies beneficiary of the MTN Foundation Rural Telephone Project in a rural community 29 MTN Nigeria: Opportunities and Challenges Spill-over benefits of GSM: \x3 National spread and rural penetration: Mobile services available in all 36 States of the Federation, over 50% of LGAs and in at least 15,000 towns, communities and small villages \x3 Increased tele-access: average waiting time from 100 days pre-GSM era reduced to about 30 minutes \x3 Cross-Industry linkages: a direct impact on the development of other key industries 3Financial services, Oil & Gas, Agriculture, Maritime/Shipping, Trade & Industry etc. \x3 Increased turnover for advertising and marketing services \x3 Boost to the banking sector turnover: loans and advances, Increase in m-commerce & m-banking services \x3 Astronomical increase in traffic volume for other private telecom operators \x3 Contribution to Nigeria 9s GDP : 5.46% contributions (Telecoms) in 2005.<br><br> \x3 Economic empowerment & business efficiency : growth in SMMEs& improved business information \x3 Enhanced family & social relationships Source: ubscriberNumbers 3MTC H3 Reported; Coverage 3MTN Marketing Estimate 30 Thank you Questions?

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