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Plaudits for Nhleko, but ‘it is time to go’
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Simon Mundy
Business Day
Tuesday, March 02, 2010
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Phuthuma Nhleko’s eight years as MTN CEO have been a period of stupendous growth for the company. Nhleko will leave in March next year, he announced yesterday.
Thanks largely to his relentless ambition, MTN is well established as Africa’s biggest cellphone operator, with more than 100-million subscribers on the continent and in the Middle East. The MTN Group — only 16 years old — now has a market capitalisation of nearly R210bn, and thriving customer bases from Afghanistan to Zambia.
But Nhleko’s reputation has been tarnished, in the eyes of some observers, by his enthusiastic pursuit last year of a $23bn deal with Indian cellphone operator Bharti Airtel, after a first failed attempt in 2008.
The proposed partnership sparked fears that Nhleko was ceding control of MTN to a foreign company. On the day the deal finally collapsed in October, relieved investors pushed MTN’s share price up more than 6%.
“That was a key moment in the corporate history of the group,” says World Wide Worx MD Arthur Goldstuck. “It must have affected the board’s view on the company’s leadership.”
That Nhleko is to see out his contract suggests an amicable parting, he says. “But if he had not been willing to leave, they might have had to strong-arm him. There’s a strong realisation that MTN needs to become a different organisation.”
Spiwe Chireka, an analyst at Frost & Sullivan, agrees that with “phase one” of MTN’s history drawing to a close, this is the best time for a leadership change.
MTN’s lucrative expansion in Africa was helped by a one-off boom in subscriber numbers during the past decade. With the major markets increasingly saturated, says Chireka, cellphone operators will have to change their approach to continue growing profit.
“As you go further into the rural communities, you might still sign up a large number of subscribers. But these people won’t be spending as much money as the ones in the big cities, even though it costs just as much to get them on to the network.”
Operators will have to focus on boosting revenue per subscriber, says Chireka — in particular through data services.
“They’ll be buying internet service providers and communications providers in the coming years, and may look to expand the MTN Business service beyond the current markets of SA and Nigeria.”
But MTN’s dominant position in Africa faces a new threat. Bharti has pressed ahead with a $10,7bn bid for most of the African operations of Kuwaiti cellphone operator Zain.
Chireka says Bharti will have to invest heavily in Zain, a mid-sized player in most of its markets. But after five years or so, it may begin to mount a serious challenge to MTN’s dominance.
MTN will become a “much more defensive company” in the next few years, says Kaplan Equity Analysts MD Irnest Kaplan. “There are very few greenfield opportunities around now, and the company will be less acquisitive going forward.”
Yet few would deny that Nhleko leaves MTN far stronger than he found it.
“His popularity declined a little bit in the last Bharti transaction,” says Kaplan. “But … one’s got to examine his track record over nearly a decade, and all MTN’s growth metrics in that period have been staggering. You have to credit him for that.”
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