MTN will start switching off its local 3G network in 2025 to free up spectrum and save costs, but admits many South Africans will be reluctant to upgrade to 4G or 5G devices.
MTN Group CEO Ralph Mupita said on Friday the 3G service would be phased out gradually because handsets using the technology were still in widespread use. Nearly half the company’s customers — 44% — still used 2G handsets that are not data-capable.
MTN’s move is in line with the government’s plan, announced in September, for inefficient, outdated mobile network technologies to be shut down starting next year.
The department of communications & digital technologies said this would ensure “the country realises the benefits of rapid technological changes in telecommunications”. The government aims to promote “optimum spectrum occupancy and effective utilisation of high-demand spectrum”.
As part of the proposals, from next year the use of 2G devices would effectively be banned, followed by 3G phones in 2024.
But MTN intends to keep its 2G network operating to cater for customers who are still using the technology.
South Africa introduced 3G technology in 2004, enabling cellphone users to access the internet and related services. In Europe, mobile network operators are already phasing out 2G and 3G networks to focus on 4G and 5G.
Mupita said 3G is not the “most efficient of technologies”. Switching it off would result in cost savings and would free up spectrum to be used for other, more advanced technology.
“In [densely populated] areas where there is 3G, people have poor experiences,” he said.
We need to move a lot of our customers from 3G handsets to 4G… That is a big transition that we need to do over the couple of years
— MTN Group CEO Ralph Mupita
Mupita acknowledged it would be a huge challenge to persuade consumers to take up 4G or 5G devices. “We need to move a lot of our customers from 3G handsets to 4G… That is a big transition that we need to do over the couple of years.”
He said MTN would work with handset manufacturers to find ways to make the transition more attractive. This could include cutting the prices of smartphones, which are exorbitant in many markets in Africa. Other options could be subsidies and financing. The government could help by reviewing import duties and taxes on handsets.
In a quarterly update on Friday, MTN reported a 6.8% year-on-year increase in subscribers to 284.9-million in 19 countries for the nine months to September. It now has 74-million subscribers in its biggest market, Nigeria, and added 532,000 subscribers in South Africa, its second-biggest market, taking the total to 35.8-million.
Two weeks ago, MTN terminated its talks to buy Telkom. The deal would have accelerated MTN’s fibre business, which still lags those of its rivals.
Mupita said MTN SA would continue to roll out its fibre network using fixed-wireless and fibre to the home, but would also look for bolt-on acquisitions to boost growth.
“In the future, we need to be able to provide good connectivity at a good price point for low- and upper-income customers; all of them will need a decent connection and to be able to do that we need a few technologies,” he said.
The group was investing heavily in a range of technologies and in some markets fixed-wireless was growing faster than fibre.
Commenting on the failed talks with Telkom, Mupita said the rationale for the deal was “still sound and compelling to all stakeholders”.
The “strategic logic of that proposal today still makes sense but needs to be run in a place where there is a similar approach and view on it”, he said. The strategic rationale “doesn't change because we walked away”.
Mupita said consolidation was “necessary and inevitable” and was happening in fibre through various arrangements.
The group was not reconsidering its original proposal, but would continue to seek partnerships with Telkom where it made commercial sense. The companies already have a roaming agreement that enables Telkom to use MTN’s mobile network infrastructure.
According to MTN’s quarterly statement, a national roaming agreement with Telkom “aligned with the group’s work to monetise investments in networks” took effect from November 2021. “Off a low base, it gained traction in the nine months to September 30 2022, increasing its contribution to revenue and scaling steadily,” it said.
Mupita noted Telkom was already a partner “and we can continue strengthening partnerships without doing an acquisition”.
But he said MTN was always on the lookout for acquisition opportunities across the continent. The group’s strategy was not to be in many markets, but to be in countries where there were opportunities to drive “digital financial inclusion”.
“We want markets that have a young population that will consumer those services. Digital inclusion is a big thing,” he said.
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