On 19 February 2010, MTN would neither confirm nor deny speculation that its group function plans to abandon SA in favour of Dubai, a location closer to its higher revenue earners.

ITWeb has learned from several independent sources that the company plans to move its group operations out of the country and eventually delist from the Johannesburg Securities Exchange, leaving the local business as a subsidiary of the company, or even up for sale.

MTN already has a business registered in the Middle Eastern country, which it says is the head office for its Middle East and North African operations.

However, MTN has quietly been moving several of its group operation units into Dubai, without making any local splash about the plans. It confirmed to ITWeb this morning that it has moved its technical services support team to the country. Several sources say there is a chance that its technology development division will follow.

“The planned relocation of the technical services support team to Dubai is part of the group’s ongoing response to the challenges of the changing global telecommunications industry. It is also intended to address the logistical challenge of supporting the group’s networks in the Middle East in particular, and certain parts of Africa,” MTN executive director Nozipho January-Bardill said to the Arabian Business news agency in late January, when the move happened.

In addition to the quiet moves, MTN has only responded to ITWeb’s query with a vague comment on the matter, and shied away from the delisting query entirely. However, an MTN statement confirms other group services have been relocated to Dubai.

“The MTN Group has operations in more than 24 countries, including those in which it has mobile licences. Some departments within MTN Group Management Services are based in Dubai, as part of the group’s ongoing response to the challenges of the changing global telecommunications industry. This is also intended to address the logistical challenge of supporting the operations in the Middle East, in particular, and certain parts of Africa,” January-Bardill explains in a statement.

Real Possibility

While MTN has dodged ITWeb’s queries, analysts say they have heard similar speculation, although they too have not been able to confirm if the company plans to pull out of SA. “It would be a tough nut to swallow if MTN abandoned SA,” says Dobek Pater, director of African Analysis.

Pater says there are real operational reasons why the company would move its group structure outside of SA. Dubai, as a location, is almost a midpoint between MTN’s two growing revenue earners: Iran and its West African operation, in Nigeria.

Both countries have outstripped SA in terms of growth, with Nigeria already showing income dominance for MTN in 2008. Pater says having a more northern head office could also provide it easier access to other new markets either in the Middle East or even in Southern Europe.

He says the delisting of MTN from the JSE is inevitable, and his company has heard similar speculation. “It would have happened if the Bharti deal went through anyway,” he notes. He also says the company will have an easier time without a local listing.

Chris Gilmour, an analyst at Absa Investments, agrees, saying MTN has become a massive group, and the local listing is only really hurting the business. “Every time there is a blip on the South African network, MTN’s share price takes a nosedive. It makes no sense for a company across so many countries to list here in SA,” he notes.

Gilmour says a Dubai move, coupled with a delisting of MTN, makes sense in several ways. He says the tax breaks for businesses in Dubai could be a reason it plans to move there.

He agrees with Pater, saying an operation in Dubai would give it better access to its Nigerian and Iranian operations. However, he comments there is a very real possibility that MTN might delist and sell its South African operation.

“SA is probably past its best-by date. However, its customer base will be attractive to other companies locally, for example Telkom,” he notes.

Speculation had it that either Telkom or Etisalat was poised to snap up MTN’s South African operation if the company had concluded a deal with Bharti; however, neither organisation has confirmed interest.

But Pater believes MTN SA is still a pivotal operation for the group, which means it is unlikely it will sell it.

Gilmour admits that a move from SA to Dubai could be difficult, costly and take some time. However, he adds that the company may well have completed the research on how to do it during the discussions with Bharti.

Government will not be pleased if MTN’s Dubai move comes to fruition, since it owns a 13.5% stake in the business through the Public Investment Corporation.

Source ITWeb – 19 February 2010

President Jacob Zuma today promised world class broadband services and further telecoms price cuts in his first state of the nation address.

President Jacob Zuma today delivered his second State of the Nation Address (SONA) since taking office in May last year.  The opening of parliament coincides with the 20th anniversary of former President Nelson Mandela’s release from prison this year, creating a particularly big buzz around the event.

In his first SONA address in June last year Zuma said that Government will ensure that the cost of telecommunications is reduced through the projects underway to expand broadband capacity. “We have to ensure that we do not leave rural areas behind in these exciting developments,” Zuma added.

This year Zuma continued where he left off in 2009, promising lower telecoms rates and better broadband services. “As part of our efforts to encourage greater economic growth, we are working to reduce the cost to communicate,” said Zuma.

“The South African public can look forward to an even further reduction of broadband, cell phone, landline and public phone rates.  We will work to increase broadband speed and ensure a high standard of internet service, in line with international norms.”

Source MyBroadband – 11 February 2010