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5 November 2002Public hearing: Consumer issues

relating to cellular

Phuthuma Nhleko

CEO: MTN Group Ltd

Sifiso Dabengwa

MD: MTN (Pty) Ltd

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Contents

A. MTN Group Ltd

B. Focus on customer services

C. Decreasing trend in cellular tariffs

D. Network performance

E. In summary

F. The way forward - MTN Recommendations

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A. MTN GROUP LTD

Name change on 14 October 2002 MTN Group common bond/vision within group companies MTN Group Ltd - holding company with 3 divisions

Mobile Telephone Networks (South Africa) MTN International Strategic investment division

MTN Group provides a varied basket of communications services in 6 countries across Africa African multinational in tune with the communications needs of the 21st century

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MTN’s Other Networks(Total Pop = 202m, 30% of the continent’s population)

40m

120m

16m

23m

8m

1m

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MTN’s Impact in Africa (Teledensity)

29.9%0.83%$ 480 Million

as at 31 March 2002MTN NIGERIA

41.4%3.18%$ 100 MillionMTN CAMEROON

55%9%$ 35 MillionMTN SWAZILAND

71%1.06%$ 35 MillionMTN RWANDACELL

52.9%1.78%$ 95 MillionMTN UGANDA

27%32%$1,4 BillionMTN SOUTH AFRICA

MTN’S CONTRIBUTION

TOTAL

TELEDENSITY

Cumulative Investment

MTN OPERATION

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Contributions to the SA economy

MTN’s contributions to fiscus and economy 1995 - 2001

Licence fee R100m Annual NOI licence fee R 883m Annual Spectrum fee R42.7m Taxes R2bn JEDP R22bn Corporate Social Investment R80m__ Total R25.2bn

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B. Focus on customer services

MTN SA vision

Measuring customer

satisfaction

Taking complaints seriously

Customer care facilities

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MTN South Africa

VISIONTo be the industry leader through customer intimacy First for customer service Deliver above average returns South Africa’s most admired

brand Employer of choice

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MTN South Africa subscriber numbers

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

1995 1996 1997 1998 1999 2000 2001 2002

Pre-paid

Contract

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Measuring customer satisfaction

Customer Satisfaction Index (CSI) Measured by Proactive (independent company)

Computer Assisted Telephonic Interviewing

1 500 randomly picked subscribers interviewed quarterly

Respondents asked to rate services on 10 point scale, converted to a percentage

Continues process to improve customer satisfaction

Independent survey shows MTN customer satisfaction performance more than 85%

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Complaints are important

Formal structure for dealing with customer complaints Complaints Management Process Root Cause Analysis Process

MTN employs more than 1 000 customer service agents

Ongoing assessment of all our customer facing process Continuous process re-engineering Three call centers

– Gauteng– KZN (recent addition)– Limpopo (recent addition)

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Customer care facilities

24 hour, 7 day available customer care facilities Problem resolution

Information provision on handsets, products & services

Complaints management

Billing and account inquiries

Service activation

Directory enquiries

Emergency services

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C. Decreasing trend in cellular tariffs

MTN tariffs have decreased in real terms over time

Annual tariff increases Tariffs in context MTN - average prepaid prices Internal input costs External input costs Macro economic conditions influence

foreign & local investor confidence Tariffs versus services SA mobile market compares

favourably

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MTN tariffs decreased in real terms

CPI vs. Annual Average Increases (AAI)

0

2

4

6

8

10

1999 2000 2001 2002

Year

%

CPI %

AAI %

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Annual tariff increases

Annual tariff increases approved by

ICASA

Increase in tariff basket no more than

year on year CPI

CPI linked to inflation

Actual increases below CPI

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Tariffs in context

Tariffs should not be looked at in isolation, but should be seen in the context of Total customer satisfaction - cost, quality & coverage

area

Total cost of ownership - handsets, line rental & airtime

Basket of services available

Capital invested

Tariffs are cost based but also reflect market dynamics Investor/shareholder expectations

Competition & regulation

Customer expectations & affordability

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Internal input costs (more controllable)

Network costs Service Provider discounts Connection incentives COS (mobile phones & SIM cards) Opex:

Salaries & staff costs Site build leases Leased transmission costs (Telkom) Maintenance Marketing costs Sales costs Travel Training

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External input costs (less controllable)

Licence fees (up-front & annual) Spectrum fees (e.g. 1800) Interconnect rates Rates & taxes Roaming costs Universal service obligations Contributions to USF Emergency centres & free emergency calls Devaluation of the Rand against the US$ &

€ Cost of handsets Compliance with regulatory requirements

(not only telecommunications)

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Tariffs versus services

Mobile information value added services have become numerous and varied

50 ICE consumer services eg:– Ringtone & logo– Voice chat– ICE man menu– SABC competitions

10 MTN branded VAS services eg:– Directions – Legal assist– Tax assist– Wake up call– Computicket

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0

100

200

300

400

500

600

700

800

900

Cze

ch

Hun

gary

Mex

ico

Por

tuga

l

Pol

and

Irel

and

Japa

n

Fra

nce

Tur

key

Aus

tral

ia

Can

ada

S/A

fric

a

Kor

ea

New

Zea

land

Aus

tria

OE

CD

Ger

man

y

Gre

ece

UK

EU

Bel

gium U

S

Spa

in

Nea

ther

land

s

Sw

itzer

land

Luxe

mbo

urg

Ital

y

Den

mar

k

Nor

way

Sw

eden

Fin

land

Usage

Fixed

OECD basket of consumer mobile phone charges - August 2000

SA assumes business time package, 25min per month each on peak and off peak.

OECD basket assumes 50min per month

*Source: OECD Cellular mobile pricing structures and trends, May 2000

Comparison to tariffs with OECD

US

D

The South African market compares favourably with those of other equivalent economies, with significantly lower barriers to entry and tariffs

than most emerging economies.

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D. Network performance

Network coverage Network quality External influences on network

quality RF interference problems MTN SA subscriber numbers Overview - network quality

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MTN Coverage (October 2002)Country Area - 1 225 020 km2

Total Coverage - 885 666.85 km2

Land Coverage - 794 104.71 km2 (70% of land)

Sea Coverage - 91 562.14km2

Total Population - 44 million

Population Covered - 39 724 548 (96% of pop)

70% of land area covered.

96% of the population.

4000 sites.

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Mobile penetration by country

Country GDP US$ bn Population PenetrationRSA 1,968 44 million 22%

Mexico 6,304 101 million 23%

Venezuela 6,957 25 million 26%

Brazil 2,742 172 million 17%

Thailand 1,919 63 million 15%

Egypt 1,260 66 million 6%

China 909 1,290 million 13%

Globalweightedaverage

6,213 4,529 million 21%

Merrill Lynch Wireless Matrix - 1Q02 - 7 June 2002

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MTN Network Performance All hours

0

0.5

1

1.5

2

2.5

Ma

y-0

1

Jun

-01

Jul-

01

Au

g-0

1

Se

p-0

1

Oct

-01

No

v-0

1

De

c-0

1

Jan

-02

Fe

b-0

2

Ma

r-0

2

Ap

r-0

2

Ma

y-0

2

Jun

-02

Jul-

02

Au

g-0

2

Month

Pe

rce

nta

ge

Call set up failures

Drop calls

Congestion

Licence obligation “at least 2% grade of service”

Network quality

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Busy hour drop call rate

Drop call rate reduced by 233% over 9 years. (25% per year)

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Busy hour Radio Congestion

Congestion sustained for last 18 months at 0.2%. (90% lower than license requirement)

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External influences impacting on network quality, no of dropped calls, interference & congestion

Site acquisition is becoming increasingly difficult Lack of infrastructure

Electricity - Eskom can’t always supply in rural areas Transmission - obliged to use Telkom fixed links Access - access roads in deep rural and hilly/mountainous

areas prohibitively expensive Interconnection - Suitable Points of Interconnect not

always available from Telkom Spectrum costs & availability

900 MHz allocation inadequate given size of subscriber base Need for 1800 MHz but prohibitively expensive & still used

by others Continuous rise in network & equipment costs as R

depreciates against US$ & € Handset quality (grey products & illegal imports)

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RF Interference Problems Various external RF interferers

Cellular jamming devices Cordless phones Remote security video cameras Mobile pay point systems Various still to be identified (in hand with ICASA) Shielding by large structures e.g. trucks

Difficult and time consuming to trace MTN has no legal right to shut interferers down Report interference problems to ICASA

Lengthy process ICASA under staffed in many areas – could take up to 6 months or

more to resolve cases ICASA depend on legal system to gain access to sites – court orders

etc. Low percentage of reported cases resolved to date

Control on importation of illegal equipment very difficult Expensive test equipment required to perform

interference investigations

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Overview - Network quality

All hours%

Busy hour%

Paging Success 95.6 95.5Location Update performance 98.9 98.1Random Access Performance 99.0 99.0SDCCH Drop Rate 0.78 0.93TCH Assignment Success Rate 99.7 99.7TCH Dropped Call Rate 1.75 1.76TCH Erlang Minutes Per Dropped Call 63 65TCH Congestion 0.26 0.27Handover Success Rate 95 95

Network quality key performance indicators

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E. In summary

Tariffs & handset costs have decreased in

real terms while the range of applications &

solutions have increased

MTN network quality & coverage is world

class

Customer satisfaction is of paramount

importance to MTN

Operational success despite challenges

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F. The way forward - Recommendations

Industry standards & benchmarking by ICASA Consumer protection regulations Strengthen ICASA - capacity & financial Enhance consumer awareness with all

constituencies eg: Telecommunications operators ICASA DoC

Develop a national legislative framework to alleviate excessive site approval constraints

Accelerate ICT strategy implementation in especially local manufacturing

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Mobile “the African solution”