Sample Case Study on MTC Africa Mobile Telecommunications Company (MTC)

MTC Africa

Mobile Telecommunications Company (MTC) has made an exceptional step by investing in the African continent. The Kuwait’s telecommunication company, better known as Zain, decided to enter in Africa in 2005 through the purchase of Celtel, which had already spread its roots in 13 African countries. Through the company’s CEO, Dr. Saad Al-Barrak, MTC had set a strategic goal to be among the top ten mobile operators in the globe by 2011. Africa has been termed as the fastest-growing telecommunication market, and any company that would invest in the mobile operations industry is assured of good returns. MTC opted to go through an established company to minimize potential risks as it tested on new markets. This study will focus on the expansion MTC in the sub-Saharan region of Africa.

Identifying the key strengths and weaknesses of MTC

MTC has an advantage of being the first company to invest in the mobile telecommunications in the Middle East. For over two decades, MTC has built a strong brand name, hence, enabling the company to attract many customers. MTC has a large financial capital that enabled it to acquire Celtel for $3.4 billion, thus, becoming the largest Middle Eastern company ever to invest in the African continent. The acquisition of Celtel International made MTC to have a firm presence in 14 countries with a promising growth (Morris 10). The company also took the advantage of acquiring existing companies, such as Mobitel in Sudan, VMobile in Nigeria, and Madacom in Madagascar. Through Dr. Saad’s leadership, MTC has progressed from a one-country’s company to an international company, with over 46 million customers worldwide. The company is endowed with knowledgeable leaders who have long-term vision and strategies for expanding the telecommunications operations.

However, MTC is facing several challenges that have weakened its global operations. One of the company’s weaknesses is lack of strong strategy to face competition from the upcoming mobile operations companies. Companies, such as Etisalat (UAE), Wataniya, and (Kuwait), Q-Tel (Qatar), have expressed interest in following MTC’s footsteps in Africa, thus, increasing the level of competition. According to Khanna and Khan, it would require the company to formulate aspiring goals and accumulate large capital to overcome the ruthlessly competitive mobile telecom industry (1). The company has not invested much in research and development, as it relied on the success of Celtel in African market.

Examining the markets across which MTC operates, what are the similarities and differences of consequence that you see in their country portfolio? Are there meaningful groupings that make sense? How would such grouping help MTC think of its strategy?

The sub-Saharan Africa has been unexposed to the global market for a considerable period. The region had experienced dwindling growth since 1990s, pushing the region’s GDP growth rates to around 6% (Khanna and Khan 2). In all the countries that MTC operates, the penetration of mobile telecommunications was quite low due to political instability, poverty, famine, and corruption. The promise of faster growth in mobile telecommunications, in addition to cheap handset prices, drove MTC into African market with an aim of transforming the economy of this region.

Many countries that MTC has invested in have undergone a period of political instability, but later emerged as attractive investment countries due to strong governments. MTC experienced rapid growth of mobile telecommunications in these countries in its first few years after establishment. Tanzania has been among the poorest countries in Africa before it got independence in 1961. Economic reform that occurred a decade ago have helped the country to raise its GDP growth to over 5%, and since then , telecommunications industry has grown exponentially, attracting several industries in the market. Uganda has been repeatedly affected by political turbulence, but since the introduction of mobile communication in 1995, the market grew exponentially to an average of about 50% per annum. In Nigeria, a transition to civilian rule back in 1999 helped in restructuring economy that mainly relies on oil and gas. Since 2001, telecom sector in Nigeria has experienced an incredible transformation. Despite heavy competition from existing telecom industries, MTC managed to acquire a market share through acquisition of Vmobile.  No specific differences existed among individual mobile telecommunications companies within the sub-Saharan region, except slight differences, such as modes of advertising and rebranding.

MTC cannot rely on any specific grouping in developing its strategy, as no sensible groupings exist to offer new direction. MTC had already enjoyed the presence of Celtel in African market; hence, the company did not encounter difficulties in exploring African market. Rebranding from MTC to Zain has helped the company to gain more customers throughout the regions that it has already established its investments.

 

What are some specific ways in which MTC could create value through a pan-regional strategy? Are these strategic approaches sustainable and value creating?

Brands usually create their meanings and value after some time. For the customers, a brand operates as a substitute and a summary measure for all the aspects of a brand (Gatignon 189). Companies can benefit from a brand through:

  • Improving efficiency in marketing
  • Intensifying customer dependability
  • Enhancing influence within the targeted market, and
  • Creating genuine products for the company

After acquiring Celtel, Dr. Saad decided to re-brand MTC to Zain to reflect the company’s new value and position.  According to Dr. Saad, merging all the MTC branches under Zain has enabled the company to build strong brand awareness and to implement common products and services (Smith 41). The company was aiming at developing a booming business model that had the capacity to improve its market operations internationally. The new brand name carried several meanings, which made it acceptable in many countries. However, value creation demands the company to identify its overall market value and keep aside the real value of physical assets. By determining the intangible value, MTC could come up with the real value of its brand. The real value enables the company to determine how much it can risk its brand.

MTC also made a great step to enhance its values through initiating “One Network”, which enabled Africans moving from a place to another to communicate freely across regional borders without having to pay for roaming charges. Since the inception of “One Network” MTC through Celtel managed to expand its customer base by around 10%, as the service offered flexibility in network communication. The company offered a unique value in borderless mobile service that other companies could not offer. MTC’s strategic approaches in Africa have stood a test of time due to its link to Celtel, which was already established before its acquisition.  The company should also invest profoundly on Internet to take the advantage of social networking.

What specific advice would you offer Dr. Saad as he reflects on strategic options in Nigeria? What about Saudi Arabia?

Nigeria offers an attractive investment in West Africa due to its high population and high reliance on oil and gas. MTC has encountered a stiff competition from existing mobile telecommunications companies in Nigeria. The closest rival is MTN, which has gained a market share of over 45% in telecommunications operations. MTN has captured several markets to create its value while its capital value is still large. MTC should strategize on building its brand, rather than spend large sums of money to fight the competition battle. The company should work on innovations to increase its catch, in addition to improving service quality.

Banking through cell phones has become one of the most noteworthy developments in African financial sector in the recent times. The success of this development by the early founders has been duplicated in other countries through the introduction of other types of monetary services offered through cell phones (Chuhan-Pole and Angwafo 346). Mobile money transfer in Nigeria is not as extensive as it is in countries such as Kenya, South Africa, and Cote d’ivoire, thus, Dr. Saad should engage in expanding this service before the closest rivals capitalize in this service. It should exercise the foundation that Celtel built in Nigeria to transform mobile money transfer services, as it continues to expand its network coverage.

Saudi Arabia offers the best investment in the Middle East due to the presence of a large expatriate population, in addition to young and affluent population.  MTC is the third mobile telecommunications company to operate in Saudi Arabian market, thus, it is likely to face high competition from the existing two companies. MTC can replicate its model in Africa to invest in Saudi Arabia. If MTC managed to triumph in the African market that was unexplored and untapped, then it could invest in Saudi Arabia without fear of failure. The company should concentrate on enhancing its brand, which is already known all over Africa, as well as in the Middle East. With rigorous rebranding efforts, MTC should concentrate on strengthening the MTC-Celtel reunion without compromising the effort of each side.

Conclusion

MTC has encountered a successful investment journey in the African market, with had not been exploited much due to political and economic reasons. However, the acquisition of Celtel in 2005 helped the company in exploring the African market, and within a decade, MTC is reaping the benefits of such acquisition. Through Dr. Saad’s leadership, the company has expanded its investment Africa, as well as in the Middle East, through numerous acquisitions. The company rebranded its name to Zain to enhance its acceptance in the global market. Although MTC has faced a stiff competition in African market, its popularity among customers, in addition to sustenance of values, has enabled the company to survive in the mobile telecommunications industry.

Works Cited

Chuhan-Pole, Punam, and Manka Angwafo. Yes Africa Can: Success Stories from a Dynamic Continent. Washington, D.C: World Bank, 2011. Print.

Gatignon, Hubert. The Insead-Wharton Alliance on Globalizing: Strategies for Building Successful Global Businesses. Cambridge [u.a.: Univ. Press, 2004. Print.

Khan, Ayesha K., and Tarun Khanna. “Crossing Borders: MTC’s Journey through Africa.” Harvard Business School Cases (2008): 1. Business Source Complete. Web. 16 September 2014.

Morris, Lain. “MTC Group Serves An ACE.” Telecommunications – International Edition 41.2 (2007): 10. Business Source Complete. Web. 16 September 2014.

Smith, P. A. (2009, July). The Middle East interview. Middle East, 40-43. Retrieved from http://search.proquest.com/docview/220632985?accountid=1611