Although former Barclays Capital CEO Stephen van Coller is only six weeks into his new post at Africa’s mobile giant MTN, he has no doubts the sectoral switch is the right one. With MTN’s 240m customers compared with 12m at the old Barclays Africa, he has a far bigger canvass to work on – and the far-sighted Van Coller has already laid out his stall. In this interview he explains MTN’s priorities and explains why it’s all moving at breakneck pace. Primarily because MTN embraces the concept of exponential growth by providing a “digital life” for its huge client base – because its already been there. – Alec Hogg
A warm welcome to Stephen van Coller who is now the Vice President for Strategy Mergers and Acquisitions at MTN. Steve, it’s very interesting because when Michael Jordaan left banking you took over the role (at the time you were with Barclays Africa), as being the banker who was looking into the whole new technology challenges. Now you’ve also left the banking sector, does that tell us something about the extent of the hill that banks have to climb?
That’s very interesting Alec, and thanks again for getting me on your show, but from my perspective, the one thing that really attracted me about this opportunity at MTN is, as we’ve discussed many times, a lot of the world is converging. The difference is that MTN have 240-million customers as opposed to 12-million customers in my last job. So the impact you can have is significantly bigger. With everything going mobile you’re actually at the centre of it and your ability to provide that change, yes I just think it’s so much greater, number one.
Number two is they also have (how can I put it), a much bigger strategic investment spend that they’re looking to roll out and so attaching yourself to that and being able to add value around the edges of the network is just so much bigger because of the scale. And if you actually have a look at it, those 240-million subscribers are based on a 30-day active number. If you take that to like 90 days it’s probably like 400-million people who actually have a sim, so I just found it a fascinating opportunity to really get involved in social inclusion and making a real difference and so that was the exciting bit.
What is interesting though and just to add on to the whole banking to mobile tick and mobile phone companies, is that your new boss, Rob Shuter is also an ex-banker. All right, he’s been in the mobile world a little longer than you have, but do you expect that you might be seeing some of your other colleagues moving across?
Well you’ve got Ralph coming. He comes from financial services, so that’s quite interesting. The most interesting thing for me that is very exciting is you basically have three CEO’s one doing strategy and M&A, one doing finance, and one running the business and it just means you’re going to have a totally different conversation because all three of us have been in the firing line of running a full business. And as you and I have discussed, many times, it’s fundamentally different being a CFO to being a CEO or being a head of department, it’s just night and day and the fact that all three of us have had that experience, I think is going to make a huge difference.
How’s the morale at MTN at the moment and I ask this in the context of the managerial changes that you’ve seen there over the past year?
Well, my feedback is that there’s a lot of excitement in that they’ve been through the doldrums but they’re seeing the board and you know, Phuthuma in its executive capacity actually making the changes, so they’ve had a bad time, things went wrong, but there’s action and that’s quite exciting for them. What’s been interesting is in my role it’s been quite interesting how excited people are to have a non-Telco person come and have a fresh look at what the future is. I’ve had so many senior people just wanting to come and talk to me, “This is how we see it, how do you see it, we just want to understand something different because we’ve been on this treadmill of looking after our consumers, just rolling out towers and selling voice and data and that’s sort of coming slowly to an end and what do we do next?” So that’s been really interesting for me.
A little bit of the, it wasn’t the candlestick makers who invented the lightbulb kind of philosophy there, but you’re very exposed to the new world. Singularity University, that you liked so much that you brought them out from Silicon Valley (I suppose thought leaders you could call them), you brought them out to South Africa, exposed them to your clients at Barclays Africa, is there anything that you took from that whole exercise that you’re going to be able to employ in your new role?
Absolutely Alec, one thing you and I discussed around that was how exponential organisations is just a way of thinking, it’s a way of approaching a problem and it’s about not just doing the lipstick on the bulldog, not just doing incrementally more. It is actually, okay we’ve got a problem, let’s start from ground zero and say if we could build it today for what we know in the future, how would we do it and I think what’s really interesting is that when you go and speak to the board and some of the senior people in MTN, they remember the day that they put a business plan together for 250 000 subscribers and now they have 240-million.
They understand the problem with that because it was very recent and so you have a very different reception when you talk about “Listen, we can’t do this on a small scale” because they really get that and so a lot of that thinking is very pertinent to what we have to do to take MTN into the next decade of its existence. They don’t want to go and do another 250 000 person business plan given their history, they want to do something very different and that’s really where Phuthuma and the board are coming and certainly the discussions they’ve had with me.
It is historic or a break with history that you now have a device, which is your friend, it’s never more than a meter away from you even when you go to bed at night and that must bring all kinds of new thought processes to bear when you look at it from the financial services background to being able to use this mobile device in very interesting ways, what’s jumping out at you right now?
There’s two bits to that, that’s really pertinent and this is not something that’s going to happen tomorrow, it’s something that’s happening and it will happen over time, so really what I’m here to look at is not only help with some of today’s problems, but how do we build MTN for five years’ time, so start planning now for then, and you and I discussed John Nagel’s zoom-out, zoom-in. We tend to do our budgets and we take last years’ budgets and see how we do ten percent better. What he does is he says “Go and have a look at your industry in five years’ time and then have a look at your current plan today and see if your plan’s going to get you there” and in most cases in these tech environments or these disruptive environments the answer is “No”.
That’s the first thing and one of those things, the real thing that’s happening at the moment is that smartphones are disrupting the old business model in that in the old business model, in the feature phone, you had a sim card and that was the only way you could do anything, but today with a smartphone, you go home, you get onto someone else’s fiber, you go to work, you’re on someone else’s fiber, you go into a restaurant, you’re on someone else’s fiber, so you’re accessing data in a very different way. In fact, a lot of phone calls today are data phone calls. You and I, what we’re doing today, this is not a phone call, it’s a data call and it could be, I might have an MTN sim card, but I’m actually doing it through someone else’s fiber and that means you have to manage your customer relationship very differently. The other technology that’s being tested at the moment and coming in is what’s called soft sims.
Your ability to flick between operators just at one click is going to be here shortly and so that’s what’s really disrupting the telco’s and you have to deal with it. As it becomes easier and easier to do things over an internet connection whether its mobile or fixed landline or over your computer, it’s what people call your ‘digital life’. The more access you have to someone’s digital life, the more you can sell something to them and so you need to build up a suite of assets that manages your digital life. The beauty of it is that telco’s manage most of your digital life today. They know your location, they know your identity. If they have a mobile wallet and MTN has 33 mobile wallet customers today, they know your transaction history and what you do then is behavioural analytics over social media, location, payments, and identity that goes to the heart of any risk decision that anyone makes.
This is very similar to what Adrian Gore has been doing for some time, but just in a different way and so as you give people the choice, if you go to the bank today and you want a loan or a mortgage, they say you have to give me all this information of yourself. So it’s no different, it’s just electronically you can let people opt in and opt out. You can say “If you’re prepared to read five ads a day, I’ll give you X megabits of data free, so you choose” and essentially going to this thing that Adrian did around, “I need people’s exercise habits, let me give them free gym”, I can say “I need people’s transactional and identity data, let me give them a free phone”.
So it’s a lot of the shared value that Adrian preaches, the same kind of concept?
Exactly right and it’s no different to the shared growth we were doing at Barclays when I left.
Who around the world, in the telecom space is starting to get it right?
That’s a good question. I’m still only six weeks in the job, so I don’t know all the telco’s, but if you have a look at the Telefonica’s; they’ve done well in different department. Syntel have done very well in building an e-advertising hub which is very reward and loyalty-based. Who else, off the top of my head? I suppose the Verizon’s and the AT&T’s in the US have moved a long way down some of this. They’re doing different things. Some of it, I don’t agree with. I think they are reacting. The problem is, is that the US is such a different market; it’s quite difficult to transport it into Africa. There are some things that they’ve done that I wouldn’t do in terms of going too deep into the verticals.
I just think if you go too deep into vertical you get out of your experience space and that’s where you make mistakes and that’s where, historically companies have gone bad, so I’m not intending… everyone’s asked are we going to go and buy a bank. The answer is “Not while I’m here, been there done that” and they’re much better at being a bank than I’m at being a bank”, but do I want to enable them and enable my customers to be able to have access to financial services at a very much lower and easier cost, absolutely.
There’s been lots of talk over TMT, or the convergence of TMT, Telecom’s Media and Technology, is that where you’re targeting your space, media and technology, obviously you have the Telecom side?
Well, telecom’s and tech have already merged largely. There are obviously some derivatives of that, which you can go out, but I mean it’s very technology-based at the moment. I mean a lot of stuff you can, you know if you’re in the developed world you can actually just do over your phone. We’re starting to get to it. We’re not quite as good yet, but it’ll come. The second bit around media, I mean a lot of it is, you know I listen to radio over data these days.
The video stuff is starting only because they’re now getting the compression technology right and the data networks are getting good enough, so that is already converging quite fast and we need to offer video streaming, we already offer music over our network, video streaming will come, we’ve got some of it like YouTube already, so I mean that’s all converging. It’s these other businesses that start converging like health care, education, financial services in the broad sense. You know there are platforms like Easy Equities already that is all online based, very cheap fraction, or share ownership. That’s what’s really happening is all these other businesses, the digital life of a person are starting to converge onto a connected data platform.
Steve, what about the areas that you particularly are looking at now given that you’re doing the zoom-out focus and given that you have acquisitions in your portfolio, are you looking to acquire other telco’s for instance or are you now more on an innovation tack?
Well, that’s a sort of very broad question. What the MTN board has already decided is that they want to be a connectivity platform, Middle East and Africa, so they want to be the premium or premier connectivity platform in Middle East and Africa. There’s two ways to do that. You can either do it through data connections or you can actually buy subscribers through sim card acquisition, but one has to be careful that you don’t overlap, so there’s not that much optionality out there. There’s probably a few countries that you want to be in, those are the larger countries and if you could get a decently priced deal, you would do it, but to go and pay those crazy multiples for spectrum is probably not the right way to go unless there’s a perfect match because what’s really happening is spectrum’s becoming the last mile.
This is actually going to be a game around fiber to be quite frank, if you’re going to be the actual connectivity platform because the fiber connecting or the base stations gives you end times, that spectrum because you’re not using the spectrum to go from base station to base station to base station. It’s actually just connecting the people around the base station and then everything goes by fiber, so the undersea cables and the fiber, the ISP’s you know that’s going to be where we’re going to have to look.
MTN traditionally has been a consumer business and hasn’t really cracked the enterprise business, so that’s something one has to do and have a look at that and see how one does that, whether you do it organically or there are some, you know where there’s potential acquisitions out there and then really taking our assets which is access to all these people, having one of the best networks both in the ground and in the airs over Africa and how do you actually monetise that, the ecosystems that exist around it. That’s really what you’re trying to do and then trying to get a decent diversified spread across Africa is really where you want to go over time.
When we spoke in January at the World Economic Forum in Davos, you were exposed there to Jack Ma and to PayPal and you had quite a bit to say about that and about that space. One would think that the Chinese story has got quite a lot that one can learn from when you’re looking at it from an African perspective.
Correct, I agree with you. What Jack Ma has done is he’s basically gone from, he went and built a marketplace, and now he’s filling in the gaps behind to get access to everything the telco has got, so all transactional history of people. With ENPAY now he is getting identity etc. so he’s backfilling from a different position but he created this, what he calls is, basically he’s just connecting SME’s to the world and that was his whole philosophy and he’s done it very successfully and he did it so well he’s now managed to get all the data that China Telco probably had but couldn’t monetise. And so what a mobile company needs to do is they need to take what they’ve got and build what Jack Ma has before he does it. It’s as simple as that, it’s actually not rocket science.
Then what you have to do is you have to make sure, and it’s a bit easier in a single country than it is cross border, but you need to find a way to take friction out of the payment system. There’s a lot of cost inherent in the payment system and that’s what’s been the flaw in terms of getting financial inclusion because you just get to a point where a transaction is too expensive and therefore you can’t bank those people. That’s the big thing you have to get right in the payment space and the technologies are getting better and better. We hear a lot about blockchain, that has a long way to go, but there’s a lot of work being done on alternative payment rails that will take battering out, make it real time and this concept of trying to make digital money better than cash and if you get that right, boom, you don’t need cash anymore and you take just masses of cost out of the system.
It’s quite interesting from a South African perspective and particularly now your competitors, you’re looking at them differently no doubt. You’ve got Vodacom and they’ll always I suppose be your prime competitor, but at Cell C where they’ve brought Blue Label and Net 1 in as significant shareholders, Net 1 through Blue Label, aren’t they focusing on that area already and might they be someone to (I suppose an acquisition is not possible), but someone that’ll be causing you some sleepless nights?
Listen, I mean there’s a few things going on that I think we as a company have been a bit slow to react to, he sourced Econet and Liquid Telecom and is getting it going. That’s something that has happened under our noses and with our network and capability we should have been ahead of that game and so we have to play a bit of catch up there. I suppose as well, it’s going to be interesting to see how with Net 1 and Blue Label, they monetise that because a lot of it is smartphone based and a lot of those customers are not smartphone customers, but clearly, yes over time if that smartphone penetration goes quickly they will be able to monetise that ecosystem.
So yes, but the space is so competitive and that’s why people like the Google’s, the Uber’s, etc., they’re trying to get scale because there is only place for maybe two or three people in the space because you need scale to keep costs down and so that’s why it’s going to be fascinating. I sort of liken it to the shopping centre game, you can build Sandton City 30 years ago in a farmland and you know that it’s going to eventually get that, but that doesn’t stop someone putting up the Mall of Africa at some point to try and drag your customers away, so if you don’t go and put electric plugs at your parking lot, you know, people will eventually go to where there are.
You’ve got to keep changing, keep innovating, keep making your ecosystem the best ecosystem for people to be there because you can no longer lock them in like you can and with sims you’ve got one thing that we call ‘lock-on’ because it’s such a great experience. So the world’s becoming massively competitive because of technology and continually evolving, so we will see more and more competitors come in, different ones, some will come, some will go. You’ve just got to be on top of your game. I just believe at MTN you’ve got a head start because of the brilliant business they built over the last 25 years, but if you do nothing you’ll end up having a Jack Ma come in and have all the information and assets that you’ve had and never used.
If you were to, just to close off with that zoom-in, zoom-out approach, look five years ahead and look back at where you are today and to say to the five years younger Steve van Coller, (you’ve done well here and this is what you’ve targeted to achieve), what would it be, what would satisfy you in five years from now?
What would satisfy me is if we could create a digital life. Just on a basic scale for all our 250-million customers because at the moment even the little bits we’re doing with some of these micro lenders, our information we get back is 80% of them are first-time financial services users and if you can just create that ability, the economic growth and prosperity that you will create across Africa will fundamentally make a dent in poverty and in same due, you’re still creating a great company that’s making money, but that knock on affect into the economy is huge and if you just do nothing better you rise at the tide and so for me it’s just; can I create a digital life for as many of those people as we can because it’s game changing.
Is that a digital life?
It’s for all of those people. Even if it’s just give them basic financial services, basic payments, some insurance product and educational product, you know it’s the real basics that people need to prosper or improve their situation, we would have succeeded because then GDP will go up, you’ll have more customers and that velocity of money. I don’t know if you’ve been listening to this discussion on the minimum wage.
One of the things I hadn’t thought about is if you get it right you actually stimulate the economy because you’ve got this whole new lot of people with more disposable income, so it’s not all negative and that’s exactly what we’re trying to do, try and create more disposable income within our 250-million customers because that in itself creates GDP growth and allows us to then monetise more and then you just get this multiplier effect and if you’re at the middle of it, if you think there can only be two or three players across Africa, you want to be one of them.
Steven van Coller is the Vice President for Strategy Mergers and Acquisitions at MTN.