AFRICA’s mobile phone giant MTN [JSE:MTN], which is looking for new growth opportunities, is encroaching on the territory of Naspers [JSE:NPN] – the multinational group of e-commerce and media platforms that owns stakes in China’s Tencent and Russia’s Mail.ru.
The proliferation of affordable smart devices is propelling e-commerce to a centre stage and enabling MTN to steal market share from bricks-and-mortar shops.
Behind the intense positioning is a simple proposition: smartphones and other smart devices are playing a critical role in the growth of e-commerce in South Africa and the rest of the continent.
More than 10% of active internet users in Africa shopped on mobile during 2013, according to secondary market research publisher yStats.com, which illustrates the increasing importance of mobile connectivity on the continent.
In areas where computers are hard to come by, consumers increasingly use mobile devices to connect to the internet.
The expertise of South African-based behemoth Naspers – which is valued at more than R581bn – lies in e-commerce, connecting people, distributing media products, creating media content and encouraging its global users to do so.
It believes e-commerce will be the largest segment of the internet in most global markets in years to come, and mobile internet helps Naspers to increase scale and reach.
Johannesburg-based MTN, which has a market value of more than R435bn, is a mobile phone operator that connects more than 208 million people in 22 countries across Africa and the Middle East.
It started as a company providing basic voice calls and messaging services, broadening its offerings to include mobile payments, content, entertainment services, etc.
The convergence of technologies is blurring the distinction between the mobile and e-commerce industries.
But with MTN struggling to maintain its market share in South Africa, one wonders whether it is a wise move to instigate a battle with Naspers.
Furthermore, is MTN really taking on Naspers on e-commerce in its quest to diversify its revenue streams?
MTN might not really be trying to compete head-on with Naspers, but it could be chasing lucrative opportunities on a platform (mobile phone) that is core to its business model.
This move places MTN on a collision course with Naspers.
That said, MTN has gone where others feared to tread and has manage to connect millions of Afghanistanis, Iranians, Syrians, Nigerians and Sudanese. So, it seems as if the company is up for another big challenge in order to create shareholder value.
As an indication that the company is prepared to compete in the e-commerce space, MTN is planning to invest about €168m over the next two to four years into Africa Internet Holding (AIH) – a joint venture between Rocket Internet and Millicom International Cellular.
MTN recently became an AIH shareholder after it bought a 33% stake to develop online ventures across the fast-growing internet markets of Africa.
That move could signal that MTN, Africa’s largest mobile phone group, is increasingly willing to protect its market share and keep its consumers by providing e-commerce services.
Clearly MTN is betting on Africa’s digital shopping sector to diversify its revenue streams.
Hopefully, the company’s efforts into e-commerce will translate into an even bigger mobile audience, not to mention incremental revenues.
Who is top of the log?
So, who has the upper hand between MTN and Naspers?
MTN has millions of cellular subscribers in Africa, and Naspers has the e-commerce expertise locally and internationally.
There is no doubt that Naspers is far ahead of MTN in the e-commerce space.
Naspers already generates more than R20bn in e-commerce revenue globally, while MTN is still making its move into this lucrative industry.
However, MTN might be banking on the uptake of affordable smartphones and smart devices by its existing and new customers to unlock the potential of e-commerce.
This could be based on the fact that e-commerce in Africa is hovering on the cusp of growth.
Research publisher yStats.com says e-commerce has a high potential in Africa, where the growing middle class is looking for more convenient shopping and better price quality. This is driving local and international internet merchants to operate in the region.
“The growing Internet penetration, the spread of mobile technology and improvement of payment and delivery infrastructure are factors than can boost e-commerce on the continent,” says yStats.com
The entry by MTN into e-commerce and its possible scrum with Naspers may deepen more competition in the sector.
As the industry grows, MTN and Naspers could use their fat balance sheets to gobble up smaller e-commerce players in the continent.
MTN has already indicated that it is prepared to spend money to grow its e-commerce footprint. It has bought an interest in Bidu, an online insurance price comparison and brokerage provider in Brazil, through the venture capital fund, Amadeus Digital Prosperity Fund IV.
The move by MTN is likely to serve as an industry catalyst to propel e-commerce to a centre stage in Africa.