1. 1 5 November 2002 Public hearing: Consumer issues relating to cellular Phuthuma Nhleko CEO: MTN Group Ltd Sifiso Dabengwa MD: MTN (Pty) Ltd

2. 2 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

3. 3 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

4. 4 MTN’s Other Networks (Total Pop = 202m, 30% of the continent’s population) 40m 120m 16m 23m 8m 1m

5. 5 MTN’s Impact in Africa (Teledensity) 29.9%0.83% $ 480 Million as at 31 March 2002 MTN NIGERIA 41.4%3.18% $ 100 Million MTN CAMEROON 55%9% $ 35 Million MTN SWAZILAND 71%1.06% $ 35 Million MTN RWANDACELL 52.9%1.78% $ 95 Million MTN UGANDA 27%32% $1,4 Billion MTN SOUTH AFRICA MTN’S CONTRIBUTION TOTAL TELEDENSITY Cumulative Investment MTN OPERATION

6. 6 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

7. 7 B. Focus on customer services MTN SA vision Measuring customer satisfaction Taking complaints seriously Customer care facilities

8. 8 MTN South Africa VISION To be the industry leader through customer intimacy  First for customer service  Deliver above average returns  South Africa’s most admired brand  Employer of choice

9. 9 MTN South Africa subscriber numbers

10. 10 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%

11. 11 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)

12. 12 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

13. 13 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

14. 14 MTN tariffs decreased in real terms

15. 15 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

16. 16 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

17. 17 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

18. 18 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)

19. 19 Macro economic conditions influence foreign & local investor confidence Global down turn in telecoms markets Local & foreign investor confidence influenced by  Certainty & predictability of policy, legal & regulatory environment  Stability of local currency  Level of inflation & interest rates  Extent of investment required –Average mobile network investment ± $4 billion (add R700 million 1800 fee & investment becomes unattractive) High level of local & foreign investor confidence will result in  Stronger local currency & lower inflation  Increased FDI & local investment  Increased competition - benefiting the consumer  Increased development of local market & labour force  Increased employment  NEPAD objectives being met

20. 20 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

21. 21 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 USD The South African market compares favourably with those of other equivalent economies, with significantly lower barriers to entry and tariffs than most emerging economies.

22. 22 D. Network performance Network coverage Network quality External influences on network quality RF interference problems MTN SA subscriber numbers Overview - network quality

23. 23 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.

24. 24 Mobile penetration by country Merrill Lynch Wireless Matrix - 1Q02 - 7 June 2002

25. 25 Licence obligation “at least 2% grade of service” Network quality

26. 26 Busy hour drop call rate Drop call rate reduced by 233% over 9 years. (25% per year)

27. 27 Busy hour Radio Congestion Congestion sustained for last 18 months at 0.2%. (90% lower than license requirement)

28. 28 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)

29. 29 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

30. 30 Overview - Network quality Network quality key performance indicators

31. 31 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

32. 32 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

33. 33 Mobile “the African solution”