MTN will no longer 'subsidise' Afrihost - TechCentral

MTN will no longer ‘subsidise’ Afrihost

Mteto Nyati

Mteto Nyati

Afrihost is in talks with alternative providers of wholesale data because MTN is not prepared to continue providing data to the Internet service provider, which it bought in 2014, at below cost.

“Let me be open about this. Afrihost has been a customer of MTN Business for a long time. We have given them wholesale prices that were subsidised by MTN. We cannot afford to do that going forward,” MTN South Africa CEO Mteto Nyati said in an interview with TechCentral in Johannesburg on Wednesday.

Afrihost is testing services from alternative providers with some of its clients as it fights to stay competitive in a fiercely contested service provider market.

And as far as MTN is concerned, if the company can source better wholesale prices elsewhere, it’s welcome to do so, even if that means less traffic flowing across MTN’s wholesale infrastructure.

“It’s important that that business … must deliver the profits we expect,” Nyati said. “When we assessed [Afrihost], we felt if they could get similar pricing from us from outside, it’s a good thing. We will still get the profits. We will not consider to [continue to]subsidise the prices they’ve been getting [until now].

“That business needs to relook its positioning. We need to look at what it is Afrihost can offer. It cannot be about lowest price because that’s not sustainable. We need to look at repositioning it into a value space, offering value versus being the lowest priced,” said Nyati, who chairs Afrihost’s board of directors.

Asked if MTN’s decision not to sell bandwidth to Afrihost below cost had affected the quality of its network given that many consumers have taken to social media and other forums to complain about network speeds, Nyati simply said: “In terms of network quality … it’s not linked to them being associated with us.”

MTN acquired a controlling 50% stake in Afrihost last year for R408m.  — © 2015 NewsCentral Media

20 Comments

  1. So much for the amazing network AfriHost were supposed to have upon moving over to MTN.

  2. Greg Mahlknecht on

    MTN really screwed up this deal. They seem to be trying to force Afrihost to think about nothing but the bottom line. The statement “must deliver the profits we expect” shows how narrow mindedly they’re thinking. Afrihost became an almost billion rand business from playing fast and loose with the profits – instead of stifling that, MTN should have put the Afrihost guys in charge of ALL their broadband products and said go wild, forsaking short term profits for long term subscriber growth.

  3. John Horrocks on

    Mr Nyati, ever heard of marginal costing? What are you going to do with spare bandwidth capacity when traffic is moved off MTN infrastructure; your retail MTN subscribers are barely / not growing? I am an MTN shareholder & have an Afrihost contract!

  4. Mr Nyati only wants to keep shareholders happy, unless his contract says target goal for this year X amount of millions. ! Maybe he is referring to Mobile data, or ADSL data. cancelling my MTN contract when the tern cones to an end.

  5. I don’t know much about much, but isn’t this akin to eating your own young ? Unless that was the strategy all along, to buy into an entity that is busy developing the market then eat them up whole once the market is whole ?
    ‘You know nothing, Jon Snow’

  6. Greg Mahlknecht on

    It’s all to common – they saw a company that knew how to make consumer broadband work, and wanted some of the action – and then MTN fed their crappy ideas through Afrihost thinking they’d become good ideas, rather than letting the new company’s ideas filter back in to MTN.

  7. If they have been subsidising Afrihost’s data (at some kind of special wholsesale rate) that is completely anti-competitive. So theoretically they should be offering the same rate to everyone (or the comp commission can go to town on them ala Telkom).

  8. Twelfth Doctor on

    Yeah, anything below R1/MB is probably considered a subsidised price. Wonder when they will consider to stop “subsidising” their own GSM contract customers.

  9. Make like the minister of mines – shut the whole operation down and stop ripping off your customers!

  10. Ofentse Letsholo on

    What MTN touches turns to rust, AfriHost used to be no.1 and now it’s what?!. Yhooo the MTN effect.

  11. A lot more than a bit. Once Afrihost were the hottest, most dynamic ISP; they’re now haemorrhaging subscribers through poor network quality.

  12. Andrew Fraser on

    Except that Gian Visser claims that Afrihost never received any preferential pricing.

    According to Mybroadband:” ‘We have never received a discount on these prices and any ISP could have got these same prices from MTN,’ said Visser.”

  13. Andrew Fraser on

    ‘“In terms of network quality … it’s not linked to them being associated with us.”’

    If it sounds like a duck, walks like a duck…

    Strange that one of the highest rated ISPs went from hero to zero over the period of less than a year… which coincides directly with the timing that MTN took control.

  14. This is 100%, same deal offered to others as standard wholesale deal. Incredulously it looks like MTN wants to increase the cost of their wholesale data when competitors doing the opposite!

    Almost like MTN has resigned itself to its market share and going to try increase its margin off existing data deals/volumes. Typical “next 12 months” large corporate thinking, they meet some budget target in 12 mths time but have destroyed their 3 year positiing.
    **How do you think Afrihost got to it’s market position?**

    Would love Afrihost to succeed on someone else’s bandwidth, that would give the mirror needed to MTN SA board……..

  15. Magomarele Gomi Thobejane on

    It makes business sense. There’s nothing wrong with MTN allowing Afrihost to go wild and source the lowest prices there is. It benefits both. MTN doesn’t force Afrihost to stick with MTN prices.

  16. Cheeseburger on

    I said the Miserable Telephone Network was a bad idea back before they sold out. I hate being never wrong.

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