MTN South Africa Voice Revenue Decline Accelerates Amidst Banking Competition
MTN South Africa's voice service revenue is experiencing a worsening decline, marking the fourth consecutive reporting period of falling trends. Banking competitor Capitec Connect's strategy of offering free calls between its SIM cards is impacting traditional operator revenue models.
Key takeaways
- MTN South Africa has reported a worsening decline in voice service revenue for four consecutive periods.
- Capitec Connect's strategy of offering free calls between its SIM cards is impacting traditional operator revenue models.
- MTN's Ebitda margins have fallen below its own medium-term guidance range.
- Voice services are increasingly being used as a retention feature by new market entrants.
- Investors are watching MTN's upcoming results for signs of accelerating decline and margin recovery.
MTN South Africa is facing an accelerating decline in its voice service revenue, a trend that has persisted for four consecutive reporting periods. The company's trading statement for the half-year ending June indicates that the South African prepaid market proved challenging in the second quarter of 2026, particularly concerning voice service revenue.
What Happened
Voice revenue in MTN South Africa's home market saw a 2.8% decrease in the third quarter of 2025, followed by an 8% fall in the fourth quarter, concluding the full year with a 4.2% reduction. The first quarter of 2026 experienced a 9.6% decline, and the second quarter continued this difficult trend.
Prepaid services constitute approximately 52% of MTN South Africa's service revenue. Over 2025, the prepaid subscriber base contracted by 0.7% to 29.7 million. Consumer prepaid service revenue decreased by 2.3%, with a more significant contraction of 3.9% in the fourth quarter.
Overall service revenue for the year grew by 2% to R44.03 billion. However, earnings before interest, tax, depreciation, and amortisation (Ebitda) fell by 10.2% to R17.67 billion, resulting in a reduced Ebitda margin. The first quarter saw Ebitda down 12.5% at a margin of 32.6%, a year-on-year decrease of 4.1 percentage points. This is significantly below the company's medium-term guidance for the unit, which targets a margin of 35-37%.
Why It Matters
The primary driver of this shift is the entry of Capitec Connect into the market. Capitec Connect, a banking service, does not rely on voice revenue and reached 1.5 million active clients by February. In April, it eliminated charges for calls between its own SIM cards. While Capitec Connect saw a 150% increase in voice minutes to 768 million in the year to February, it generated R442 million in net income from its Connect offering, more than doubling the previous year's R193 million, despite offering free calls.
This strategy positions voice services as a retention tool for banking relationships rather than a revenue stream. Traditional operators like MTN cannot compete on price with free services, especially as MTN's prepaid voice revenue is a profit line, not a customer acquisition cost. Vodacom is also affected, though its prepaid mobile customer revenue decline was less severe at 2.1% for the year to March.
Furthermore, a significant portion of the voice traffic impacting MTN's retail revenue travels over MTN's own network under wholesale agreements. Capitec Connect operates on Cell C's wholesale network, which is itself a roaming customer of MTN, indicating that revenue erosion is occurring even on MTN's infrastructure.
Background
The trend of declining voice revenue has been consistent. In the fourth quarter of 2025, voice revenue dropped 8%, compared to 2.8% in the third quarter of 2025 and 9.6% in the first quarter of 2026. MTN's prepaid subscriber base saw a shrinkage of 0.7% over 2025.
Vodacom Group CEO Shameel Joosub has previously expressed concerns about the potential fragmentation of the South African market, drawing parallels to Spain's market dynamics. Cell C, in its first results as a listed company for the six months to November 30, 2025, reported that almost all its service revenue growth stemmed from wholesale, which increased by 22.5%.
Key Facts
- MTN South Africa's voice service revenue has declined for four consecutive reporting periods.
- In Q3 2025, voice revenue fell 2.8%; in Q4 2025, it fell 8%; and in Q1 2026, it fell 9.6%.
- Prepaid services account for about 52% of MTN South Africa's service revenue.
- Capitec Connect, a banking service, offers free calls between its SIM cards and reached 1.5 million active clients by February.
- Capitec Connect generated R442 million in net income in the year to February, with voice as a retention feature for its banking services.
- Vodacom's prepaid mobile customer revenue fell 2.1% to R26.7 billion in the year to March.
- Cell C's wholesale revenue grew 22.5% to R840 million in the six months to November 30, 2025.
What Happens Next
Investors are closely monitoring MTN's upcoming 2026 interim results. Key areas of focus will include whether the second-quarter voice revenue decline is steeper than the first quarter's 9.6%, which would signal an acceleration of the trend. Attention will also be paid to whether MTN South Africa's Ebitda margin can recover towards its 35-37% target range or remain in the low 30s. Additionally, investors will assess if the company revises its medium-term guidance, which currently assumes voice revenue stabilization.
Sources reviewed
Project Chintan independently synthesized and analyzed information cross-checked across the sources listed above.
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