Foreign Direct Investment

FDI in Telecommunications

The Success Story of MTN in Nigeria

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Case Study for Economics & Management in Developing Countries

INSEAD, MBA 2004

October 7, 2004

Covadonga Velasco

Samy Belemi

Wouter Belmans

TABLE OF CONTENTS

1 Introduction 3

2 MTN Success in Nigeria 5

2.1 MTN approach to investing in Nigeria 5

Strategy 5

Financial aspects 6

2.2 Results in March 2004 7

Sustainability of the results 8

3 Benefits of MTN’s investment to Nigeria 10

3.1 Economic Development 11

Job creation 11

Time and Expense Saving 12

Transparent Market Place 12

3.2 Social Development 12

Healthcare 12

Education and Knowledge Spillovers 13

Governance 14

4 Conclusion 14

TABLE OF FIGURES

Figure 3 1: An ICT Based Development Model: New Virtuous Circles 10

Figure 3 2: MTN Nigeria value chain 11

1 Introduction

In 1999, one of the worst post-colonial dictatorship regime in Africa comes to a end. Sani Abacha’s military ruling in Nigeria is overthrown and a transitional regime led by Olesegun Obasanjo is put into place. The country, touted in the 70’s as one of the potential success stories of Africa following the discovery of huge oil reserves and the building of decent infrastructure in cities such as Lagos and Port Harcourt, is in ruins.

Part of the challenge, second only to the need to restore the rule of laws, was to rebuild the country infrastructure. Very soon, it was obvious that the quicker fix could be done in the telecommunication sector, thanks to the introduction of advanced mobile technologies such as GSM, which reduces drastically the need of civil works compare to former fixed line technology. Hence, at the end of 1999, the Nigerian government announced their decision to offer 3 GSM licenses for a fixed price of 250 Millions US$ each.

Nigeria was (and still is today) a challenging environment for foreign companies willing to invest in what represent potentially...