Which Rules Should Rule in the Digital Age? In conversation with MTN Sudan's CEO, Malik Melamu
James Wiliams sat down with MTN Sudan's CEO, Malik Melamu, to chat about connectivity in Sudan. Hear about Malik's journey to his career, challenges of connectivity in Sudan, and the books he recommends in 2020.
James Williams: So Malik, how are you? Where have you been during COVID? What's your journey to where you are today?
Malik Melamu: Hi, James. It's an honour that you give me time to listen to me. I was born in South Africa. Just some of the countries I've worked in are Botswana, Lesotho, South Africa, of course, Tanzania, DRC, Benin in West Africa, and now I'm in Sudan, of course. They all have their ups and downs. They all have their challenges. Sudan is a new stretch I've had in my career - to be working in an environment that is in hyperinflation. That's probably the biggest challenge I've ever had in my working life, and probably the best opportunity to learn something different as well. So I've been in Sudan for four years, and basically, the trajectory of the inflation rate in Sudan has been 17% and then 35%, and then 62%. And currently, the inflation rate on a 12-month run rate is at 119%.
So, my challenge has been to try and keep the business afloat and keep the business running in a hyperinflationary environment. We have managed through a combination of tariff reviews and also very skilful commercial activity, particularly using a lot of BTL and CVM activity to make sure that we always extract the best value we can from our subscriber base. We've also done a lot around pushing subscriber growth in that environment. And of course, you can imagine in that hyperinflation the subscribers themselves are also suffering. So it's to make sure that you stay top of mind of your customers in terms of the extra pennies they have to spend on communication.
Fortunately, I think the advantage we have in all emerging markets is there is the high dependency on communication because it does change people's lives. So people are far-flung across the country.
And for the most part, they've lived in places where they've had no access to communication. If they need to pass a message or make a payment, it's about giving the money to someone or sending a message through someone who's traveling, and obviously when you bring them into this world of communication their life changes. So we do have that advantage that we're bringing, what I would say, is a life-changing service. So we are generally top of mind, but of course, in the hyperinflationary environment, it is then the high level of costs of running the business that keep changing. So you have to run a very tight ship.
So some of the examples I've given is not just inflation, you have an exchange rate that's also depreciated rapidly over the last four years. From when I started we were probably at about nine Sudanese pounds to the dollar. And today, as I'm talking to you, it's 270 Sudanese pounds to the dollar, and we still managed to run the business. What does that entail? It entails... I think I could probably give lectures in universities about how to refine your budget on the trot. If I give an example of last year, 2019, in the first quarter of 2019 due to rapid depreciation of the currency, we revised our cap ex budget six times in the first quarter. And this is, it's a habit. It's something we constantly do. We review our tariffs. We review our product set. We review the messages that we put out to customers on BTL.
The other thing that we do to support our business is we have to be very astute and very, very creative in dealing with the external environment, particularly the regulators, the government. In this kind of macroeconomic environment, you can imagine that the government is also hard up in terms of its treasury. And they're always looking for income.
I mean, I've lived through I don't know how many tax increases and increases in fees, regulatory fees, increases in VAT. On a regular basis it would be frightening if I would describe what we've had to run through, but you know, much as it's frustrating, it does actually reflect the realities of the world we live in, particularly in emerging markets. So I think I've had a full blown opportunity to test my metal in that kind of environment. We've grown operationally to show the potential of emerging markets, despite these challenges. I mean, we've grown massively in an operation. Everything that's within our control with we just seeing exponential growth. If I look at 2016, when I arrived to where we are currently, we've probably grown our prepaid revenue and about 650% with a combination of tariff reviews. And as I said some very creative commercial activity.
James: You made an interesting point in your conversation with Adrian at the Africa Tech Festival around the latency period between technological development and actual integration and rollout for citizens. I mean, 5G's a very good example of that. You see and countries rolling out 5G trials, whereas the vast, vast majority of the population are dealing with, 2, 3G.
It's also as important, maybe more important, with smartphones and all the functionality that go around with that in developing countries. So getting smartphones in the hands of people unlocks access to banks, TV subscriptions, video calls, all the different things that invite data allocation to go with that.
So what is MTN doing to put smartphones in the hands of citizens?
Malik: Okay. Yeah, I think the comment I made is that... And you wouldn't want to stop the rate of innovation because it is obviously useful. But I think what happens in our industry often is that everything is driven from a technical perspective. So we're rushing down this road to develop new things. Yes, more efficient technology, technology that can do more. That is more powerful, that is faster, greater quality. But I think one of the challenges in the emerging markets is that you can get so highly strung on that, that you leave people behind. And you forget about the basic steps that people need to be able to follow, to become part of that. So, as I said, sometimes just for someone to be able to make a voice call in our markets is still revolutionary for some people.
So you have to take that into account. So now what we're doing, I mean, for a long time we've had people accessing the internet through 2GH basic H technology. And now, of course, 3G has become widely dispersed in our markets. Sudan is no different. You're getting a lot of people using a 3G, but the pace at which they're adopting 3G is still far behind. I mean, we're now talking about 5G and we've just over the past year and a half managed to shift that a large number of our subscriber base onto our 4G deployment. So you can imagine for them it's revolutionary. It's changing their lives. And I often question, because now 5G is moving into a space where you're going to start having applications that are a lot different, smart cities, self-driving vehicles and that.
So we have to keep our excitement about innovation, but we have to keep within the reality of our markets.
I still feel in emerging markets, you have huge gain to move people from 3G to 4G, to move people from 2G to 3G, massive gain. But then of course, the key is with all this innovation is the expense behind the access to it. Now we're going to 5G. So we've got 5G phones out. We're in markets where the vast majority of the population earning under $2 a day. How do you get them up to speed with that. So some of the things that we're doing with MTN, MTN in collaboration with China Mobile and a company called KaiOS, they actually created probably at the time, a year and a half, two years ago, the cheapest smart feature phone that you can get on the market with a landed cost of about $15 to $20, which in terms of our industry, it's a wow moment. But of course, for someone earning less than $2 a day, it's still prohibitive.
It's still prohibitive. So some of the other things we're doing is we're entering into partnerships with OEMs and large distributors within our markets where they will provide phones, because they're able to bring them into the market at a reasonable cost. And then we will give bundled offerings that are attached to a phone that's purchased, a smartphone. And then what we're doing is we're enabling people to, for example, buy the smartphone with installments over a period, six months, nine months. We are now also talking to the micro finance world in emerging markets to see whether they can step them and also offer financing for smartphones. So these are the things that we're trying to do to really upscale the adoption and put as many smartphones in the hands of people.
So at the moment, we're probably talking about a smartphone penetration that is from our base. We have a base of about 9.3 million subscribers. And of that, smartphone penetration is about 35%, 36%. We, we still have an aspiration over the next year to move that into 40% to 45%. So it is a very protracted process because it's really about economics, right? You offer someone a chance to pay a phone for over six months. And it seems like, "Wow, nice idea in that." But for people who are earning limited amounts of money, it's still a challenge. It's a major decision they have to make.
One of the things we're trying to do as well as to bring governments and regulators more into the picture with creative ideas. At the moment it's discussion and ideas, we're saying, "Well, why don't you somehow have reduced customs rates for those phones coming in?" Have something creative, because we do know that when you increase the penetration of internet usage in the country, it does actually positively impact the GDP of the country. So it be might worthwhile doing something like that. So these are discussions that we're taking in various markets to try and find creative ways to make sure what we say in MTN is, "How do we connect the next billion?" Because that's the challenge we have as a world and emerging market.
James: That's exactly it. Yeah. And I mean, in my opinion, from the research we've done for the events and the webinars and the stories we do, is probably as important as any other thing you could do to engage and financially include citizens across Africa. And the irony is you have big companies like yourself and event organizers like ourselves, and putting on these big events and talking about all these issues, but the actual citizens, which are 90%, 95% of the people, don't work the conference because it's more high level it's business led. So it's also an issue with engagement and things like that as well. So shifting gears slightly, cause I'm aware we are relatively limited for time. A session that we had Africa Tech Festival was about misinformation.
And we have the U.S. State Department in there. Now we have Twitter on there. It's a very topical issue at the moment, not just in Africa, I'm sure people will agree. Especially interested in Africa at the moment with some of the civil unrest that is going on. But the access to accurate diverse stream of information is the bedrock of a free and well-informed society. If people are informed, they can make intelligent decisions, whether that's voting, whether that's where they spend their money, pounds and pence. So many African nations have historically had issues with either governments or private institutions or even foreign governments, controlling internet access and campaigns of misinformation. What are your thoughts with that on the issue working in Sudan and also broadly across Africa as well and how it impacts people?
Malik: Yeah, I think I'll probably start by saying it's very much in the same vein. It's where the speed of technology and the new world is opened has then again, outpaced the thinking and the preparation of individuals of government. It's really grown rapidly and governments have driven and really driven operators to increase the access to internet because they do know that it will help drive GDP. But at the same time, the regulatory environment and the necessary frameworks and the necessary research has not been in place to be prepared for that. And so all over the world, there's good and bad internet because there's some people who abuse internet horribly. We've been watching the elections in U.S.A. And the amount of fake news that pervades around that. And it's happening in Sudan where I am. We went through a revolution in 2019, and there was a lot of fake news that was put up.
People put out information about something happening and when you go and look, it hasn't really happened. So what we haven't done is we haven't really prepared. We've driven the growth of an animal that we haven't yet prepared ourselves for. And obviously then the knee-jerk reaction of regulators of that, particularly in situations like revolutions or elections or insurrection, the knee-jerk reaction is to switch off the internet. And that to me is not always a facet of the government being bad. It's more around us not having been prepared for what the internet is going to bring us. This new world that it opens. Because there's also a psychology of a human being. When you're behind the screen, you feel more comfortable saying whatever you say, because you feel nobody can see me and I don't really have to account for it.
So there are two sides to this story. The governments that abuse it and their knee-jerk reactions, but if I put myself in their shoes as well, there's a lot of abuse. There's a lot of people who create problems, who create insurrection by pervading fake news. I think all of us as stakeholders, government operators, research houses like yours, we need to actually help develop frameworks that will support, policy frameworks. I don't think it's correct to say, because there are a lot of activists who sit and say that there's no way you should switch internet off. And I agree because it's... Everybody should have a right to communication, but in most countries and in most constitutions your right to communication goes as far as it affects negatively the rights of other people. So if you use your right to communication to pervade fake news and create massive problems and even insurrection and harm to other people, well, you should be curtailed.
But the point is we should build a framework that doesn't allow it to be arbitrary. And I really think what's happened, James, for the right reasons, that the explosion of internet is a good thing for the world. I think for the most part, it's outstanding. You can't argue against the benefits but in the same vein, as I spoke about technology, I think in our brand, I would prepare it.
If you compared to 10 years ago, the number of people in the world who are using internet to what we have now, and we haven't yet prepared ourselves framework-wise, regulators are not ready.
They don't know how, so they use very arbitrary things. And so you get regulators saying, "Here's WhatsApp. We realize the benefits of it." And they say, "Now, no video calls over WhatsApp. No this, no that."
That's a knee-jerk reaction of someone who's not prepared for what has been implemented. So we need to go to the drawing board and really fix what's missing in the policy loopholes and the framework. But I think we're also... You mentioned that AI. As we talk about AI, we should learn from that and spend as much time and energy as we are on all the benefits that AI will bring. Self-driving vehicles, let's look at self-driving vehicles. It's made maybe five, six years now, but a number of companies launching or ready to launch self-driving vehicles. some have launched, and they've pulled back. They have the self-driving vehicle that's run over a pedestrian, right? So then everybody pulls back. So again it's that nature within our technology space of innovation and excitement around innovation drives us.
And we forget that the 95% who are not in a high level and in our innovative thinking space who are going to be the users, and what role of frameworks do we need to put in place to make sure that they benefit from it in the safest way. So there's a lot of shouting about, "Why the governments shut down internet," but I think people are spending time to realize and unpack the reasons why. So in Sudan in November, the beginning of November, we got a notice from the government to say, "You need to shut down the internet from 8:00 to 11:00." 8:00 in the morning to 11:00 in the morning, every day for two weeks. And that was during the national exams, right? And it's because somebody before, on the eve of the exams, used WhatsApp to leak the coming exam paper to some students.
So you see there's two sides to it. So you're sitting as the government, you say, "These things are being leaked over the internet. And so people are going to sail through the exams without really having deserved it. So what do we do? Do we pick, and do we have time to find out who it is who's going to leak or do we just shut the whole thing to stop it?" And I think sometimes as well, the critics don't take time to analyze what is really the issue. Look, there are times when the internet is switched off because governments want to be doing things. People are protesting and they want to be doing things that are not seen. I mean, that's terrible. And I think that's the sense in which most people attack the internet shutdowns.
But if you unpack it like I am, there's several incidents of that. How do you control leaked exams in an environment where you have limited infrastructure as the government, but people in the street have more infrastructure than you because of the internet. I think there are a lot of good heads that can sit around the table and we should get in the habit that when technology and innovation is flying at this pace, which is necessary and it's to make our life easier, there should also be a think tank and brains that are also flying and making sure they evolve the policies and the guidelines that will underpin that innovation.
James: Yeah. We mentioned the United States as well and the election, but by no means is it an African-only problem. I think in the UK, when 5G started to be rolled out, some 5G towers were attacked because of rumors they cause COVID or rumors of mind control and things like these. So by no means, is it an African only problem is it's a global problem.
Malik: Everywhere. So what I'm saying is without insulting because, I mean, the engineers and the IT people who develop all these things, they're outstanding. They're geniuses, and they're really moving us in a way to make our life better. But it's not an integrated approach. We've left it in their hands. And when you have that integration and maybe even involving customers in the research or in the use case.
You might start coming out with a launch of innovation that looks like it is more tailored to real life situations, and it's not outrunning what human beings really are. And I think that's the challenge we have. But as we always say, "It's an opportunity," isn't it?
We're in a world where innovation is going to keep moving at a rapid pace for the right reasons. So we need to change gears as well in terms of how we regulate and how we look, because we're using regulations that were evolved 10, 20 years ago to try and regulate, to try and pigeonhole innovation that we dreamed of, that we used to watch movies and think it will never happen and it's happening.
But we're using the same regulatory frameworks to try and pigeonhole that, and it's not working. And I think that that friction is always an opportunity to make change.
James: Yeah, absolutely. Last question for you, Malik, and not a business or technical one, but one related to the spare time that I'm sure people have had from working from home. Got any books that you would like to suggest to our community?
Malik: Well, from my side, and it's linked more to my spiritual side, but what I've been reading right now is actually a book someone wrote, because I'm a student, I'm an eternal student of leadership, and it's... They've taken the prophet Muhammad and the way he behaved and the way he evolved and they've taken it and looked at it from the perspective of leadership. So it's a book about leadership nuggets from the life of the prophet Muhammad. So I'm almost done with that. That's something I'm reading now, and it's purely part of my journey to learn and understand more and more about leadership. So I'm not sure what will be next, but I love reading. I mean you flashed something in front of me about, that you were just reading, about ego. I've already been on a visit to Amazon, I've already pulled that, put that in my library. And I could well see myself reading that as well.
Second one that is on my shelf is the next in line to read. If anything, yours, that Ego Is The Enemy might slip in. Because it looks interesting, but I also downloaded a book that I want to read called No Rules. No Rules Rules: Netflix And The Culture Of Reinvention.
Because I think I find it very relevant at the moment because well, the whole world around us is reinventing. And what I was describing to you when we were talking about the whole issue of internet shutdowns and that, it's because the regulatory and policy space is not reinventing itself at the pace. I think reinvention is probably the big buzzword for all of us in the leadership world going forward. So it's called No Rules Rules.
Netflix And The Culture Of Reinvention. It's written by Reed Hastings and Erin Meyer.