NOVEMBER

2021

TECHNOLOGY AND TELECOMMUNICATIONS

SECTOR REPORT 2021

DR SALOMÉ TEUTEBERG
AND IFEDOTUN AINA
Contents
Introduction .................................................................................................................................... 2

The Sector ....................................................................................................................................... 2

Financials......................................................................................................................................... 3

Revenue ...................................................................................................................................... 3

Profit before Tax ......................................................................................................................... 6

Directors’ Remuneration: a ten year retrospective........................................................................ 8

CEO Remuneration 2020............................................................................................................. 9

Table of Figures

Figure 1 Technology and Telecommunications Sector Revenue 2020 ........................................... 4

Figure 2 Technology and Telecommunications Sector Revenue Pie Chart 2020 ........................... 5

Figure 3 Technology and Telecommunications Sector 2014 to 2020 ............................................ 5

Figure 4 Technology and Telecommunications Sector Average Revenue 2012 to 2020 ............... 6

Figure 5 Technology and Telecommunications sector Profit before Tax 2020 .............................. 7

Figure 6 Technology and Telecommunications sector Profit before Tax 2014 to 2020................. 7

Figure 7 Technology and Telecommunications sector Average PBT 2014 to 2020 ....................... 8

Figure 8 Technology and Telecommunications sector CEO Remuneration 2011 to 2020 ............. 9

Figure 9 Technology and Telecommunications sector CEO Remuneration 2020 ........................ 10

Figure 10 Technology and Telecommunications sector Executive Director Remuneration 2012 to

2020 .............................................................................................................................................. 11

Figure 11 Technology and Telecommunications sector NED Average Total Annual Remuneration
2011 to 2020 ................................................................................................................................. 11

1
Introduction
The Johannesburg Stock Exchange lists six companies in the Telecommunications sector. Our
sample includes three companies from the list. These companies are:

MTN Group
Telkom
Vodacom Group Limited

The Technology and Telecommunications sector in South Africa is one of the fastest-growing
sectors in the country. This makes it a key industry for the LRS to monitor. Firstly, this report looks
at the significant effect the COVID 19 pandemic has had on the sector. The rich data extracted
from the LRS’s MNC Database further enables a retrospective view of company performance over
the last seven years. We also analyse the the remuneration packages received by directors in this
sector.

The Sector
The most significant impact of the pandemic on the telecommunications sector within South
Africa has been the lockdown measures that were enforced. Covid-19 lockdown conditions have
resulted in more people working and schooling from home and has raised the demand for
connectivity. Some operators have reported almost 50% growth in mobile data traffic and more
than 200% traffic in fixed data traffic over the period 1. This unprecedented reliance on
connectivity for digital services and customer interactions during a period of personal income
uncertainty has raised further concerns on the affordability of data in South Africa.

1
https://www2.deloitte.com/content/dam/Deloitte/za/Documents/technology-media-telecommunications/za-
Telcos-V4.pdf

2
The sector generates its income from two main services: telecommunications (which includes the
provision of fixed, mobile and internet services) and broadcasting. The three companies in our
sample employed about 35,000 people in the 2020 financial period, out of which 55% are
employees of MTN. According to Brand Finance's 2021 annual report on the most valuable and
strongest brands in South Africa, MTN was elected as the country's most valuable brand for a
tenth consecutive year. MTN’s direct competitor, Vodacom, was named the second most
valuable brand in the country. Vodacom trails behind MTN based on geographic reach because
of the latter's market share. Both companies together control over 70% of the South African
mobile market in terms of subscribers. 2

Telkom business units were impacted in different ways by the Covid-19 pandemic in 2020. Like
other telecommunication companies, the business benefitted greatly from the increased
demand from people working from home and online schooling. Mobile data which contributes
approximately 70% of the mobile business was the main driver of growth and it was driven by
substantial increase in mobile traffic. The mobile business continued to gain market share from
its peers both from a customer and revenue perspective to become the third-largest mobile
telecom in South Africa within ten years of establishment. 3

Financials
Revenue

From the Figure 1 chart below, it is clear that MTN remains the biggest company in the
Technology and Telecommunications sector, with Vodacom following. While Telkom recorded
0.3% increase in revenue in 2019 when compared to the previous year, in 2020 the revenue
increased by 3.04%. Figure 2 shows a pie chart of the companies in our sample by revenue. This

2
https://www.news24.com/fin24/companies/battle-of-the-brands-latest-report-highlights-which-sa-companies-
ruled-the-roost-in-2020-20210525

3
https://businesstech.co.za/news/mobile/434575/telkom-talks-up-mobile-growth/

3
chart shows the size of the sample market that each company has by revenue. Telkom remains a
small competitor when compared to other MTN and Vodacom.

Figure 3 shows that Vodacom and Telkom have reported a steady increase in revenue since the
2014 financial year. In 2017, MTN reported a sharp decrease in revenue. By 2020, MTN reported
its highest revenue since 2014.

On average, the three companies reported an 11.89% increase in revenue in what could be
termed the worst year of the Covid-19 pandemic. This is compared to a 6.84% increase in average
revenue for the same companies in 2019. From the graph below (see Figure 4), we see a steady
upward trend in revenue since 2017. This is expected to continue given the increasing
dependency on mobile network and data in the country.

Technology & Telecommunications Sector 2020

200,000,000,000
179,361,000,000
180,000,000,000

160,000,000,000

140,000,000,000
Revenue ZAR

120,000,000,000

100,000,000,000 90,746,000,000

80,000,000,000

60,000,000,000
43,043,000,000
40,000,000,000

20,000,000,000

Figure 1 Technology and Telecommunications Sector Revenue 2020

4
 Technology & Telecommunications Sector 2020

14%

29% 57%

MTN Group Vodacom Group Limited Telkom

Figure 2 Technology and Telecommunications Sector Revenue Pie Chart 2020

Technology & Communications Sector Revenue 2014 - 2020

200,000,000,000
180,000,000,000
160,000,000,000
140,000,000,000
120,000,000,000
100,000,000,000
80,000,000,000
60,000,000,000
40,000,000,000
20,000,000,000
0
MTN Group Vodacom Group Limited Telkom
2014 2015 2016 2017 2018 2019 2020

Figure 3 Technology and Telecommunications Sector 2014 to 2020

5
 Technology & Telecommunications Sector Average
Revenue 2012 to 2020
120,000,000,000,00

100,000,000,000,00

80,000,000,000,00

60,000,000,000,00

40,000,000,000,00

20,000,000,000,00

-
2012 2013 2014 2015 2016 2017 2018 2019 2020

Linear (Average)

Figure 4 Technology and Telecommunications Sector Average Revenue 2012 to 2020

Profit before Tax

MTN remains the biggest earner in the sample. Compared to the previous year, the 2020 Profit
before Tax for Telkom took a big hit and went down by over 75%. In the same year, MTN reported
a PBT of ZAR 29 billion (a 65% increase compared to 2019). Telkom reported the lowest profit in
our sample, the companies reported ZAR 974 million PBT for the 2020 financial year. On average,
the 2020 PBT for the three companies went up by 21.56%, compared to the 2019 value. From
the graph below (see Figure 8), we see a steady upward trend in PBT since 2016.

6
 Technology & Communications Sector PBT 2020
35,000,000,000

29,086,000,000
30,000,000,000

25,000,000,000 23,058,000,000

20,000,000,000

15,000,000,000

10,000,000,000

5,000,000,000
974,000,000
0
Telkom Vodacom Group Limited MTN Group

Figure 5 Technology and Telecommunications sector Profit before Tax 2020

Technology & Telecommunications Sector PBT 2014 - 2020

60,000,000,000

50,000,000,000

40,000,000,000

30,000,000,000

20,000,000,000

10,000,000,000

0
Telkom Vodacom Group Limited MTN Group

2014 2015 2016 2017 2018 2019 2020

Figure 6 Technology and Telecommunications sector Profit before Tax 2014 to 2020

7
 Technology & Telecommunications Sector Average PBT 2014 - 2020
30,000,000,000

25,000,000,000

20,000,000,000

15,000,000,000

10,000,000,000

5,000,000,000

0
2014 2015 2016 2017 2018 2019 2020

Average Linear (Average)

Figure 7 Technology and Telecommunications sector Average PBT 2014 to 2020

Directors’ Remuneration: a ten year retrospective

The LRS MNC database allows us to look at CEO remuneration over the last ten years. For the
three companies in our sample, we see the trend between 2011 and 2015 being downwards,
with a large spike in 2016 when the then MTN CEO retired and was paid a significant salary and
bonus (see Figure 9).

When looking at Figure 9, we see that in 2017, 2018, 2019 and 2020 there was a gap between
the average total remuneration without LTI and average total remuneration including LTI. This
shows that large LTIs were paid in these four years. So far, 2020 has the highest values for both
the average of total without LTI and with LTI.

8
 Technology & Telecommunications sector CEO
Remuneration 2011 to 2020
50,000,000

45,000,000

40,000,000

35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

-
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Average of Total without LTI Average of Total with LTI

Figure 8 Technology and Telecommunications sector CEO Remuneration 2011 to 2020

CEO Remuneration 2020

From 2019 to 2020, average total remuneration for CEOs in this sample went up by 10.4%. The
CEO of MTN, RA Shuter, resigned on 31 August 2020 and received a total remuneration of ZAR
73.7 million, including an LTI payment of ZAR 5.7 million and a cash bonus of ZAR 30.1 million.
This makes him the highest earner in the sample for the 2020 year. RT Mupita ceased to be Group
Chief Financial Officer (GCFO) of MTN on 31 August 2020 and was appointed as the Group
President and CEO on 1 September 2020.

Despite low performance in 2020, Telkom CEO SN Maseko received an LTI of ZAR 10.5 million and
a total remuneration of ZAR 21.8 million in 2020. Out of the three companies, Vodacom CEO Aziz
Joosub received the highest LTI of ZAR 17.6 million and a total remuneration of ZAR 42.4 million.

9
From 2019 to 2020, the average total executive director remuneration went up by 4.2%. In the
same period, average non-executive remuneration went up by 8.3%.

Technology & Telecommunications sector CEO Remuneration 2020

80,000,000

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0
MTN Group Telkom Vodacom Group Limited
LTI payment ZAR 5,713,000 10,531,129 17,661,111
Other payments ZAR 17,807,000 0 1,016,758
Benefits ZAR 1,997,000 2,455,469 819,941
Cash bonus ZAR 30,104,000 0 11,688,915
Salary ZAR 18,154,000 8,830,449 11,240,684

Salary ZAR Cash bonus ZAR Benefits ZAR Other payments ZAR LTI payment ZAR

Figure 9 Technology and Telecommunications sector CEO Remuneration 2020

10
 Technology & Telecommunications sector Executive Director
Remuneration 2011 to 2020
35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Average Salary Average Total Annual

Figure 10 Technology and Telecommunications sector Executive Director Remuneration 2012 to 2020

Technology & Telecommunications sector NED Average Total

Annual Remuneration 2011 to 2020
1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

AverageTotal Annual

Figure 11 Technology and Telecommunications sector NED Average Total Annual Remuneration 2011 to 2020

11