MTN’s Recharge Card Phase out and its likely impact
MTN is phasing out scratch cards from the market. Their reason? To minimize contact, a major way through which COVID19 spreads. Instead, subscribers will have to use either mobile money (momo) or the credit transfer system in purchasing airtime.
Beyond that though, by their sheer scale and reach in Ghana, this single action has big implications for Ghana’s Telco market (users, agents, MTN and other competitors). I expand on that and more here.
In a small way, this phase-out isn’t restricted to MTN. Indeed, I previously found that all 4 major telcos had phased out the GHS1 scratch card as of 2020.
Yet, since the latter part of 2020, two (2) things happened:
1. An MTN recharge card shortage on the market.
2. Rumours among recharge card sellers about MTN’s plans to phase out the rest of their scratch cards.
Finally, it got confirmed in February 2021. There are a few potential impacts this could have.
The big one: It expands the Mobile Money Ecosystem beyond person to person transactions into value-added services
As of December 2020, 10.6 million MTN users (43%) used mobile money. The remaining 13.8 million (57%) use MTN but aren’t active on mobile money. This move will incentive the latter group to load airtime unto their phones through mobile money.
Through this, more money flows within the mobile money ecosystem instead of being cashed out. This translates to increased business for momo agents. What scratch card agents used to do, momo and credit transfer agents will now do.
It wipes out half of the card market into a secondary one
Some vendors are already reporting a sharp drop in card sales.
Currently, card sellers rarely carry Glo cards (758,843 or 1.87% voice subscribers as of August 2020), and of course, MTN’s is being phased out (23.7 million or 58.4% market share). That means a little over half of the scratch market has been wiped out. That leaves about 16 million users (39.78%) of the voice market for sellers.
This impacts other Telco’s too by making their recharge cards a less viable business and simultaneously positions them as an alternative for users who still prefer cards for other reasons. Some agents might diversify into MTN’s Electronic Vendor Distribution (Credit Transfer) or branch into mobile money since that’s where the main recharging market is being formed.
MTN gains a digitised distribution channel but loses a Brand touchpoint
I’ve previously written about mobile prepaid scratch cards and how we can think of them as flyers that Telcos have strategically placed their agent networks to distribute.
From that analysis, MTN leveraged scratch cards beyond just showing airtime value:
There’s was a clear emphasis on promoting their mobile app and other value-added services:
This means they are phasing out something beyond a scratch card.
However, they do make significant gains in digitizing their recharge distribution channel which reduces operational expenses on logistics and warehouse staffing across the country.
It’s not clear the number of users this impacts
According to MTN Ghana’s CEO, Selorm Adadevoh, scratch cards represented 5% of recharge sales in 2020, down from between 15% to 20% a few years ago. Without the percentage of users recharging through scratch cards, it’s not clear the number of users this change affects.
Regardless, most of this analysis assumes users will make the transition from cards to either credit transfer or mobile money given the awareness people have of both channels and the bonus incentives being offered to make the switch:
So it does seem like a reasonable assumption to make especially if it affects a small fraction of the user base.
Conclusion
It’ll be interesting to see if the cards make a return when we finally get a hold of COVID19 or if instead, another Telco joins MTN in phasing cards out. Only time will tell.
Thanks for reading!
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