CFO of the Week: MTN's Brett Goschen, part 1: successfully playing devil's advocate
After conquering Nigeria and Ghana for MTN in various CFO and CEO roles, Brett Goschen was ‘redeployed’ last year as Group CFO. Today we publish PART 1 of an exclusive interview with Goschen, in which he talks about the business support role of a CFO and the challenges a mobile telecommunications multinational faces.
Click HERE to read part 2 of this interview, in which Goschen explains how to successfully do business in West Africa.
You have worked in the mobile telecom industry since 1996, first at Altech Autopage Cellular and since 2002 at MTN. What do you like about the industry?
"I like to be involved at the leading edge of change. I can't get excited about industries or products that the man in the street cannot relate to or does not use. Cell phones are used by almost everybody in everyday life. Not only do they provide functional benefits but from day one, cellphones have also made a lifestyle statement. For example, having the smallest and lightest phone initially, such as the Nokia 2110, and more recently having the latest smartphone, says something about the device owner."
"In the early days, there was a lot of hype in our industry, as the telecommunications sector grew at an unprecedented rate. In recent times voice growth has slowed. However, this has not dampened excitement around new opportunities which have emerged with the advent of smartphones. These novel devices are now driving a vast array of new digital products and services. We are part of an industry that is defined by rapid technological evolutions and regulatory changes. This in turn requires our business to be agile in response to the dynamic business environment in which we operate. Personally, I find this feature of our business much more exciting than traditional industries which have done more or less the same thing for over 100 years. At MTN, we touch the lives of so many people and contribute significantly towards the socio-economic development of Africa."
Which of your accomplishments at MTN are you most proud of?
"What immediately comes to mind is the rapid growth rate we achieved when I moved to Ghana as the country CEO. I believe that we played an important role in helping to jump-start that country's economy. This is in spite of the fact that our business had been present in Ghana for nearly 12 years before I arrived in that country in 2006. The high growth rates that we achieved were realized by focusing on making our network more efficient and introducing innovative new products to our subscribers. As a result of these efforts, MTN Ghana grew by around 60 percent per annum, for the first couple of years of my tenure there. We went from 2 million subscribers in 2006 to nearly 10 million in 2011, attaining a 53 percent share of the total market. That was hugely successful."
"Another highlight in my career was our achievements in Nigeria when I returned to that country as CEO. My return to Nigeria followed my time as CEO in Ghana and an earlier stint as CFO in Lagos. From being an almost totally voice-oriented operator, we successfully implemented a digital strategy and quadrupled our data revenues in the first 2 years. I believe that my team and I laid the path to developments at MTN Nigeria which currently see 15 to 20 percent of our total revenue being derived from data. In the process, MTN has also become the largest distributor of music in Nigeria. Our capex project management in that country was also hugely successful. After great price reductions in 2010/2011, we embarked on a massive capital program to grow our network capacity, in line with the traffic growth. We managed to rollout 1.6 billion dollars of capital equipment in 2012 and an equal amount the next year to grow our infrastructure."
Which industry specific challenges do you deal with as CFO?
"Some specific challenges relate to cash flow and capital allocation choices. MTN has always had a very strong balance sheet, while other operators in most of our markets outside of South Africa were typically more cash strained. We were thus able to expand our networks faster and wider than our early competitors and gain a greater proportion of the early adopters. We were in the fortunate position of being able to invest wherever an acceptable return on investment would be made."
"Due to the rapid pace of developments in the industry, another typical challenge has been to ensure that the systems and business intelligence (BI) that are useful for management decision making, provide the necessary information timeously. One of the most rewarding aspects of a CFO's role is being able to contribute to the business success by providing the right information and guidance. But that means you need to have the systems, reporting tools and expertise in place to identify the key trends, risks and opportunities for the business to focus on."
"The core function and responsibilities of the finance department are pretty similar across most industries, although Revenue Assurance - that is the prevention and detection of revenue leakage - probably plays a much larger role within the telecoms industry."
"From a business challenge perspective, irrational competition is something we have to deal with from time to time. This is where competitors would reduce the price of calls or data to levels below their costs, which are not sustainable. That is where your product mix and what you market or withdraw becomes very important. You need to have systems in place such as Activity Based Costing that detect where you are losing margin, where you are gaining margin, by how much and through what type of customers. In this role there is also a need to highlight the opportunities where we can lower or increase prices, or where we should avoid implementing such measures."
So it's the finance department that eventually has to tell the marketing guys 'no'?
"For finance people, I think it is always healthy to be a bit on the conservative side. You need to be able to play devil's advocate. Risks often provide the returns, but it's important to know what those risks are and what the likelihood is of those returns materializing. Having a backup option is always important, particularly if your actions do not go according to plan. On the other hand, circumstances also arise where the marketing guys may be erring too much on the side of caution. In these cases, the finance team would be expected to highlight the benefits versus risks of taking more aggressive actions. Sometimes short-term losses need to be incurred to pursue longer term strategic goals. At MTN, we tend not to employ people that only act as gate keepers, although there is always an element of that required when you're in finance. We like pro-active finance people who see it as their duty to support their colleagues in the various divisions of the business."
Also read part 2 of this exclusive interview!
If you also would like to share your ideas with the CFO community, you want to be part of the leading CFO South Africa Community or you want to know more about hosting a CFO South Africa event, you are most welcome to get in touch with CFO SA. Please contact Jurriën Morsch at [email protected]
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