Tax demands and currency variations create headaches for Millicom’s new Africa CEO

By:
Alan Burkitt-Gray
Published on:

Too many governments think of mobile operators as easy ways to fill shortfalls in revenue. But apart from that, Millicom’s African business is growing well. CEO Cynthia Gordon, a former Ooredoo executive, talks to Alan Burkitt-Gray

Cynthia Gordon, Millicom

Cynthia Gordon: Finance ministers are always looking for
new revenue streams – the tax system is really penal in
our countries




Cynthia Gordon

  • 2001 VP business marketing, Orange 
  • 2007 Chief commercial officer, MTS
  • 2009 VP commercial partnerships, Orange 
  • 2012 Group chief commercial officer, Ooredoo
  • 2015 CEO Africa, Millicom



Financial risk is one of the big challenges of working in Africa, which produces low revenue per user “and a currency risk”, says Cynthia Gordon, who’s no stranger to working in difficult economies: she’s now CEO of Millicom’s African operations, but in the past she’s worked in a Middle East business that had a unit in Iraq and in a Russian business that owned a business in Ukraine.

“We are doing a lot of work with our suppliers, which are sharing the risk.” Most contracts are in local currency, but not all: “We were paying for the call centre in dollars and it was local labour. We’re starting to make decisions on that. How much is in local currency, how much is in dollars? Currency is a challenge, in terms of getting new growth.”

Tax, though, is a bigger issue. “Governments are using us to collect taxes and sometimes it is up to 50% of the revenue.” Of course, she understands, countries have to impose taxes to pay for services, but Gordon clearly feels that the mobile industry pays an unfair amount. “The tax situation is really penal in our countries.”

Millicom, in association with other operators in Africa, is working with industry organisations and international institutions to emphasise the benefits of improved mobile services and increased mobile usage, and reduce those sudden tax demands.


New revenue streams

“There’s a short-term benefit and a medium-term loss. These are people with the least ability to pay the highest prices. But I understand that finance ministers are looking for new revenue streams. Countries are looking at how to make up a shortfall,” she says. “We need to do a lot to convince people.”

Millicom Africa is Gordon’s first CEO role, after working in the industry for nearly two decades, largely in marketing. After a long spell with Orange, she spent two years in Russia as chief marketing officer for the MTS group, a company with 91 million customers, before returning to Orange as vice president of partnerships and emerging markets.

During that second spell at Orange Gordon handled the group’s relationships with Apple, working to get the iPhone into customers’ hands. At the time she made a point of taking a BlackBerry when going to visit Apple’s head office in Cupertino – just to show, she hinted at the time, that she wasn’t totally beholden to the Californian company.

Gordon’s next role was at Ooredoo – though the company was still called Qtel when she became chief commercial officer – and she helped the group adopt an active role in the GSMA’s Connected Women initiative. Under her watch, Ooredoo also formed links with the Cherie Blair Foundation for Women, a charity that helps women overcome the challenges they face in many countries and to play an important part in the economies and societies in which they work and live.

Cherie Blair herself, a prominent lawyer who is also the wife of the former UK prime minister, was Qtel’s guest of honour at the launch of the Ooredoo brand in 2013.

In the three years that Cynthia Gordon was chief commercial officer at Ooredoo in Qatar, she successfully encouraged the company to introduce a number of programmes aimed at improving the position of women. In Ooredoo Myanmar, the company introduced a maternal health programme which helps ensure that women can get a wealth of useful maternal, child health and wellness information is both during and after pregnancy. In Iraq, the company’s Asiacell operation designed a service offering called Almas – which means “diamond” – aimed at women. Through this more than two million female customers have connected with friends and family, becoming more socially and financially independent.

These, and more, were created in close collaboration with the GSMA’s initiative, developed when Anne Bouverot – a former colleague of Gordon’s at Orange – was the director general of the mobile industry’s trade association. So it should be no surprise that less than a year after she became CEO of Millicom Africa, her new company should announce that it was also joining the same GSMA initiative. With Millicom, this programme focuses on reducing the gender gap in mobile internet and mobile money services in Africa – both areas on which Gordon wants the company to concentrate.


Mobile gender gap

“It is essential for Tigo to increase the participation of women in the growing mobile economy,” says Gordon about the programme she has started in Africa. “Joining this initiative reflects our commitment to closing the mobile gender gap and enabling women to experience the benefits of mobile internet and mobile financial services.”

Tigo Rwanda has started off by training 70 women on financial business management and customer service. The company has launched a research study on consumer insights, with the support of the GSMA.

In Tanzania, the company has given away 400 mobile phones and given training on mobile phone use to poor women in two districts. As part of the commitment, all operations will work to increase the proportion of their female customers using mobile financial services (MFS) and Tigo Chad has also committed to increase the proportion of female customers using the mobile internet.

“We are undertaking specific commitments to connect hundreds of thousands of women, who have never had access to the internet before, with the incredible life-changing opportunities of online services,” says Gordon. “This can make measureable differences in their lives and their communities.”

Apart from focusing on what Millicom can do to improve the position of women in its African territories, there are a number of other issues on Gordon’s mind since she took over the role: building up the business market; expanding data centres; building up MFS; increasing consumer penetration and their use of data; and improving the company’s return on investment. And those tax demands.

Millicom is owned by largely Swedish investors. Its registered office is in Luxembourg but its central administration is in the UK. Businesses are in eight Latin America – not Gordon’s territory – and five African countries.


DRC sale to Orange

There were six in Africa until April 2016, when Orange bought the company’s unit in the Democratic Republic of the Congo (DRC) for $160 million.

Almost all of the operations use the Tigo brand, except for Zantel, the 85% owned business on the Tanzanian island of Zanzibar. Millicom also owns 100% of Tigo Tanzania.

So what’s the logic behind the sale of the DRC business to Orange? “We could have been a buyer or a seller in the DRC. It was an offer we couldn’t refuse,” she smiles. According to the GSMA’s database, there are six mobile companies in DRC. Market research company TeleGeography says that Tigo was fourth with a 12.9% share; Orange was just behind with a 12.8% share. The merger will give Orange a healthier 25.7%.

Mobile money is the heart of many of Millicom’s projects. “We have more than 30 million customers, with about 7.5 million using MFS,” says Gordon. In Chad – where MFS penetration is around 15% – there’s an opportunity to improve the lives of farmers. “Chad provides 20% of the meat for Nigeria: it’s a huge market,” she says. But farmers take a huge risk taking their animals across the border and coming back from markets with cash. With MFS, livestock farmers can be paid electronically for the meat, and can carry it home on their mobile accounts safely.

“Chad today has the potential to be the next major market for MFS,” says Gordon. “We also have a service called Tigo Paare, which is a community savings bank. One of the people’s main concerns is to have their money visible. We provide solutions with MFS, so that the bank can make loans and every member can have visibility. We were the first to offer interest on savings – it’s 7% in Tanzania.” There are business opportunities with MFS, too, but so far business revenues have made up a small percentage of Millicom’s revenues in Africa. To help stimulate new opportunities, the group is building data centres across the continent. In the past few months the company has announced new data centres in Chad, Ghana and Senegal – about the last of which she says: “We want to support African enterprises in general and those of Senegal particularly in their development through innovative technologies and digital services.”

According to the latest results, for the second quarter of the year, Millicom’s revenue in Africa grew 9.2% to $222 million. Group CEO Mauricio Ramos said: “We saw the benefit of actions taken last year as EBITDA grew 8.7% organically in Q1 and 23.8% year-on-year to $62 million, a margin of 28.1%.”

“I am focused on organic growth,” says Gordon. “We see a big rise in data over the past two years – and data grew at 50-60% in the last year. This year, we want even more – accelerated growth. We need to look at what’s best from the return-on-investment point of view.”