Value-Added Tax Change Implementation Aftermath: A Case of MTN

Abstract

The main objective of this article is to explore and describe the impact of the Value-added tax (VAT) increase on Mobile Telephone Networks (MTN) performance by exploring the end-to-end telecommunication (telco) business process. For the nature of this research, there is limited research in both South African and international scholarship that seeks to explore an understanding of the full end-to-end telco industry where study would look at the complexity of telco strategies right from the product catalogue down to rate cards, price configuration, system capacity, network depletion rules, billing engines, and customer invoices. Failure to apply the correct VAT change to any of these elements will result in either over- or underbilling of customers. This is a serious problem because an undercharge influences the operator’s revenue, causing a loss, not just because of the 1% VAT increase. Damages can reach far beyond this: an overcharge may increase customer complaints and result in reputational risk that is not limited to customer churn. This article provides insight into how fiscal policy affects industries. The insights and practical experience gathered in the research field can be used for operational improvement, training, risk identification and control development in the telco industry. A mixed-method design was used with a case study approach. This article reports on the qualitative findings. Five main themes were identified after analysing the qualitative data, namely: the effect of the VAT increase on MTN’s performance, change management, change in business processes, the impact of an incorrect VAT rate on MTN’s system, and system or process configuration. The case studied and the primary data analysed to explore the impact of a VAT increase aftermath are limited to the South African telco industry. The change management risk exposure detected, root cause analysis and insights of this article highlight the pitfalls that the project managers, change management professionals, marketing, information system and technology teams need to avoid when performing network configurations and system updates in the telco industry. Over a decade there has not been any new VAT content in South Africa since in September 1991, the original general sales tax (GST) rate of 10% was replaced by the consumption form of VAT subsequently, was adjusted to 14% in 1993. This article provides new content with a close look at the telco industry to contribute and expand the existing literature since VAT and GST are important economic aspects and contributors to the government’s income.