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* Company looks to offset growth for telecoms basic services
* MTN faces regulatory hurdles in mobile banking
* Expansion pits MTN against dominant Safaricom's M-Pesa
By Tiisetso Motsoeneng
JOHANNESBURG, June 23 (Reuters) - MTN's new chief executiveRob Shuter has been brought in to boost profits at Africa'sbiggest mobile phone group after a $1.7 billion fine in Nigeria,by persuading its 200 million clients to use their handsets tostore money and pay bills.
But the hunt for returns by the outsider, the currentEuropean head of Vodafone and a former banker, willthrow MTN into an unfamiliar world of finance withincreasing regulatory risks as authorities step up efforts tocombat illicit money transfers.
It will also pit MTN against African rival Safaricom, which is 40 percent owned by Vodafone, andwhose mobile money business M-Pesa helped offset falling pricesfor basic telecoms, convincing investors that financial servicesis the industry's next growth area.
"It will not be easy for MTN or any other operator toreplicate the M-Pesa success story because a regulatory loopholein Kenya meant that Safaricom did not need a formal bankingpartner or license to launch services," said Ovum telecomsconsultancy analyst Richard Hurst.
Shuter will start no later than July 2017 and replacesSifiso Dabengwa who resigned last November after a the fine inNigeria exposed corporate governance flaws at MTN..
MTN has also struggled to make money at a faster pace asyears of price wars and regulation aimed at bringing tariffsdown hit profit margins and make it less appealing to spend on new networks.
Operators now entering the financial transactions marketface even tougher regulations, which differ according to countryand region, as authorities weigh whether to bring standards inline with those that apply to banks, Hurst said.
In MTN's biggest market Nigeria, where about 40 percent ofthe population has no bank account, fewer than 1 million peopleused mobile money in 2014, according to an EFInA survey.
This is partly because regulators only allow banks tooperate mobile money accounts rather than telecoms companies.
Payments by mobile are predicted to increase rapidly aroundthe world over the next few years, with telecoms groups,retailers and banks all trying to secure a piece of the pie.
Recent research by consultancy McKinsey suggested that by2025, 360 million people in sub-Saharan Africa will have accessto the internet via smartphones making it easier for users tosend and receive money across countries.
BANKING EXPERIENCE
Investors are hoping Shuter will use his experience as headof investment banking at Standard Bank SBKJ.J and managingdirector at Nedbank NEDJ.J retail banking unit division, to shake off MTN's reputation as a stock with a limited potentialfor growth.
"It's a strategically sound appointment because mobilephones are moving from being just a communication tool todistributing content and provide banking services," saidMomentum SP Reid analyst Sibonginkosi Nyanga.
Shuter's background should help him fit "very well withinMTN as it repositions itself as both a telecoms, e-commerce andfinancial services player," Anthony Sedgewick, the founder offund manager Abax Investments, which has an MTN shareholding ofjust under 0.2 percent, told Reuters by email.
MTN said it had also appointed a yet-to-be-named new headthe mergers, acquisitions and strategy, with a "wealth ofbanking experience".
"His substantial commercial experience will assist in theformulation of a revised strategy for MTN, particularly in thearea of convergence between mobile telephony and financialservices," the company said in a statement.
MTN and its rivals, including Etisalat, the Gulf'ssecond biggest mobile phone operator, have been waging pricewars that have hurt their bottom lines and the share price.
Shares in MTN have slumped about 40 percent from their peakin September 2014, lagging behind a slightly higher blue-chipJSE Top-40 index.
MTN has also made forays in e-commerce as part of the searchfor fresh revenue streams including a stake in German's RocketInternet, a company behind a loss-making Nigeria-basedonline retailer Jumia that was established in 2012.
"We are also looking to extend our service offering tocustomers that include insurance and we are currently piloting amoney lending platform in our Cameroon, Uganda, Zambia and SouthAfrican as a means to expand our mobile money servicesoffering," MTN head of digital services Herman Singh toldReuters.
But some investors say MTN, founded with the help of theSouth African government shortly after the end of apartheid in1994, needs to do more to grow.
"For a while now, it's been difficult to look at MTN andsay: 'there is a company that growing'" a top ten MTNshareholder said. "Management have done very little to put thiscompany back on growth path except to allow a big regulatorybreach happen under their watch in Nigeria."
MTN said on June 10, after months of talks, that it hadagreed to pay a heavily reduced fine of $1.7 billion, or a thirdof the initial penalty, in a settlement with Nigeria for missinga deadline to deactivate more than 5 million unregistered SIMcards. (Editing by Anna Willard)
