OPINION: MTN now cheap, but still not going anywhere

FILE PHOTO: A worker attends to a customer at an MTN shop at mall in Johannesburg

JOHANNESBURG – It has been two and a half years since MTN hit the wall and halved to below R120 a share. 

Everybody knows their Nigerian headwind and subsequent roller-coaster ride, but when (if ever) will they recover? Since its listing in 1995 this darling JSE counter delivered a spectacular performance for 20 years, but then became part of the non-performing shares on the JSE, nowadays most of our companies belong to this club.

MTN is a pure-play emerging markets mobile operator, offering cellular network access and business solutions.

The company connects people and communities across the Middle East and Africa through voice and data services. It has mobile licences in 22 countries, servicing 217million customers. MTN business provides cloud services, security as a service, enterprise mobility and managed networks.

File picture: Philimon Bulawayo

They also have more than 22.2million Mobile Money subscribers, which enables people to make financial transactions using their cellphones and bringing them entertainment and online shopping.

Their full-year results published in March showed some green sprigs. They achieved 6.8percent top-line growth. Strong growth in data (34percent) and digital revenue (14percent) were the primary drivers of the increase in service revenue. MTN declared a final dividend of 450cents a share, bringing the full-year dividend to 700c which is in line with the previous year.

Gaining momentum

MTN South Africa contributed 32percent to group revenue, and subscribers rose marginally to 29.5million. The post-paid business continues to gain momentum; however, it is taking longer for this to flow through into income. Pre-paid service revenue rose by 7.7percent, and data revenue rose by 25.8percent.

MTN Nigeria contributed 27percent to group revenue, with 11.4percent growth in income. Voice revenue, which accounts for 75percent of Nigeria’s service revenue, rose by 7.2percent during the period. Data revenue (12percent of Nigeria’s service revenue) grew by 86.6percent driven by improved network quality and customised data plans. Subscribers rose by 5percent to 52.3million, compared to June 2017. MTN Iran Service revenue rose by 17.3percent to R39.1bn due to strong growth in data and digital. Southern and East Africa contributed 15percent to revenue. This division includes Uganda and Ghana. Revenue rose by 17percent supported by a 38percent increase in data revenue and 29 percent rise in digital revenue.

West and Central Africa contributed 16percent to group revenue. This division includes Cameroon, Ivory Coast and other countries in West and Central Africa.

Middle East and North Africa contributed 10percent to group revenue, and this includes Syria and Sudan. Revenue rose by 7.5percent supported by a 33.8percent increase in data revenue and a 21percent rise in digital revenue.

imageMTN is South Africa’s most valuable brand File Image


MTN has rebased its dividend strategy and indicated dividend guidance of 500c for the next year to December 2018, with a growth of between 10percent and 20percent over the medium term.

The group is looking at listing MTN Ghana and MTN Nigeria. The proceeds of the listing will be used to reduce debt, for share buy-backs and dividends as well as to invest in growth opportunities.

Low data penetration markets, as well as demographic growth, presents opportunities.

Over the next few years, management expects to achieve high to single-digit growth in service revenue supported by double-digit growth from Nigeria and mid to single-digit growth from South Africa.

MTN also hopes to achieve higher Ebitda margins and their capital expenditure will be a critical factor in facilitating enhanced customer service and a competitive data network which will support growth in the group’s data and digital business.

The group expects consolidation in the telecom space and believes it will be well positioned to take advantage of opportunities as they arise.

Amelia Morgenrood is PSG Wealth regional director. Morgenrood does not hold MTN shares personally, but some of her clients hold MTN.

The views expressed here are not necessarily those of Independent Media.


Source: iol.co.za