MTN may spin off fibre, fintech businesses to unlock value

MTN Group is considering spinning out its fibre and financial services units and will potentially list one of them to unlock value trapped in its core business, the company said on Wednesday.

MTN, with 280 million subscribers across 21 countries in Africa and the Middle East, has been diversifying from its core business of connectivity to financial services and digital offerings such as instant messaging in search of higher returns.

But it believes some of those businesses can thrive and be valued better if they are spun out from the core business, such as its fintech, fibre and data centre assets, CEO Ralph Mupita said.

“MTN Group has enormous value that is not currently reflected in the share price,” Mupita said in an interview after the group reported a surge in 2020 earnings.

“Within the core (connectivity business), there are some infrastructure assets and platforms that we believe the market is putting little to no value on,” he said, adding that those assets are valued at low earnings multiples.

The company also suspended its dividend for the year despite the rise in 2020 earnings to focus on faster debt reduction at its holding company and due to uncertainties around repatriating funds from Nigeria, the timing of proceeds from its asset sale programme and the impact of Covid-19.

Open to options

MTN is open to third-party capital and partnerships in those fintech and fibre businesses over the medium term, “with the potential of either, in due course, that some of these assets could be listed or remain unlisted”, Mupita said.

Africa’s mobile phone operators are ramping up plans to bring banking to millions of Africans after the coronavirus crisis caused a surge in use of digital financial services led by a faster than anticipated switch to e-commerce and mobile banking.

In the year ended 31 December, MTN added 11.7 million mobile money users to reach 46.4 million, while fintech revenue rose by 23.9%, although capped by reductions in transaction fees to support customers during the pandemic.

The company is in the middle of a R25-billion divestment plan launched in March 2019 aimed at simplifying its portfolio over the next three to five years. Over the past year, it received about R4.3-billion in proceeds.

The board expects to announce a revised medium-term dividend policy in 2021 results in March 2022, said Mupita.

During the transition, MTN said the board anticipates paying a total ordinary dividend of at least R2.60/share for the 2021 financial year and will consider returning further cash to shareholders in the form of special dividends or share repurchases after the release of its 2021 results.

It posted headline earnings per share of R7.49 compared to R4.68 in the previous year.  — Reported by Nqobile Dludla and Aby Jose Koilparambil, (c) 2021 Reuters