MTN feels blowback from hot-spot strategy
It’s hard not to have some sympathy for the team of top executives at MTN. They have to cope with the consequences of a growth strategy that focused on setting up or acquiring operations in some of the hottest spots on the globe.
For them right now the most damaging of those consequences is that the share price is not only at a five-year low but is significantly below the R120 at which options were awarded to them in December 2016.
As MTN’s past keeps coming back to haunt it, there doesn’t look to be much reason for optimism that the share price will reverse its five-year trend.
At one stage it seemed as though MTN used the US government’s travel warning site to guide its growth strategy.
For a long time this looked to be a winning strategy and pumped out good earnings growth. But now it looks as though it may not have had the right systems in place — or at least didn’t have sufficiently vigorous systems.
In 2016, the MTN news was all about the Nigerian debacle. If Turkcell has its way, the next year or two could be dominated by allegations around the Iranian cell licence.
There’s no doubt the Turkish mobile operator is being opportunistic in pursuing its legal action against MTN in the local courts. It has failed to fly in a number of other jurisdictions.
The action was first filed back in November 2013, when Turkcell alleged it lost the valuable Iranian cellphone licence because it was the victim of “corruption and bribery”.
Turkcell claimed chairman Phuthuma Nhleko and former executive Irene Charnley “acted wrongfully” and interfered with Turkcell’s relationship with the Iranian government.
The last thing MTN executives need right now is that sort of headline-grabbing allegation.
The details released on Monday of Exxaro’s replacement black economic empowerment (BEE) transaction showed no concessions to Eskom’s outrage when the reduction in black shareholding was first announced seven months ago.
The transaction remains one in which a new BEE structure holding 30% of Exxaro’s shares will be put in place, down from more than 50% held by the 10-year structure that recently matured.
Eskom’s now suspended acting CEO, Matshela Koko, said in December that Exxaro had “no decency” and was “showing Eskom the finger”.
Eskom has its own requirement of at least 50% plus one share BEE ownership of its coal suppliers. Even the controversial new Mining Charter requires only 30% BEE ownership, and Exxaro’s new structure complies with it.
Exxaro finance director Riaan Koppeschaar said the BEE structure was not being put in place only to satisfy the charter since it also had strategic benefits. For example, when Exxaro sold coal to domestic cement or steel manufacturers or developed renewable energy projects it needed to be a blackempowered company.
Koppeschaar said that there were uncertainties at present over the interpretation of certain clauses in the new charter but the timing of this transaction was appropriate since Exxaro wanted to capture the equity now available for reinvestment by its existing black empowerment shareholders.