MTN to offload Cyprus unit
• CEO says the network operator will reduce debt and strengthen the balance sheet with proceeds of the sale
MTN Group will use the funds from the sale of its business in Cyprus to pay down debts and strengthen its balance sheet, CEO Rob Shuter says.
MTN Group will use the funds from the sale of its business in Cyprus to pay down debts and strengthen its balance sheet, CEO Rob Shuter says.
The network operator, which trimmed its dividend to reduce debts worth nearly R60bn, said on Monday it had agreed to sell its operations on the Mediterranean island for €260m in cash. The buyer, Monaco Telecom, would pay fees to MTN to keep using its brand for up to three years.
MTN Cyprus is MTN Group’s smallest unit by subscribers — it had 426,000 subscribers there at the end of March — and is its only operation outside of the Middle East and Africa.
Shuter told Business Day on Monday MTN would use the cash “for general corporate purposes”, including reducing debt.
While MTN Cyprus had performed well in recent years, the country of about 1-million people did not fit the group’s strategy to target emerging markets where internet penetration was growing quickly.
“There’s been a lot of interest in it over the past year or so. So we thought if we got a good offer we’d probably move on.”
The deal values MTN Cyprus at about eight-times earnings before interest, taxes, depreciation and amortisation (ebitda).
That was a good price considering that MTN currently traded below five-times ebitda when adjusting for associate companies, said Vestact portfolio manager Bright Khumalo.
With the group set to receive annuity income after the sale, and Cyprus being a noncore asset, “it’s a good deal for MTN overall”, Khumalo said.
Shuter said that MTN was conducting a review of its extensive portfolio.
Even though the group’s 21 other operations fit its geographic and demographic criteria, and all held number one or two positions in their markets, MTN would still consider exiting businesses that no longer made sense for the group to be in.
“We still need to be able to make decent economic returns; some of the markets are very difficult to operate in, with social unrest,” he said.
MTN operates in a number of war-torn countries including South Sudan, Yemen, Syria and Afghanistan.
“Also, there will be opportunities over time to bring in some new geographies,” Shuter said.
MTN has expressed an interest in Ethiopia, where regulators are preparing to open certain state-owned enterprises up to foreign investors.
Meanwhile, Shuter said MTN still planned to conclude its initial public offering in Nigeria in 2018, as long as market conditions were “favourable”.
While it was a complicated process, “for us it’s full steam ahead”, he said.
MTN agreed to a local listing of its Nigerian business as part of the $1bn fine imposed by regulators in 2015.
The hefty penalty came after the group missed a deadline to disconnect unregistered subscribers in the country.