MTN’s Ralph Mupita is more than a safe pair of hands
By any measure, Ralph Mupita has been very successful as CEO of MTN, Africa’s largest telecom company. An insider with extensive knowledge, Mupita was appointed CEO of MTN on September 1 2020.
Over the past three years, with Mupita at the helm, MTN shares rose 132.1%, which made investors happy.
However, on Monday, the market unfairly punished MTN. Mupita’s report that MTN core earnings dropped almost R700m owing to load-shedding, triggered the share price drop.
MTN shares slumped 9%, the steepest fall since December 2020. On Tuesday, MTN shares closed 1.57% lower at R124.67.
In my opinion, the market reaction was unfair because SA’s retailers were not oversold as they’were affected by Eskom s power outages. Could it be that jittery investors were spooked by MTN’s leadership opting to keep money in the bank instead of paying out higher dividends?
On Monday, MTN revealed that executives’ prudent approach to liquidity management enabled the company to maintain a liquidity headroom of R60.2bn on December 31 2022, made up of R22.6bn in cash balances and R37.6bn in committed undrawn loans.
MTN has also committed to repaying a portion of its R8.2bn in Eurobonds early.
It declared a dividend of R3.30 a share, or R6.2bn for the full year, an increase of 10%. Not impressed, dissenting investors, who expected higher dividends, have dumped their MTN shares. However, the board expects the dividend to remain at the same level until 2023.
Needless to say, Mupita must be congratulated for being generous with such a dividend after the effects of the pandemic.
He must be allowed to use the money to expand the fibre business, MTN Global Connect, which has increased its turnover to R6.2bn and whose total owned fibre stood at over 105,157km on December 31 2022. He must also be enabled to invest in the fintech business, which has increased its turnover by 14.3% to R17.2bn, with solid performances in Nigeria, Uganda and Ghana.
The market should reward Mupita for being quick to deal with potential crises compared with his predecessors.
OUTRAGEOUS BILL
When Ghana imposed an outrageous R14bn bill, Mupita and his team quickly engaged stakeholders to find a solution.
As part of the risk mitigation for the company’s largest asset, Mupita sold portions of the MTN Nigerian unit in a public offering, raising about R12bn.
This was more effective than when Sifiso Dabengwa was CEO of MTN and Nigeria fined the company $5.2bn.
In short, Mupita has steered the group in the right direction in the past three years. He is well on his way to unlocking value by structurally separating the company’s fibre and fintech business from its GSM business.
MTN’s greedy investors stand to benefit handsomely from the third quarter of 2023 and early 2024.
Mupita seems to be delivering on his promises, if not slowly exceeding them. The “Ambition 2025” strategy seems to be on track. It has delivered solid economic performance despite challenging macroeconomic conditions.
In the 2022 financial year, MTN subscribers increased by 6.1% to 289.1-million. Headline earnings per share
— SA’s key profit metric — rose 16.9% to 1,154c.
In 2019, Mupita’s predecessor Rob Shuter launched an asset realisation programme aimed at reducing debt, simplifying the portfolio, reducing risk and improving returns. The programme should generate proceeds of about R25bn over three years.
By December 31 2022, Mupita and its team had generated gross proceeds of R18.8bn in March 2020, with assets of R12bn realised in 2022.
For me as a nonshareholder, the company is living up to its tagline of driving digital and financial inclusion in Africa. MTN’s active data subscribers increased by 12.3% to 137-million in 2022 and active mobile money (MoMo) users increased by 21.4% to 69.1-million. MTN’s instant messaging platform, ayoba, grew its user base, recording 21.7-million monthly active users, up by 86.6%.
The company is on target to reach 100-million MoMo users, 200-million active data users, 100-million ayoba users and 10million broadband users.
This contributes to many African children being able to participate in the digital world and achieving financial inclusion.
There is still a long way to go, but MTN’s outlined plans and investments are welcome.
Investors are best advised to go easy on Mupita, keep the faith and wait it out until the MTN share price recovers. There are opportunities are aplenty for Mupita to explore across Africa to create shareholder value.
MTN’S GREEDY INVESTORS STAND TO BENEFIT HANDSOMELY FROM THE THIRD QUARTER OF 2023 AND EARLY 2024