A fine mess
MTN’s share price continues to decline as the uncertainty over its US$3.9bn fine in Nigeria persists. Since the beginning of the year the stock has fallen by almost 6%.
It ended last year at nearly 40% down.
The drop was a result of the huge fine that came after the group’s Nigeria unit missed the deadline for switching off millions of nonregistered subscribers, as required by law.
The company is still in negotiations with the Nigerian authorities for a settlement of the fine.
Though it has a p:e ratio of 16.87, making it less expensive, it remains to be seen whether investors still see it as attractive. MTN has also lost its crown to Vodacom as the biggest listed network operator — Vodacom now has a market capitalisation of R246.7bn, with MTN’s market capitalisation at R232.3bn. Peter Takaendesa, portfolio manager at Mergence Investment Managers, says there are a number of unknowns with MTN at the moment “and, as you know, the market behaves that way in the short term whenever there is uncertainty”.
The share price has had a strong correlation with the oil price in the past. Its large exposure to oil-producing Nigeria, and the volatility in the oil price, filters into the MTN share price.
Though there is still significant potential long-term value in MTN’s market-leading operations in Africa, “we think it will remain difficult for the share price to sustain any material upside near term for as long as the Nigeria fine remains unresolved and the oil price remains at these lower levels,” says Takaendesa.
It is still not clear how much of the proposed $3.9bn Nigeria fine MTN will pay.
The company is set to announce a new CEO this month. Phuthuma Nhleko, who was the nonexecutive chairman, is acting as executive chairman in the interim.
In the four months to April, MTN Nigeria recorded a 6% decline in sales.