MTN Group pre­par­ing for a swift ap­pre­ci­a­tion

Finweek English Edition - - INSIDE - BY MOXIMA GAMA

MTN Group, once t he f ieri­est of them all, more than tripled its share price be­tween 2005 and early 2 0 0 8 , a nd f r om 2 0 02 to 2 0 0 8 out­per­formed the FTSE/JSE All Share In­dex by 400%.

Sub­scriber num­bers were on an up­ward curve, earn­ings were mul­ti­ply­ing and the busi­ness was reap­ing large sums to in­vest in its net­works and new ven­tures − par­tic­u­larly in the rest of Africa.

In 2006, it es­tab­lished its pres­ence in the Mid­dle East and looked in­tensely into busi­ness in six more African mar­kets in an at­tempt to in­vest in an­other big deal. At that time noth­ing was stop­ping MTN from be­com­ing one of the big­gest telecom­mu­ni­ca­tions play­ers in the world.

MTN started in mid-1994 in South Africa and in four years grew to over 2m sub­scribers. With t he i ntense com­pe­ti­tion on t he r i se bet ween Vo­da­com, Cell C, MTN and Telkom Mo­bile, and sub­scriber num­bers still grow­ing rapidly, net­work providers are forced to ex­plore dif­fer­ent ways to at­tract or keep cus­tomers.

So in an at­tempt to ob­tain a big­ger slice of the pie, MTN has pro­claimed its ini­tia­tive to al­low its cus­tomers to share un­used data for­feited by sub­scribers at the end of ev­ery month – a move that will ben­e­fit cus­tomers and could see Vo­da­com, the coun­try’s big­gest mo­bile phone op­er­a­tor, jump­ing onto t he bandwagon. Un­til re­cently, sub­scribers were not able to ac­cu­mu­late un­used data, which is gen­er­ally re­moved by the ser­vice provider on the ad­vised date of ex­piry.

For a very long time mo­bile op­er­a­tors, in­clud­ing fixed-line tele­phone op­er­a­tor Telkom, have taken back un­used data even though con­sumers pay for it – mean­ing that op­er­a­tors have been fully aware of un­fairly tak­ing money away from their cus­tomers and now they are ready to make amends.

To but­ter us up, MTN has launched an un­lim­ited stor­age ca­pac­ity cloud ser­vice cost­ing R99 per month – also payable us­ing pre­paid air­time.

In the group’s re­cent an­nual re­sults brief­ing, it an­nounced an in­crease in sub­scribers by 7.5% to 223.4m, with rev­enue sig­nif­i­cantly jump­ing by 6.4% to a shade over R146.156bn. Data rev­enue rose mas­sively by 33.2%, con­tribut­ing R27bn to the group’s earn­ings.

To com­bat the power out­ages, a daily re­al­ity that is ex­pected to last for the next three years, MTN has in­stalled a 2MW power plant at its Jo­han­nes­burg head­quar­ters to re­duce its re­liance on Eskom. From a fun­da­men­tal per­spec­tive MTN seems set to main­tain good earn­ings and in­creased div­i­dends, mak­ing it a good all-rounder.

POS­SI­BLE SCE­NARIO: MTN is still trad­ing within its pri­mary bull trend and has fur­ther up­side po­ten­tial as the third phase of this trend forms. Cor­rect­ing since Septem­ber 2014, a fall­ing-wedge pat­tern is in the mak­ing, and I ex­pect a pos­i­tive break­out, con­firmed above 22 800c/share, to ap­pre­ci­ate the share price to the 36 445c/share tar­geted mark in the long term (one to three years). Be­cause MTN would po­ten­tially em­bark on the third phase of its pri­mary bull trend, up­side to that tar­get could be rapid.

AL­TER­NA­TIVE SCE­NARIO: The bullish con­tin­u­a­tion pat­tern would be negated through the lower slope of the pat­tern. Down­side be­low 18 900c/share would pre­ma­turely end the sec­ond phase of the bull trend, and losses to ei­ther the 16 500c/share sup­port level or the ma­jor sup­port trend­line could en­sue.

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