New management should boost performance
The worst should be over for telecoms giant MTN and for long-term investors the company remains attractive at current prices.
MTN has suffered huge share price and earnings losses since October 2015. But despite a slew of setbacks, its share price is trading at reasonably attractive levels
share price has been under pressure since a massive regulatory fine in Nigeria, initially imposed in 2015, highlighted governance risks at the multinational telecommunications group.
The fine, which has since been reduced, was followed by allegations that MTN has illegally repatriated money from Nigeria, its biggest market. MTN has denied any wrongdoing, but the regulatory fine has triggered a shake-up of its management and reporting structures, aimed at improving governance at the firm and avoiding similar regulatory breaches in future.
As part of the restructuring, MTN has appointed Rob Shuter, the former head of Vodafone Europe, who also has extensive banking experience, as its new CEO. He will join the firm later this month.
In an interview with finweek, published in the 2 March issue, Mergence Investment Managers’ Peter Takaendesa said Shuter is joining MTN at a good time. “Fortunately for Rob, most things that could go wrong have gone wrong. Most of the disasters are behind them now.”
In an updated trading statement for its financial year ended 31 December, MTN said it expects to report a headline loss per share of between 74c and 81c, compared to the previous year’s headline earnings per share of 746c. The loss is largely attributable to the regulatory fine in Nigeria, as well as costs involved with the Zakhele Futhi BEE transaction, and losses from investments in its Digital Group, mainly African Internet Holdings, Middle East Internet Holdings (MEIH) and Iran Internet Group, MTN said. The group was due to release its results on 2 March, after this issue of finweek went to print.
MTN has suffered huge share price and earnings losses since October 2015. But despite a slew of setbacks, its share price is trading at reasonably attractive levels. The Nigerian debacle has forced the company to overhaul its operations and management – even recruiting a number of bankers and telecoms executives.
With new management in place, MTN should start to deliver a better performance, which should rebuild market confidence. Also, a recovery in the crude oil price should improve economies in some of its key countries.
New management has openly stated its intention to continue expanding within Africa, to gain an even larger footprint. For a long-term investor, MTN is still an attractive investment at current prices. On the charts the company has breached the resistance trendline of its longterm bear trend and is currently consolidating, with the short-term range being at 10 475c/share to 13 500c/share, and the mediumterm range at 10 475c/share to 15 650c/share. Go long: A move above 13 500c/ share would end the seven-month sideways pattern – go long – and gains to the next major resistance level at 15 650c/share should then follow. Increase positions aggressively above that level, as the ascending phase of a huge bottoming-up pattern would kick in to the first target at 18 790c/ share. Go short: A move below 10 495c/ share would mark a complete loss of investor confidence – triggering a massive sell-off towards 7 325c/ share.