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.

Finweek English Edition - - MAR­KET PLACE - Ed­i­to­rial@fin­ Mox­ima Gama has been rated as one of the top five tech­ni­cal an­a­lysts in South Africa. She has been a tech­ni­cal an­a­lyst for 10 years, work­ing for BJM, Noah Fi­nan­cial In­no­va­tion and for Stan­dard Bank as part of the re­search team in t

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.

Tech­ni­cal view:

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.

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