Fight­ing a los­ing bat­tle

Finweek English Edition - - Marketplace -

We have been here be­fore. In Oc­to­ber 2015, MTN got hit with its first Nige­rian fine of some $5bn. Now two fur­ther pay­ments of $8.1bn and $2bn hit the company within days of each other. The gov­ern­ment wants a tax pay­ment of $2bn. The cen­tral bank de­mands the re­turn of $8.1bn in repa­tri­ated div­i­dends.

Back in 2015, I ex­ited MTN, ag­grieved both by the fine and the company’s in­abil­ity to com­mu­ni­cate timeously with share­hold­ers.

This time at least the company com­mu­ni­cated cor­rectly, get­ting a Sens to the mar­ket be­fore open. Is this MTN’s fault? Or is it, as some have sug­gested, merely a shake­down by the cen­tral bank? It doesn’t mat­ter.

The net ef­fect on share­hold­ers is the same – more value de­struc­tion in a sec­tor strug­gling to hold on to its mar­gins.

I have writ­ten re­peat­edly about telecom­mu­ni­ca­tion com­pa­nies and how the shift to data es­sen­tially makes them util­i­ties that will sell data at very low cost and mar­gins. But they sell enough to make for at­trac­tive div­i­dends. How­ever, dur­ing the tran­si­tion to util­i­ties it is go­ing to be messy as they try to re­main rel­e­vant – a bat­tle I ex­pect them to ul­ti­mately lose. So let’s rather sit back and wait for the fines and the tran­si­tion to hap­pen. Then we can con­sider in­vest­ing in telcos again. ■

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