Nigerian woes not over yet as MTN reels
Devaluation of naira could slow earnings more
A FURTHER devaluation of Nigeria’s currency this year could spell trouble for the timing of a listing of MTN shares on that country’s stock exchange, analysts have cautioned.
MTN plans to sell a portion of its shares on the Nigerian Stock Exchange in the second half of next year, part of a peaceoffering settlement it reached with Nigerian authorities last year to resolve a bruising $1.1billion regulatory fine over unregistered sim cards.
At the group’s annual results presentation on Thursday, chairman Phuthuma Nhleko said a listing in MTN’s largest market had always been part of the plan even before the agreement with regulators.
“We want to list as soon as practically possible,” Nhleko said. But he said better macroeconomic conditions and regulatory clarity were needed for a prospectus to be issued.
Mila Mafanya, head of equities at Afena Capital, said the weaker naira, strained consumer spending and the effects of mandatory sim-card deregistrations had led to depressed earnings from MTN Nigeria.
“One of the impending risks VOLATILE: A police truck awaits personnel deployed when anti-South African protesters attacked the MTN office in Abuja, Nigeria, on February 23 weighing on investors’ minds is that it’s probably likely you’re going to see a further devaluation of the naira some time during the course of this year,” Mafanya said.
Last year, Nigerian authorities devalued the currency to ease the shortage of money.
But that did not improve the situation much — investors seemed not to believe in the value of the currency and decided against trading in it, fearing it could be devalued later, Mafanya said.
“If the [further] devaluation happens this year then you might still have depressed earnings in the next year or two. What’s likely to happen is if you do the listing on the low earnings base then you’re going to end up with a low valuation. Management doesn’t want to do a transaction value destructive to the current shareholders.”
Sasha Naryshkine, a director at Vestact, said: “I think they’ve got to figure out the timing of the Nigerian IPO [initial public offering] because I don’t necessarily think that’s a good thing for local shareholders.
“You’re giving away some of the crown jewels at what seems to be near the bottom of the trough in the cycle.”
MTN is also considering the sale of a 30% stake in MTN Ghana to local investors to improve its chances of securing a slice of radio-frequency spectrum to operate its data-hungry products.
Data was the largest growth item for the 22-country group, which reported its worst results in its 22-year history as the Nigerian fine and associated fees, costs of a new phase of MTN’s Zakhele empowerment scheme in South Africa and writing off a portion of the South Sudan business caused a 31% drop in earnings.
But the share price rallied about 10% to an intraday peak of R129.95 on Thursday as the firm announced a final dividend of 7c. It closed at R124.27 on Friday.
Frost & Sullivan information technology research analyst Mauritz Venter said confirmation of the dividend payout created “confidence that MTN has weathered the worst of its financial storm . . . and the worst could be behind them for now”.
Data traffic rose 143% and contributed R39.5-billion to group revenue of R147.9-billion, which overall was marginally higher. Voice revenue was flat; voice traffic dropped 2%.
Venter said competition and market encroachment from services such as WhatsApp had an increasingly detrimental effect on the average revenue per user for operators. Iran, Ghana and Ivory Coast reflected strong data growth. US-led sanctions against Iran — MTN’s thirdlargest market — were lifted early last year, resulting in the highest smartphone penetration in the group being recorded there, while data revenue jumped 58%.
MTN repatriated R6.3-billion from Iran, which was the entire amount due under a loan advanced for a licence fee in 2005.
In South Africa, unit CEO Mteto Nyati said the focus was on lowering costs of its managed services contracts and rentals and electricity costs. Last year, MTN partially outsourced its call centre to reduce the oversupply of labour, Nyati said. “We will be having a significant amount of savings,” he said.
Investors seemed not to believe in the currency You’re giving away some of the crown jewels