Fighting a losing battle
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. ■