Caution is crucial with MTN shares
SOME SILVER LINING IN CLOUD OVER NIGERIA FINE
THERE has been a lot of negative news about MTN Group of late, with the company having been levied a fine of $5.2-billion (R74-billion) by the Nigerian Communications Commission (NCC).
The fine was issued after MTN failed to cancel SIM cards that had not been registered through a process similar to Rica in South Africa, which sought to identify each mobile device and link it to a particular individual’s ID number.
It appears MTN, and perhaps other operators in Nigeria, did not take the instruction to deregister such customer SIM cards seriously and are now facing the brunt of new president, Muhammadu Buhari, and his administrative organs, in this case the NCC.
Yesterday morning we woke up to the news that Sifiso Dabengwa, the group CEO of MTN, had resigned from his position because of the Nigerian debacle.
MTN Zakhele owns 4% of MTN, and this shareholding is the only asset that the company has. The valuation of MTNZ is based on the value of MTN’s own market value.
We have received numerous calls from clients looking to find out what they should do with their MTNZ shares. We cannot make decisions for individuals, but can only share our views on what shareholders need to consider:
MTN is currently negotiating with the Nigerian authorities for a softer penalty;
MTN’s licence in Nigeria has been renewed, which is a positive, as some investors had been thinking that the company would not get a renewal due to its failure to comply with the NCC;
We suspect that quiet diplomacy may be at work with our government and its Nigerian counterpart in the case of MTN’s fine. This is our view based on the fact that our government did assist MTN when it first went to Nigeria;
The Lagos government’s limited tolerance for corruption needs to be taken seriously, and other companies may soon be forced to deal with similar regulatory challenges; and
With the departure of the group CEO, shareholders clearly have come first after this disastrous turn of events, and is potentially a positive, as Phuthuma Nhleko, its founding CEO, is in charge for six months.
Whatever happens post the negotiations, caution is key when dealing with all MTN shares.
To trade, or get more information on MTN Zakhele, please call Inkunzi Wealth Group on 087-180-0018, or email us on invest@iwgsa.co.za