Research archive for MTN

MTN in the news yesterday, firstly the Appointment of New MTN Group President & Chief Executive Officer was met with major excitement by Mr. Market, a man with a lot of experience and deal making activities, here he is - Robert Shuter. As you can see from a well maintained LinkedIn profile, Rob is currently Chief Executive Officer Europe Cluster at Vodafone. He was head of Investment Banking at Standard Bank once upon a time and for a long while was Managing Director for Nedbank Retail, before moving to Vodacom as the Chief Financial Officer.

MTN have finally announced a settlement with the Nigerian government slash communications authorities. The announcement is pretty simple (excuse the poor format, not ours) - MTN - Nigerian fine update & cautionary withdrawal. As you can see, the fine is tiered, in terms of payment. The company will pay 330 billion Naira over three years. What amazes me about the release is this excerpt from the sentence detailing the fine - "the equivalent of USD1.671 billion at the official exchange rate and USD902 million at the Lagos Parallel Market Rate".

MTN had results on Thursday, these were for their full year to end December, in what has been their toughest year in a decade and a half. I remember all those years back when they seemingly overpaid for a licence in Nigeria, only for it to turn out to be genius. We looked, we watched and we tried to understand what the market is making of the fine, the unresolved issues. I have chatted to many people about South African businesses going about their work in that territory, let us just say that it is strained at best. It is a bit like that here, somehow we pretend to stand together as a continent, in reality however the situation is different. Each territory has their fair share of challenges, each territory has a separate regulatory environment, in fairness all trying to achieve maximum coverage at a fair rate for their people.

MTN released a statement yesterday which the market responded to in a Goldilocks way. Not the best via the website white labelling: MTN-update on fine imposed and cautionary renewal. In short, the company will make "without prejudice good faith" a payment of 250 million Dollars. At the unicorn rate (the official rate) that is 50 billion Naira, at the street rate i.e the real life rate of 370 Naira to the Dollar, that is equal to 92.5 billion Naira. I swear, you cannot make this up, National newspapers are talking about the parallel rate in Nigeria on their websites: Nigerians Shun Money Transfer Agencies as Exchange Rate Gap Widens, the quote:

MTN released a really ugly looking trading statement yesterday after the market closed. Earnings are likely to be more than 20 percent lower for the full year to end 31 December 2015. HEPS in 2014 was 1536, it is likely that HEPS will be 307 cents lower than that. In other words, from 1229 cents per share or lower than that. Which means that at the TOP end of the range, the stock will trade (after the results on March the 3rd) on an earnings multiple of at least 12.5, possibly much higher if the earnings are likely to be much worse than that. And this excludes the pending Nigerian fine.

So to MTN quickly. The company stuck out a SENS message, as we said, that had a marked impact on their share price. The stock surged 9.21 percent on the day, yet there hasn't been much to cheer about this year, the stock is still down over 7 percent year to date and nearly 40 percent lower over the last 12 months. The stock reached a 52 week low of just over 113 Rand a share last week, which meant that Vodacom had, with one quarter of a subscriber base, a bigger market capitalisation. For obvious reasons we know why the MTN share price has fallen, the company has been under the pump for the pending fine in Nigeria. A little bit of "good" news, the market interpreting this announcement that way. So here is a copy paste, titled Further update on the fine imposed on MTN Nigeria:

MTN was out with another bit of bad news during the day, the authorities in Cameroon suggesting that the company is involved in bribery, along with the other operator, Orange. And guess what, they are seeking to hit the company with another fine. No fine yet and MTN haven't been given any official documentation so they haven't released a SENS, that didn't stop the stock tumbling over 4% yesterday. We certainly are in the midst of a terrible storm for the company, the Nigerian overhang of a court case pending and now this, it really feels awful. And by the way, we certainly called this one wrong in the short term. Wrong, wrong, wrong. Currently trading on eMpTyN. We will continue to evaluate and for the time being continue to suggest that one holds the line here, uncertainty always leads to selling and with lower prices the faith is lost. As Byron pointed out yesterday, MTN has 4 times as many subscribers compared to Vodacom but now has a lower market cap. At the moment MTN finds themselves on the wrong end of the stick as far as developing markets are concerned, the wrong ones. Emerging market stocks, the market tells you those are finished.

OK, very important news on the MTN front near the end of the market close yesterday. A SENS that I am going to copy and paste the important bits: "shareholders are advised that all factors having a bearing on the matter have been thoroughly and carefully considered including a review of the circumstances leading to the fine and the subsequent letters received from the Nigerian Communications Commission (NCC)." OK, as you would expect from the company, take legal advice and then proceed, what to do from here though?

I seriously cannot believe it. I was taken to task by a reader for being condescending towards Nigeria in my observations over the weeks. I shall publish it, once I have the permission of the person that wrote the piece back to me. My point to them was that I bat for capital and individuals, not for government, not for organisations. And capital changes lives, for the better. Are normal Chinese peoples lives better as a result of liberalisations in the economy or were they better under the communist great leaps forward? You know the answer. Here comes the part I seriously cannot believe, a day after receiving the first letter:

MTN have released a SENS announcement this morning, saying that they have received a formal letter from the NCC and it reads as follows:

Another conversation that I had with a client yesterday is also worth sharing, he raised concerns over MTN, rightfully so, the stock has been a significant laggard in our client portfolios, we have consistently suggested that until we know something, we know very little other than there is a pending fine, that at face value looks ridiculous. A traffic violation that gets a 400 year sentence is the analogy that a Nigerian blogger used early on in this unfinished business. I think that in my answer (I have left out client sensitive information), again I was a little forceful with the way that the Nigerian authorities have handled this.

MTN have released a SENS this morning updating shareholders on the ongoing negotiations around the fine in Nigeria. The middle part reads as follows:

The drama continues at MTN. This time the biggest of them all to fall is the CEO, who resigns this morning, a statement released by the company -> MTN - Executive Chairman appointment. As you can clearly see, Sifiso Dabengwa has resigned, it does not say with immediate effect, and means that there is a lot more that meets the eye in their Nigerian operation. That is exactly NOT what the situation needed, more uncertainty.

Yesterday was another day of drama for MTN shares, the stock was down sharply at the beginning of trade (on rumours that MTN had agreed to pay the full fine), and then just after ten thirty the stock was suspended. In other words, you were no longer able to trade in the stock until the company had revelled some fresh information. The problem being that there was no new information forthcoming. Eventually the company, three hours later put out a release and the stock started trading again.

WTF? Really? Excuse me ... The biggest news by a country mile yesterday was that the Nigerian Communications Commission (NCC) had imposed a fine of 5.2 billion Dollars on MTN. Why? As per the release: "This fine relates to the timing of the disconnection of 5.1 million MTN Nigeria subscribers who were disconnected in August and September 2015 and is based on a fine of N200,000 for each unregistered subscriber."