MTN interaction, what to do with my shares?

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.


" ... the situation has been poorly managed, and perhaps MTN tried to call the regulators bluff. If this is the case, then no doubt that is why Sifiso Dabengwa fell on his sword.


There are plenty of reasons to sell the company today, as you point out, the news flow has been increasingly negative.


The shift of whether or not a fine will be levied (and the quantum) is at the highest office in the land, Muhammadu Buhari, the president. This is a man who was once the dictator of Nigeria in the eighties and the man that also took half a year from being elected (this year) to appoint a cabinet. Yet, the people of Nigeria elected him and knew all of this, and that part we must and should respect.


That said however, MTN are an important part of the Nigerian economy, 46 percent of all subscribers in Nigeria use their services. MTN operate in a hostile economic environment, the electricity supply is patchy at best, the infrastructure is poor and they need to be shown to be complying with first world communication authority standards. It seems a little skewed.


Call us optimists here at Vestact, the company has invested more in the Nigerian infrastructure than most foreign companies. They are still putting up 2G base stations in Nigeria, that is how far they are behind. We think that in the end, the stock has baked in a 50-60 percent chance of the full fine being levied against them, we think that the quantum will be reduced, and the fine will be converted to an investment commitment.


In Africa, across our continent, internet penetration is a mere 26 odd percent, somewhere in that region. There is no chance of a big infrastructure roll out of fixed line options any time soon. It will be mobile solutions that connect Africa to the internet, MTN has a massive first mover advantage."


I hope that answers more questions for all of our other clients on the matter.