MTN expects turnaround after big fines

MTN'S row with the Nigeria's Central Bank ended last month. File Photo: IOL

MTN'S row with the Nigeria's Central Bank ended last month. File Photo: IOL

Published Jan 16, 2019

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JOHANNESBURG – MTN, Africa’s biggest mobile operator by subscribers, is expected to turn around after hefty fines from Nigerian authorities wiped out two-thirds of its value last year, analysts said.

The company’s row with the Nigerian Central Bank over historic dividend repatriations ended last month, after dragging the share price to its lowest level since 2006.

It has shed 35 percent since last year but gained marginally by 0.09 percent on the JSE yesterday to close at R85.54 a share yesterday, valuing the company at R161 billion.

The mobile giant agreed to pay just $52.6 million (R728.3m), a fraction of the $8.1bn initial fine for allegedly improperly repatriating monies between 2007 and 2015. However, it is not out of the woods, as the attorney-general of that country still wants the company to pay $2bn in back taxes. 

Peter Takaendesa, a portfolio manager at Mergence Investments, said 2019 would see the company turn around. “MTN has better potential for growth longer-term due to lower mobile data penetration in its west African operations, and valuation is attractive if there are no major fines from Nigeria and earnings normalise higher from current depressed levels.” 

MTN has claimed that its taxes were above board and the matter is expected to be heard in court on February 7. It also has made no provisions for the fine on confidence that the case would conclude in its favour.

Both fines sparked pessimism around investing in Nigeria, which accounts for a third of the company’s 220 million customers. It also saw the South African Reserve Bank warning of its risk to the country’s financial system.  

Takaendesa also said Nigeria had improved significantly after the exit of key challenger Etisalat telecoms, the multinational telecoms service provider. “But the ongoing tax dispute with the government as well as upcoming February presidential elections are keeping investors on the sidelines for now,” he said.  

Nancy Bambo, a Momentum Securities analyst, said the $52.6m was relatively affordable by MTN, being 6 percent of its June 30, 2018, cash balance and was equivalent to 41 cents of headline earnings per share. 

She said group headline earnings per share in the first half of 2018 were 215c compared to 182c in the 2017 financial year and 77c in 2016. “We maintain that, operationally, MTN is a sound business,” she said.

MTN’s offshore woes have also seen Uganda yesterday announcing plans to charge the local unit of MTN $58m for a 10-year licence extension following negotiations between the two parties. This was a reduction from an initial $100m.

MTN SA said yesterday that it was eagerly awaiting the release of the 4G spectrum, by the South African government and the Independent Communications Authority of South Africa. 

“The release of the spectrum, in line with the president’s economic stimulus package, will help to additionally boost our network quality and delivery and will also be a significant contributor in further driving down the cost of data,” the company said.

MTN is scheduled to provide the group’s outlook for the year when it announces its 2018 results in March.

BUSINESS REPORT

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