MTN dropped to R104.73, down from Friday’s close of R106.68, as the mobile provider said that its MTN Dubai subsidiary had entered into an agreement to sell 100percent of MTN Cyprus to Monaco Telecom for approximately R4.1billion, in an ongoing review of its portfolio.
MTN said the net sale of the proceeds would be paid up front in cash.
It said the transaction would push MTN Cyprus nearly eight times past its 2017 earnings before interest, tax, depreciation and amortisation value.
The group said it had agreed to allow Monaco Telecom to use the MTN brand in Cyprus for up to three years in return for a commercial fee.
MTN Cyprus is MTN’s only operating business in the EU.
The unit was acquired as part of MTN Group’s acquisition of telecoms holding company Investcom in May 2006 for a reported $5.5bn (R72.8bn) in a cash and shares deal.
The group said MTN Cyprus fell outside its core footprint of Africa and the Middle East.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said MTN indicated earlier that it would review its portfolio of investments and operating countries so that it could focus management's time more on key core assets.
“MTN Cyprus is therefore one of the non-core assets and the numbers disclosed imply a good valuation for the asset. Cyprus is a relatively high income per capita country, but the market is not large enough to make a significant contribution to MTN group,” Takaendesa said.
MTN said the Cyprus purchase, which would remain subject to various closing adjustments, would allow it to realise an attractive valuation for the asset.
It said it expected the transaction to conclude within the next few weeks as it did not fall under any regulatory completion conditions.
The accounting effects of the transaction would be communicated to shareholders with the 2018 interim results which are expected to be released on August 8.
MTN Cyprus had 426000 customers.
Takaendesa said MTN would continue to discard of its non-core businesses and the proceeds from the disposals were likely to be directed towards reducing debt further.
“We have seen some encouraging capital allocation decisions from the new management team over the past year,” he said.
- BUSINESS REPORT