Investors weigh up MTN risk vs reward
While risks still remain for MTN Group’s (MTN) operations in Nigeria and Iran, the group still offers an attractive dividend, according to a local analyst.
The civil unrest in Nigeria, which some have warned could lead to political instability, along with the ongoing sanctions imposed by the west on Iran, has unnerved investors in recent weeks.
MTN’s shares fell close on 7% in the first 11 days of 2012, after a decision by government to scrap a fuel subsidy led to mass protests.
The group’s shares have however stabilised over the past week, although at a time when the JSE has breached 34,000 for the first time ever – and is up 6% for the year.
A local dealer and share analyst at BoE Stockbrokers told BusinessTech that risks still remain in Nigeria and Iran, adding that the tense relationship between the US and the Middle Eastern country “will affect US investors’ decisions on the stock.
Goldman Sachs recently dropped MTN Group from its pan-Europe buy list and cut its rating to neutral.
Nigeria is MTN’s largest territory in terms of subscribers at 41.107 million, while in Iran, through a 49% holding in Iran Cell, the group boasts 33.314 million subscribers and a 44% market share. For the quarter ended September 2011, MTN Group recorded 158.59 million subscribers.
“These problems [in Iran and Nigeria] are still lingering around and will have investors weighing up the likelihood of a worst case scenario. MTN however, is on a pretty healthy dividend, and presents an attractive option,” the analyst said.
In 2011, MTN declared a final dividend of R3.49, compared to R2.80 declared by rival Vodacom (VOD).
MTN said it continued to eye developments in Iran. “MTN is monitoring the latest developments relating to Iran as a matter of course, however cannot provide further comment,” said Rich Mkhondo, MTN Group spokesperson.
Regarding Nigeria, Mkhondo said: “The removal of petrol subsidies imposed by the Nigerian Government does not directly impact on MTN Nigeria’s primary fuel related costs as the company uses diesel to support the powering of base stations.
“Diesel has already been deregulated. MTN cannot comment further on the impact of petrol subsidy removals.”
In noon trade on Friday, shares in MTN slipped R1.44, or 1.07% to R 133.56 on The JSE.
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