MTN Group closed Friday (3 August) at its best figure in more than four years on the JSE, as the mobile operator continues to break out of bear trend ahead of its interim results next week (8 August).
Relative to its peers, MTN is out-performing both Telkom and Vodacom on the local exchange.
By close of play on Friday, MTN Group advanced R2.40, or 1.55%, to R157.50 – its best level since 18 May 2008, where it climbed to R158.59, before closing the session at R157. The group boasts a market cap of R296.88 billion.
It is also well off its five-year low of R74, recorded in October 2008, and its year to-date worst price of R127.
Analysts have noted that MTN recently broke out of a technical resistance level of R147, although they cautioned that the group’s share was entering back towards “overbought territory”.
One analyst said that, following a cyclical break above its resistance level, the group would go long, with the upside target at R167. He said he expected MTN to remain bullish ahead of its results presentation.
Nadim Mohamed, investment analyst and partner at First Avenue Investment Management, noted that both MTN and Vodacom trade at very attractive dividend yields and P/E multiples are not particularly expensive.
“We view the recent move by Cell C as disruptive and will eventually result in substantially lower prices in SA. In Africa, competition from Zain and Etisalat is intensifying and likely to also put pressure on voice margins,” Mohamed said.
“Growth in the near term is dependent on how long they can maintain the lack of transparency in pricing – many consumers do not know how to compare one package from another as they are too complex to understand,” he said.
Francois du Plessis, CEO of Vega Capital was more bearish on Vodacom’s current position. He noted that the group has been exposed to significant management changes recently, namely Sipho Maseko, as MD of Vodacom SA and COO of the Vodacom Group, while CEO Pieter Uys is also preparing to leave the group soon.
He added that Vodacom was also more exposed than MTN to lower prices introduced by Cell C recently. “This is likely to put Vodacom’s margins under pressure.” He also questioned how exposed both Vodacom and MTN were to more aggressive staff poaching by Cell C.
Vodacom closed Friday at R97, up 0.52%, some way off its one year best of R105.32 achieved in April.
Investors will be looking for clarity on MTN’s court case in the US, when the group reports its latest results.
The group has been sitting under a political cloud in 2012. On March 28, Turkcell filed a complaint against MTN Group in the U.S. District Court of Columbia, Washington DC, demanding $4.2 billion in damages over the awarding of the cellular licence in Iran in 2004.
Turkcell claimed that MTN used political and monetary lures to enhance its relationships and leverage its position within Iran, a claim which the latter party denies.
MTN owns 49% of Irancell, the group that was awarded the second Iranian GSM licence.
On Wednesday (25 July 2012), an analyst told Businesstech that Turkcell may look to settle with MTN outside of court.
MTN and Turkcell declined to comment on the speculation.
MTN Group has not put out a trading update, ahead of its interim results.
In March, MTN Group noted that revenue for the year ended December 2011 increased to R121.9 billion, from R114.7 billion in 2010.
Profit before tax jumped to R37.6 billion (2010: R28.1 billion), while profit attributable to equity holders of the company rose to R20.8 billion, from R14.3 billion before.
Furthermore, headline earnings per share grew to 1,068.6 cents per share, from 760.6 cents in 2010.
MTN declared a final dividend of 476 cents per share.
In the interim period before that, for the period ending June 2011, MTN declared a dividend of 273 cents per share with a total dividend per share for 2010 at R5 per share.
The group also recorded 170.573 million subscribers at the end of March 2012, up 3.7% for the quarter from 164.501 million before.
MTN South Africa contributed 13.3% to group subscribers, and upped its subscriber base by 3.2% for the quarter.