MTN tested record highs in early afternoon trade on Monday (1 July), as investors continue to react positively to the group’s failed bid for a telecoms licence in Myanmar.
By 13h00 shares in MTN advanced 1.60% or 2.95% to R186.95 on the JSE, with an intraday best of R187.17, giving the operator a market cap of R350.60 billion.
The JSE All Share Index climbed 0.69% to 39,850 points.
Shares in MTN have gained R13 since Thursday (27 June) when it was announced that Norwegian operator Telenor, along with Qatari firm Qtel (Ooredoo) had been declared the successful applicants for two nationwide telecommunications licence in Myanmar.
An analyst at PSG Konsult told BusinessTech: “Investors are looking at the free cash flow MTN produces, now that it wont be spending its capex in Myanmar.”
He noted also that twice in the past MTN has failed to land a deal with India-based telecommunications firm, Bharti Airtel, something which he believes was a blessing in disguise as the operator has been struggling in a fiercely competitive Indian market.
“Investors also believe there is still a lot of opportunity for MTN in the market in which it currently operates, especially in Africa,” the analyst said. MTN operates in 22 countries across Africa, Asia and the Middle East.
He added that Myanmar would present challenges of its own, requiring large amounts of capex, with margins not all that attractive.
Nadim Mohamed, investment analyst and partner at First Avenue Investment Management said that while losing out on a licence in Myanmar presented the opportunity to renew corporate value for MTN, investors would likely expect a higher dividend payout.
“MTN’s operations are highly cash generative and they would possibly be a position to pay a higher dividend a big deal is not in the pipeline,” he said.
In April, MTN CEO Sifiso Dabengwa said the group could spend up to $8 billion on an acquisition.
“Growth through M&A is still an important part of our strategy,” he said. “Anything between $4 and $8 billion is something that we could look at.”