MTN surges on strong earnings

 ·1 Aug 2022

Mobile operator MTN says it expects to report a big jump in earnings for the six-month period ended June 2022.

The group said it expects an increase in earnings per share (EPS) of between 195% and 205% (or 289 cents to 303 cents). Considering the EPS of 148 cents for the corresponding six-month period ended June 2021, this translates to a range of 437 cents to 451 cents for the six-month period ended 30 June 2022.

EPS includes impairment losses that mainly relate to goodwill totalling approximately 25 cents, an impairment loss on remeasurement of disposal groups of 52 cents, and a net loss on the disposal of SA towers of 45 cents, it said.

It anticipates headline earnings per share (HEPS) to increase by between 40% and 50% (or 155 cents to 194 cents). Considering the HEPS of 387 cents for the corresponding six-month period ended 30 June 2021, this translates to a range of 542 cents to 581 cents for the six-month period ended 30 June 2022, it said.

HEPS has been negatively impacted by some non-operational and once-off items of approximately 94 cents for the six-month period. These include hyperinflation excluding impairments, foreign exchange losses (88 cents) and an IFRS 2 charge arising from the MTN Ghana localisation transaction, the group said.

Telkom acquisition

MTN Group is currently in talks to buy Telkom in a deal that would make the combined company the biggest South African mobile-phone operator by number of subscribers, Bloomberg reported.

MTN proposed to pay for the partially state-owned Telkom in shares or a combination of cash and stock, it said in a statement earlier this month. Discussions are at an early stage and there is no certainty the transaction will be completed, it added.

Bloomberg reported that MTN is flush with cash – after a multi-year asset-disposal program – and is looking to strengthen its position in its core African markets. A combination with Telkom would close the gap with rival Vodacom Group Ltd, South Africa’s market leader controlled by the UK’s Vodafone Group.

A recent spectrum auction made the continent’s most-industrialized economy even more attractive to operators.

While a deal would need to pass certain regulatory and competition concerns, “it makes financial sense to go after all of Telkom given many other undervalued assets” in the company, said Peter Takaendesa, head of equities at Mergence Investment Managers.

“I’m sure they have found ways to deal with potential problem areas such as spectrum that may cause regulatory and competition commission issues.”

Shares in the group advanced 3.5% in mid-morning trade on the JSE on Monday, while it expects to publish its results on 11 August.

Read: Telkom paid former boss R10 million retention fee to keep competitors away

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