MTN surges to record high

While the JSE climbed to yet another record peak on the all-share and top 40 indices on Tuesday (6 November), MTN Group pushed to record highs of its own, driven by continued growth in its 21 markets of operation and offshore interest.

By close of play on the JSE, shares in MTN Group advanced R1.21 to R166.20, giving the firm a market cap of R312.62 billion.

The group reached an intraday best and new record of R166.89 on Tuesday, hovering at levels last attained in 2008, when MTN and India’s Bharti Airtel were involved in “exploratory discussions” over a possible sale.

Back then, it was believed that Bharti offered MTN R160-R165 a share for a 51% stake in the group.

Equity analyst at Avior Research, David Lerche told BusinessTech: “MTN has been driven by a combination of a weaker rand relative to the Nigerian Naira (which accounts for around 40% of (ebitda) and continued growth in its markets.”

On 25 October, MTN Group reported a healthy rise in its subscribers in a quarterly update for the period ended September 2012, to 182.7 million across the 21 countries in Africa and the Middle East.

MTN CEO, Sifiso Dabengwa said that a solid operational performance over the quarter had enabled MTN to increase guidance for net additions for 2012 from 21.25 million to 23.70 million.

Subscriber growth in Nigeria increased 5.7% to 45.640 million.

SA mobile war impact

While the price war between operators in South Africa rages on, Lerche believes this battle has enhanced MTN’s position with investors. “The SA market has not seen wholesale switching to Cell C, despite cheaper headline price offerings, which has been positive for both MTN and Vodacom.

“Data growth in both SA and MTN’s other markets has a long way to go and should continue to drive growth, especially given the high cost and lack of availability of fixed-line solutions,” he said.

MTN under-performing

Fred Teeling-Smith, an analyst at Stanlib pointed out that, on a year-to-date basis, MTN has still underperformed the Industrial Index by around 11% and also Vodacom by around 7%.

“I think it (MTN) is playing catch-up and the price increase is generally driven by the offshore buyer rather than the local buyer.

“If you look at the graph below (red line US$ price, blue line ZAR price) you will notice that in USD MTN is still off its high reached of around $22 in April 2011, foreigners still look at MTN’s dollar price so at these levels they see some value, at $18.80 per share it is still around 15% below its 20 11 US$ peak.

“You need to remember that the Nigerian Niara has remained relatively strong against the US$ compared to the ZAR,” he said.

Teeling-Smith also stressed that MTN’s management believe that the pricing and hence revenue pressures in local currency have bottomed in Nigeria which could be contributing to renewed investor interest.

Vodacom outlook

Vodacom has run hard in 2012, with its shares reaching new highs of R112.22 in September, up from a low of R89.11 at the start of January. MTN, meanwhile, reached a year-to-date low of R127 in April amid bribery accusations to secure a mobile operator’s license for Iran.

“In our view, the difference between the two companies is that MTN has a more certain growth profile given its businesses outside SA, while Vodacom is more exposed to an increasingly competitive environment in SA. We still see some value in MTN, but find Vodacom expensive at current levels,” Avior Research’s Lerche said.

At close on the local bourse, shares in Vodacom slipped 66 cents to R110.84.

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MTN surges to record high