MTN can accumulate, say analysts

MTN made solid gains in trade on the JSE on Tuesday (23 April), picking up R3.00 or 1.89% to R162, following a run of poor form which has seen the group come off an all-time best figure of R184.45 since early February.

The All Share index gained 1.74% to 34,169 points.

Given its geographical spread, analysts believe the company will continue to deliver as an investment vehicle, albeit in the long term.

MTN already operates in 21 countries in the MEA region, yet is has recently hinted at a more aggressive expansion policy. Group CEO, Sifiso Dabengwa recently told Reuters that the group could spend up to $8 billion on an acquisition, and is looking for targets on the continent, the Middle East and Southeast Asia.

“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.”

MTN is currently one of 12 groups shortlisted for two telecoms licences for Myanmar and has also been linked with a 53% stake in Maroc Telecom, currently held by France-based Vivendi S.A, although the group declined to comment on speculation.

The group is believed to be in talks with several banks to raise funding for the deal, valued at $6 billion, according to UK based news provider TMT Finance, who cited three sources.

Analysts view

Speaking as a guest on CNBC Africa’s Hot Stoxx recently, investment analyst at Investment Solutions, Chris Hart said: “From a long term perspective, its (MTN) is on the right edge of technology, and where technology is going.”

He noted that the group was in emerging markets, with a good geographic spread, while its growth is not saturated, and the group has continued to deliver healthy dividends.

In March, MTN reported a final dividend of R5.03 for the year ended December 2012.
Revenue increased to R135.1 billion (R121.9 billion). Ebitda rose to R58.6 billion (R54.8 billion) and operating profit was higher at R41.3 billion (R39.3 billion).

The group said it anticipates reaching the milestone of 200 million subscribers by mid-year in 2013.

“All the stories about Iran, and lets call it ‘funny’ jurisdictions they operate in, I think it’s priced in,” Hart said. “This is a company that you can put in the bottom draw, and still accumulate.”

Fellow guest on the show, Paul Theron, equities asset manager and CEO of Vestact, noted MTN’s recent indications that it may be prepared to spend as much as $8 billion on an acquisition, while also applying for a licence in Myanmar.

“Yes there are some concerns about their business in Iran, but the Iran issue seems to have gone a bit quiet; there’s an election coming up in Iran, I know that there are sanctions issues, but for whatever reason or another, MTN seems to have negotiated a ceasefire with the US authorities.”

“Remember, the strategy here is converting people from dumb phones…to smartphones, so they can use more bandwidth and pay for data,” Theron said.

Buy or sell?

When questioned whether it may have been tempting to sell MTN shares at its all-time best level, Theron noted that the group briefly touch R165 a share back in 2007 when there was talk that it was going to do a deal with Indian company, Reliance Communications.

He said that the company has fallen back somewhat, but he is not tempted to sell, as a current investor in the group. “With 182 million customers, and they add five or ten million customers everytime they report quarterly numbers, it’s a great place.”

Nigeria, Theron said, “is the most exciting emerging market country for this kind of product on the planet.”

MTN said on Tuesday (23 April) that it had signed a $3 billion loan facility with a consortium of banks.

MTN Nigeria said that the syndication and the entire amount is meant for MTN Nigeria only, and will fund the group’s 2013-15 business plan.

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MTN can accumulate, say analysts