For MTN Group, it is up up up as share price on JSE nearly doubles in a year

MTN shares have breached the R130 mark for the first time since March 2018, continuing their upward march, a sign that investors are behind management’s growth strategy.

Shares in Africa’s largest mobile operator ended 8.59% up for the week, having almost doubled over the past 12 months, up 98%.

Its Nigerian unit, MTN Nigeria has just had its operational license renewed for smitten years.

On the day the stock was 1.95% weaker at R130.31, which may be attributed in part to the Public Investment Corporation (PIC) selling down its stake in the group from about 27% to just under 23%.

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In the rest of the sector, South Africa’s Vodacom ended the week 3.21% firmer, up by a similar amount — 3.22% — over 12 months. Telkom was down 2.53% for the week, though the stock is 40% stronger over the past year.

Without giving away too much, MTN group CEO Ralph Mupita indicates that positive sentiment in the market has been driven by the group’s ability to execute on its strategy.

“We’re just focused on execution and trust that the market will see the value, which will in turn reflect in the share price. We still think there’s much more value to unlock in MTN and much more work to be done,” he told Business Day South Africa.

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Mupita says they remain focused on the three things underpinning this strategy.

“One is to accelerate growth. We believe that the digitisation that we’re seeing across markets is a structural change and we’re very well positioned to take advantage of that. From our results, you can see that growth is being delivered.”

Second is to reduce the group’s debt, an issue that has plagued it for years because of an inability to repatriate funds from countries such as Nigeria and Iran. In the half year to June, MTN cut its borrowings to R36.7bn from R43bn. As a ratio to equity, this has come down to 1.4, ahead of guidance of 1.5.

Third, Mupita says, is to “unlock value in our infrastructure assets and our platforms, particularly fintech”.

“Infrastructure is making progress. We’ve added about 2,500km to our fibre network, just in the half [year], predominantly in Zambia.”

The company aims to make a fifth of its revenues from its fintech unit in the next five years, which includes mobile payments and insurance products.

That unit now makes up 8% of service revenue.

As the stock continues to climb, seeking out its 2014 peak of R255, market players have continued to back the company, despite some negativity through the year.

In addition to the unrest seen in Gauteng and KwaZulu-Natal, which cost MTN roughly R40m, the group has had to deal with recent unrest in Eswatini; a battle with Syrian authorities, which resulted in the company abandoning its operations in the country; a US antiterrorism case, which recently turned in MTN’s favour; an ongoing court challenge against SA’s telecoms regulator over the delayed spectrum auction; and last week’s takeover of Afghanistan by the Taliban.

Despite all this, investors seem encouraged by MTN’s progress.

Speaking about the group’s recent financial performance for the half year to June, David Lerche, head of equities at Sanlam Private Wealth, said “a healthy set of numbers, where the underlying growth in key markets was encouraging. The group’s medium-term guidance was reassuring.”

The group reported service revenue rose 19.7% to R81.9bn, led by growth of 9.3% in MTN SA, 23.8% in MTN Nigeria and 25.5% in MTN Ghana. Data revenues surged by a third, thanks to a 56.4% increase in data usage.

MTN has 277-million subscribers across its operations.
“The business appears to be firing on just about all cylinders, which is rare for a group with operations across such a diverse array of emerging and frontier markets,” said Lerche.

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