Research archive for MTN

What was up with the cell phone companies too? Vodacom is close to their all time highs, MTN is not too far away from theirs. I suppose that if you "add back" the very recent MTN dividend you are beyond that all time high comfortably. Telkom? They too have been on a tear. It depends though where you draw your line in the sand though. Telkom remains a worse investment than either of these mobile companies, we still maintain that MTN is still in the early stages of transition towards becoming a provider of more data to their relatively low (globally) on a ARPU basis customer base. The fact that fixed line infrastructure has been essentially "skipped" across our continent is good news for the mobile providers, the big risks for them is that they become more utility like. But, with mobile money becoming increasingly important for the mobile providers, these businesses are changing and morphing into something different. Just this morning we have another announcement from MTN, teaming up with Bharti:

Yesterday the Gauteng High Court ruled on the much publicised interconnection battle between MTN, Vodacom (working as a team ironically) versus Icasa who are trying to drop these rates to 20c per minute (what MTN and Vodacom would charge Cell C and Telkom mobile). The ruling was bitter sweet for all parties involved and in my mind makes no sense. The court said that yes the new Icasa installed interconnect rates were unlawful and invalid but the order to stop them will be suspended for 6 months.

MTN results for the full year have hit our screens this morning. This is one of the companies that we have held for the longest for our clients, since we opened our doors for business over 11 years ago now. Why would we want to own such a business? Well, I guess communication is at the core of every single one of us, we want to be in control of our own personal and business communication. 6 and a half years ago, when the company reported in August 2007 (their interim results), they had 50 million subscribers. Now they have 207.8 million subscribers and managed to grow their subscriber base by nearly ten percent during the last financial year.

MTN indicated that they expect earnings, HEPS, to be between 25 to 30 percent higher for the full year to end December 2013. There was a positive impact (1.1 billion Rand positive versus 2.7 billion Rand negative) from the weaker currency through the course of the year. Remember that FX losses of 178.5 cents were incurred in Iran, Syria and Sudan. Now the way I see it, Syria is worse, Sudan is worse, perhaps Iran is a lot better than before and that is probably where the positive impact was. HEPS last year was only 1089 cents, flat on the prior year because of those currency headwinds. So by my simple calculations HEPS should be in the 1361 to 1415 range. The stock initially popped, but the Sanusi news is negative and indicates that although Nigeria has come a long, long way in cleaning their banking sector, much is still to do.

MTN have released their results for the six months to end June 2013, and at face value they do seem pretty impressive to me. The overall MTN subscriber base increased by 6.5 percent, clocking in excess 200 million for the first time. 201.5 million to be exact, notwithstanding the 3.2 million disconnections in Nigeria due to the subscriber registration process, much like we had here, remember?

This morning we received a nice looking trading update from MTN for the 6 month period ending June 2013.

In the afternoon of two sessions ago, Monday, there was an announcement from MTN on the resignation of their CFO. Now, the resignation of any board member, other than a personal reason, or perhaps age (I guess that is personal) is always frowned on by the broader public and in particular the investment community. The reasons given may appear more sinister than they really are, but this is equally not good: "Mr Patel explained to the Company that he does not wish his continued employment with the Company to prejudice the Company in respect of certain allegations made against him, which are subject to an ongoing investigation which had been commissioned by the Company.". I guess immediately the morbid curious creatures that we are, we ask, what allegations? And often presume the worst, even paint the fellow into a guilty corner. You know what Steven Segal said about assumptions!!!

Yesterday we received a business update for the 4 months to 30 April 2013 from MTN. I am still constantly amazed by the subscriber growth of this business. Not because I think the numbers are not there but because off a constantly higher base the growth remains consistent. MTN are expecting to service 200 million people by the middle of the year. That is astounding.

This is unusual from MTN, releasing subscriber numbers at the beginning of the day, I am used to releases in the middle of the session. Check it out: MTN Group records 195,4 million subscribers. These are subscriber numbers for the first quarter to end March 2013. Across the group, for the 1st quarter versus the prior quarter, MTN grew their base to 195.388 million folks. A 25 million addition from the same quarter this time last year, hardly sounds like ex-growth to me. But of course there are questions about saturated markets, that is almost always true. You can't add reams of subscribers when you reach a level where the number of subscribers exceeds the population. That does not mean that users cannot use multiple sim cards. Locally, their pre-paid environment saw a soft patch, perhaps the price wars are starting to pay off a little for Cell C, although the war on their bank account will be more. Should they worry? Well, yes and no. There is certainly a mountain of money at HQ, 216 14th Avenue in Fairlands, whilst I am not so sure the same exists at Cell C, 10 Rivonia Road in Sandton.

One of the most important companies that we here at Vestact have invested our clients funds in over the years is MTN, and that company reported numbers this morning for their full year to end 2012. Their earnings are now more than the share price that we initially bought the stock at, for those clients who have been around for a long time. Well, almost. In April of 2003 we were buying them around 12 Rands a share, they certainly looked expensive back then and the yield was negligible.

MTN have been in the news over the last week or so, we should have expanded on what looked like a rather important announcement. Here is the very best SENS from the MTN investor relations website: MTN -- delivery of report by Independent Committee. We were waiting for this, and I am sure that in recent days the stock has been lifted to higher levels on the basis that the allegations of an individual might actually be dismissed. That would obviously leave Turkcell with some egg on their face, if it was the case. Remember that this was the internal MTN investigation findings. Before you say, yeah right, I knew that was going to happen all along, bear in mind that Lord Leonard Hoffmann is chairman of this board tasked with looking into these allegations and his very good reputation is at stake. The next date to watch out for then is closer to the middle of this year, where the US Supreme court will decide whether or not it has jurisdiction or not. We will keep a close eye on this one.

I made a mistake yesterday, apologies. In my MTN piece I said that Shanduka had bought the stake in MTN Nigeria from MTN International, that was not the case. In fact Shanduka bought the stake from a private equity crowd called ACA that were exiting the investment. The annoyance was not that Shanduka had bought it, but that MTN International had not. Sorry for that, clarification! Now the one part that we are struggling with in the office is the part in which Phuti Mahanyele (she is the CEO of Shanduka) says that this transaction was done at an arms length from MTN. Implying that Chairperson of MTN, Cyril Ramaphosa, did not take part in the negotiations. MTN in fact had a pre-emptive right to buy that stake, but did not. I wonder why? That is still an irritation for us. And I suppose that Ramaphosa's family interests, his family trust which owns a little more than 30 percent of Shanduka must have known that this deal was taking place. Surely. But I am guessing that it is very plausible that Mahanyele could have briefed Ramaphosa after the deal had actually happened. No need to speculate. This is a massive deal for Shanduka, the WSJ suggests that their (Shanduka) enterprise value is 1.58 billion Dollars. So 335 million Dollars is a big deal.

MTN Nigeria. There is a BusinessDay article by Sure Kamhunga this morning which is suggesting that MTN International are selling part of a stake in their business in Nigeria to the Shanduka group. I can't find anything on either the MTN Nigeria website, under press releases or the MTN group website either. Sure's article, which you can find here: Ramaphosa's Nigeria deal raises eyebrows, does not give the minority stake percentage, but does give the price, 335 million US dollars. Which is nearly three billion Rands at the current exchange rate, that is a lot of money. As Paul said in the office, he is a little disappointed that MTN are selling a stake in a very profitable and exciting business. Not so much the issues around whether or not the right partners are involved, just you would think that MTN should keep on the stake.

MTN released their quarterly subscriber numbers this morning, and they managed to increase subscribers by 3.8 percent quarter on quarter to 182.7 million folks. Due to a more solid than expected last quarter, the company has raised their subscriber guidance for the full year by nearly two and a half million subscribers to 23.7 million additions. A rather bland looking Official Announcement- Thursday, 25 October 2012, MTN quarterly update is available via their website. But I am a glass half full guy, rather some information than none at all, not so? Yes. I hacked the release and have posted this table, which I think provides you with all the information that you need:

Notwithstanding the fact that South Africa does not seem to be making headway, relative to the rest of the world, what is making progress is MTN. A business that is only as old as the country is a democracy. 18 years old. In that time the company has managed to attract just short of 176 million subscribers spread across 22 countries across Africa, the Middle East and one in Europe (Cyprus), clock half year revenue of 66.426 billion Rands and register group EBITDA of 29.798 billion Rands. As a listed company the stock has done remarkably well. I remember a time when the company was expensive at 20 Rands, they did not have the earnings to back the price is what the analyst community said. The stock was beaten up, because the company would not "make it" in Nigeria, the analyst community was very sceptical. I swear I remember a time when the cell phone industry was called a "vampire" industry because it leached money from retailers. Now, every single major retailer has a booth with a wide array of mobile phones. Let us just say that communication is hard coded in each and every one of us.