Barely three months after a blockbuster listing on the Nigerian Stock Exchange (NSE), MTN Nigeria is riding on its imminent inclusion to the Morgan Stanley Capital International (MSCI) Frontier Markets Index to narrow the market capitalisation gap with Dangote Cement to N12.7 billion.
Shares of the telecoms firm jumped 4.45 percent Thursday to N135, the highest since June 14, ahead of an interim dividend payment of N2.95, bringing its market value to N2.74 trillion, while those of Dangote Cement fell 1.82 percent for a market capitalisation of N2.76 trillion.
“Since MTN Nigeria was added to MSCI Index, a lot of people tracking the fund would also need to buy MTN into their portfolios,” Ayodeji Ebo, managing director of Lagos-based investment house, Afrinvest Securities Limited, told BusinessDay. “MTN’s rally could be linked to its inclusion to the index.”
As a result, the N782.52 billion market capitalisation gap between the top two Nigerian publicly-listed firms shrank to N12.7 billion, a development analysts say would reignite the contest for the most capitalised firm on the local bourse.
“It’s an interesting race to watch out for,” said Gbolahan Ologunro, an equity research analyst at CSL Stockbrokers Limited. “Unlike what we had in the past when the most capitalised stock was held by Dangote Cement, both stocks would now rotate the title.”
MTN Nigeria listed 20.35 billion existing shares on the NSE by a way of introduction at N99 per share on May 16 with the stock gaining 10 percent on that day, to close at N108.9 on the back of high demand, bringing its market value to N2.21 trillion as against N2.99 trillion market cap recorded by Dangote Cement.
MTN’s rally did not come as a surprise as analysts at EFG Hermes, an Egyptian-based investment bank, had said the mobile network’s shares would rally in days leading to August 27 ahead of its official inclusion on the MSCI index.
The telco would join Dangote Cement, Guaranty Trust Bank, Nestle Nigeria, Zenith Bank, Nigerian Breweries, Stanbic IBTC Holdings, Seplat, First Bank of Nigeria Holdings, and Ecobank Transnational Incorporated on the index.
“Based on our calculations we also expect MTNN to join the MSCM FM 100 index, as a result, we expect to see $5 million worth of passive inflows,” said Olamide Shonekan of the sales and trading desk at EFG Hermes. The trader estimated that MTNN should see $3.5 million from the Nigeria tracker at the close of business on August 27.
Nigeria’s weight would climb to 19.4 percent from 17.4 percent among African countries excluding South Africa on the MSCI Frontier Index, bringing the country to third place ahead of Kenya although still behind Morocco and Egypt.
Given Nigeria’s rapid population growth rate with a median age of about 18 years coupled with the country’s large infrastructure deficit, Ologunro pointed out that prospects for growth abound in both the telecommunication and cement industries.
However, on a comparative analysis, the telecommunication industry in Nigeria has the potential to record stronger growth than the cement industry in the medium to long-term, according to Ologunro.
Nigeria’s Telecommunications industry is structured along oligopolistic lines with the biggest three telcos controlling 90 percent of the mobile communications (GSM) market.
MTN, however, has the bigger pie with a market share of 37.56 percent on account of its 65.26 million subscriber base as of June 2019, making it the biggest operator in Nigeria where the South African-based telco generates a third of its revenue.
In 2018, the telecommunications industry grew 5.87 times faster than the rest of the economy as telecom output grew 11.33 percent to N6.6 trillion.
The performance in 2018, the best for the telecommunications industry in the six-year period, was followed by a 12.18 percent expansion in the first quarter of 2019, while the economy expanded by 2.01 percent. Cement sector grew 4.5 percent in 2018 and 2.81 percent in the first quarter of 2019.
The cement industry, however, shows a better 6-year cumulative average growth rate compared to the telecoms industry.
Nonetheless, experts say there is a high prospect for growth in mobile telecommunications as the sector continues to benefit from Nigeria’s improving broadband penetration, increasing adoption of smartphones, and the country’s youthful and growing population.
According to a recent survey by Jumia, Nigeria’s mobile broadband penetration is forecast to rise to 55 percent of the population by 2025, with 70 percent having 3G connectivity and 17percent having access to 4G networks.
In addition, the report states that 5G network with the 26 GHz, 38 GHz and 42 GHz spectrum bands will be rolled out by 2020.
OLUWASEGUN OLAKOYENIKAN & SEGUN ADAMS
