An upcoming initial public offering of MTN Group’s Ghanaian unit may have helped unravel the valuation of its Nigerian business which is set to be listed on the Nigerian Stock Exchange (NSE), as soon as mid 2018.
Africa’s biggest mobile-phone company by subscribers is preparing to raise as much as 2 billion cedis ($447 million) through listing 35 percent of the subsidiary on the Ghana Stock Exchange in what will be the largest share sale in the country’s history.
Drawing from the above, MTN Ghana is worth some $1.27 billion, according to BusinessDay estimates.
MTN Ghana raked in revenues of $416 million in the six months through June 2017, according to its financial statements. For the lack of their full-year earnings report, we multiplied half-year earnings by 2, which gave $833 million.
For the purpose of extrapolating the worth of the Nigerian subsidiary, BusinessDay proceeded to calculate the price to sales ratio of the Ghanaian unit, which came to 1.5. We then multiplied that by the Nigerian unit’s estimated $3 billion revenue in 2017 (the revenue was derived by multiplying half year earnings of $1.5 billion by 2).
After multiplying, we arrived at $4.5 billion, as the valuation of MTN Nigeria.
However, given that MTN Nigeria probably boasts a better price to sales ratio than its Ghanaian counterpart, BusinessDay then looked at the price to sales ratio of listed telcos in countries with comparable population as Nigeria and a similar subscriber base as MTN Nigeria.
Advanced Info Service (AIS), Thailand’s largest telco has a price to sales ratio of 3.6, while Indonesia’s Telkom and India’s Bharti Airtel boasts price to sales ratio of 3.12 and 1.9 respectively. This gives an average price to sales ratio of 2.87.
Using this average, MTN Nigeria is potentially worth as much as USD$8.6 billion.
“The peer valuation gives a better sense of the Nigerian unit, given that the Ghanaian Unit is not as large as the Nigerian subsidiary. A look at their EBITDA margins would also paint a good picture,” said Wale Okunrinboye of fixed income and currency research at Ecobank Group.
There was however no readily available detailed breakdown of Nigerian operations in the Group’s financial statements to derive the Earnings Before Interest, Depreciation, Taxes and Amortisation (EBIDTA).
MTN Group Ltd. plans to raise about $500 million from the sale of shares in its Nigerian business during the first half of the year, fulfilling the terms of a deal struck with the West African nation to settle a record fine.
If successful, the Lagos share sale will be the biggest on the Nigerian Stock Exchange after Starcomms Plc, which raised $796 million when it listed in 2008, according to data compiled by BusinessDay.
Working with the valuation derived from emerging market peers, MTN Nigeria may be selling a 5.8 percent stake, when it makes an initial offering this year.
Standard Bank Group Ltd. and Citigroup Inc. have been advising Africa’s largest mobile-phone company on the disposal of as much as 30 percent of the Lagos-based unit on the Nigerian Stock Exchange.
Local brokerage firm, IC Securities Ghana Ltd, will handle the Ghanaian sale, according to sources familiar with the matter.
MTN agreed to list the Nigerian unit as part of a June 2016 agreement to pay a $1 billion fine for missing a deadline to disconnect unregistered subscribers amid a security crackdown.
The penalty, originally set at $5.2 billion, led to the resignation of the Johannesburg-based company’s then chief executive officer, a first ever full-year loss and a slump in the share price that’s yet to be clawed back.
MTN, Nigeria’s biggest mobile-phone company with just over 50 million subscribers as of end September, slumped to a loss in 2016 as it absorbed the financial impact of the fine, though said last month it returned to profit the following year.
Nigeria and other sub-Saharan African governments are trying to gain more from international mobile-phone operators taking advantage of rising smartphone use and faster data speeds.
MTN has also agreed to sell shares in Ghana as one of the conditions of a deal to gain spectrum rights, while Vodacom Group Ltd., South Africa’s market leader, was ordered to list 25 percent of its Tanzanian business last year, raising $213 million.
MTN had 230.2 million subscribers in 22 countries across Africa and the Middle East as of the end of September, with Nigeria, Iran and South Africa its three biggest markets.
The Group’s share price fell 0.26 percent Thursday February 22 2018, to 12,590 rand in Johannesburg, giving it a market capitalisation of 236.853 billion rand ($20 billion), according to Bloomberg data.
Telco’s like MTN are grappling with declining voice revenues as consumers turn to data-based platforms such as WhatsApp to make calls.
In the six months to June 2017, MTN’s voice revenue in South Africa — where SIM-card penetration far exceeds MTN’s other markets — fell 5 percent. But voice revenues in Nigeria and other African markets rose.
MTN has about 49.5 million customers in Iran, just under Nigeria’s 50.3 million and has repatriated almost $1 billion from the country in the last 12 months.
Founded at the end of white rule in 1994, MTN’s clashes with regulators in the past few years had held back growth and threatened to tarnish its image as one of post-apartheid South Africa’s biggest commercial successes.
LOLADE AKINMURELE & ENDURANCE OKAFOR
