MTN Group Limited said it is laying the groundwork for an Initial Public Offering (IPO) of its Nigerian business and should complete the process in the next six months, Chief Executive Officer Rob Shuter said.
MTNs listing analysts say will help balance the Nigerian bourse, give investors options for sector rotation and reduce volatility associated with a single name dragging down the entire market.
“The listing of MTN should further deepen the Nigerian equity market and hopefully attract more names in the telecom sector to the Exchange”, Abiola Rasaq, Head of Investor Relations at United Bank for Africa Plc told BusinessDay.
“While Telecom represents 12 percent of the economy, the sector does not feature on the Bourse, following the delisting of erstwhile telecom stocks –such as Starcomms and HIS. MTN’s linked note currently trades at $13 Over-The-Counter, which translates to about 2 percent dividend yield,” Rasaq said.
“This may however not reflect the fair valuation metric at which the counter will be listed. Notably, the Group, which is listed on the Johannesburg Stock Exchange (JSE) trades at some 5 percent dividend yield and 30 times earnings. Being a sector leader, MTN should command a premium valuation, even as investors would like to price in the waning growth of the sector and its potential to replicate the sterling historical growth,” he noted.
MTN agreed to the Lagos IPO as part of the settlement of a $1 billion fine imposed by Nigerian regulators on MTN in 2015.
Africa’s biggest wireless operator by sales incurred the penalty after missing a deadline to disconnect unregistered subscribers amid a security crackdown in the West African country.
Since then, the CEO said he’s been “pleased” with MTN’s operation in Nigeria, the biggest of the Johannesburg-based company’s 22 markets across Africa and the Middle East.
Nigeria’s telecoms sector boasts of other big names such as Glo, Airtel, and Etisalat which have chosen to remain private and refused to leverage public share sales in their expansion drive while also making the Nigerian bourse non-reflective of key sectors of the economy.
Shuter said: “We have a lot of advisers running around getting everything ready,” in an interview with Bloomberg TV on Wednesday. “It’s a complicated process and there’s a lot of regulation that needs to be arranged. We are moving forward well with the project and anticipate concluding that in the next six months or so.”
For Kayode Tinuoye, head, research, financials, Lagos-based investment bank United Capital Plc, MTN Nigeria listing had always been on the cards. One major impact he sees from the listing is that it will significantly dilute the dominance of the banking and cement sectors on the Nigerian bourse and give investors more options which is good for the market. More importantly, he noted that the market would become more reflective of the broader economy with telecoms contribution of close to 10 percent to Nigeria’s GDP.
“The Nigerian fine which eroded profitability last year, as well as the depressed valuation of the Nigerian equities market were key disincentives to listing. Now that the market appears to be out of the woods, the time looks ripe to consider listing Nigerian entity,” he added.
Tinuoye said: “Even if you adjust for relatively higher cost of equity in Nigeria, MTN Nigeria should vie with Dangote Cement as the largest listed entity in Nigeria.”
With Nigeria making up 40 percent of group revenues, combined with the still fast growing telecommunications sector, MTN’s Nigerian unit could potentially garner a $6.4 billion or N2.24 trillion valuation when it lists.
Despite a 2.3 percent decline in MTN Nigeria subscriber base, the company’s revenue increased by 11.6 percent in the first quarter of 2017.
MTN Nigeria said it “had a strong start to the year with an 11.6percent increase in total revenue, supported by a 71.3 percent boost in data revenue”.
Nigerian mobile-phone customer numbers have grown rapidly over the past ten years as handsets became more affordable and data services increased.
Africa’s most populous country had 151 million subscribers at the end of last year, up from 19.5 million in 2005.
Shuter, 50, joined MTN in March after holding executive roles at Vodafone Group Plc in Europe. He is the permanent replacement for Sifiso Dabengwa, who resigned after the Nigerian fine was imposed. Chairman Phuthuma Nhleko had run the company in the interim period.
MTN’s two other main countries are Iran and South Africa. In the former, Shuter said the company isn’t “holding back” on expansion plans even as U.S. President Donald Trump objects to the terms of a nuclear deal that led to the lifting of economic sanctions last year.
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.
MTN shares rose 0.2 percent to 122.96 rand as of 10:53 a.m. in Johannesburg, valuing the company at 231 billion rand ($16.3 billion).
IHEANYI NWACHUKWU
