MTN on market down spiral

MTN on market down spiral

March 7 2019 –  SHARES
 in mobile operator MTN, which has
increasingly run into trouble in some of its key markets, have recorded their
longest losing streak since 1995, with the stock declining for the eighth
straight day on Wednesday.

The share has lost more than 12% since the losing streak
started, Bloomberg data showed, and on Wednesday closed 2.86% down at R75.05 —
the lowest level since September 2018.

The weak performance has been attributed to the mobile
operator’s lower-than-expected profits for 2018 and as sanctions on its
third-largest market, Iran, start to bite.

A year ago — before MTN’s run-ins with authorities in
Nigeria, its largest market, led to a sharp sell-off in the second half of the
year — the share was trading at more than R122.

On Thursday last week, MTN disappointed the market by saying
its headline earnings per share in the year ended December would be between 80%
and 90% higher than in 2017. Analysts had expected a higher increase, given
that the numbers were coming off a low base. The group is due to report its
full numbers for 2018 on Thursday.

Vestact CEO Paul Theron said in a note to clients on
Wednesday that Iran’s economic woes presented another risk to MTN, which has
44.6-million subscribers in that market via its 49%-held venture, MTN Irancell.

That business contributed R7bn in revenues for MTN in the
first half of 2018, though the group is struggling to repatriate funds because
of US sanctions.

“The country’s economy is falling apart, as its oil
exports sink and its currency collapses, both largely in response to US
sanctions,” Theron said, adding that Iran’s oil exports to Asia fell
sharply in 2018 and will probably fall further.

“In an effort to offset the economy’s weakness, Iranian
President Hassan Rouhani has pushed forward a budget that will run a deficit
amounting to about 10% of GDP or 60% of the state’s general budget,”
Theron said. That seemed “very risky”.

To make matters worse, MTN has been accused of paying bribes
to SA and Iranian officials to secure its licence there in 2005.

MTN continues to deny any wrongdoing, saying that it has
been cleared by an independent jurist.

“Along with its problems in Nigeria, these concerns
have weighed heavily on the MTN share price,” Theron said. “It’s
trading below R80 per share, which is most disheartening. For now, we
wait.”

The operator’s shares crashed in the second half of 2018
when it was slapped with a $2bn tax claim by Nigeria’s attorney-general, and a
separate demand from the country’s central bank that it return $8.1bn worth of
dividends.

MTN ultimately reached a settlement with Nigeria’s central
bank in late December 2018, with the $8.1bn claim being reduced to $53m, though
the tax matter remains unresolved. – BusinessDay

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