MTN’s shares slide to worst level in Six Month

MTN’s shares are at their worst level in nearly six months as the market comes to terms with the mobile operator’s lower-than-expected profits for 2018 and as sanctions on its third largest market, Iran, start to bite.

The stock was down 1.4% at R76.15 on Wednesday morning. A year ago — before MTN’s run-ins

with authorities in Nigeria led to a sharp sell-off in the second half of the year — the share was trading above R122.

The group’s stock has slipped more than 10% since Thursday last week, when MTN disappointed the market by saying its headline earnings per share (HEPS) 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, addin 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 seems “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 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 from 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, with the $8.1bn claim being reduced to $53m, though the tax matter is unresolved.

• BusinessDay SA