MTN has lost its investment appeal, says Afrifocus - Business Day

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 A prominent Johannesburg-based wealth manager says MTN has lost its appeal as a long-term investment opportunity after lurching from one run-in with authorities to the next.

“We are seeing little value in staying invested in the company, where the continued legal disputes in Nigeria have resulted in an increase in the business risk,” Afrifocus Personal Wealth, which has a sell recommendation on the stock, said in a note to clients this week.

In August, Nigeria’s central bank told MTN to return as much as $8.1bn it claimed the company had moved out of the country illegally. Days later, the country’s attorney-general told MTN it also owed $2bn in unpaid taxes.

The mobile operator, which had barely recovered from a $1bn fine for not disconnecting unregistered SIM cards in the west African state, saw its share price slide in the second half of 2018 as the claims piled up against it.

While it recently agreed to make a $53m payment to resolve its dispute with the Nigerian central bank, the stock has barely recovered.

It was trading at R86.60 at midday on Friday, versus R107.34 on August 29 2018.

“After a disastrous couple of years, MTN will report results in March 2019 indicating a substantial cut in its annual dividend from 700c for financial year 2017 to 400c for 2018, Afrifocus said.

“This will put the share on a dividend yield of 5.2%, which compares negatively with the before-tax 6.8% dividend yield of Vodacom.”

The stock broker and wealth manager said MTN was operating in “distressed economies”.

Nigeria, its largest market, was struggling amid lower oil prices while extracting cash from Iran, the company’s third-biggest market, had been made more difficult by US sanctions.

“The company has been involved in continued fallouts with the Nigerian government, and have had the pay hefty fines. What is next?”

In 2018 MTN also had to put out regulatory fires in Benin and Cameroon.