MTN Loses Crown to Vodacom as Africa's Biggest Phone Company

  • Vodafone unit valued at $16.5 billion vs MTN's $16.2 billion
  • First time rankings have switched since Vodacom's 2009 listing

MTN Group Ltd.’s six-month battle with Nigerian authorities over payment of a record fine has cost the company its seven-year status as Africa’s highest valued telecommunications operator to rival Vodacom Group Ltd.

MTN’s market capitalization was 238 billion rand ($15.8 billion) at the market close in Johannesburg on Thursday, trailing Vodacom’s 248 billion rand. This year marks the first time the rankings have been reversed since Vodacom, a unit of Newbury, England-based Vodafone Group Plc, first sold shares in an initial public offering in 2009.

MTN’s shares have declined 32 percent since Oct. 26, when the record $5.2 billion Nigeria fine was made public. While the penalty was later reduced to $3.9 billion, the South African company has yet to agree to a payment. Chief Executive Officer Sifiso Dabengwa resigned in November, to be replaced on a temporary basis by his predecessor, Phuthuma Nhleko. Vodacom has gained 12 percent in the same period.

“The problem is all the uncertainties hanging over MTN’s head,” Irnest Kaplan, a telecommunications analyst at Vunani Securities, said by phone from Johannesburg. “The market needs to know who the next CEO will be, but most importantly the market needs to be updated on the fine negotiations and if there has been any progress. Markets do not like uncertainty.”  

Both MTN and Vodacom are relying on growth in smartphone use in international markets amid weaker sales in South Africa, where tighter regulation and competitive pricing have hurt both companies.

MTN, which had 229 million customers in 22 countries at the end of March, had revenue of 146 billion rand and net income of about 20 billion rand in 2015. Vodacom probably generated 82 billion rand in sales in the year through March, according to the average forecast of 14 analysts surveyed by Bloomberg, and net income of 13 billion rand. Vodacom reports full-year earnings on Monday.

Vodacom briefly overtook MTN for the first time on April 5, before MTN retook the top spot on April 8. Vodacom reclaimed the lead on May 6. MTN shares declined 3.1 percent on Thursday, their eighth drop in nine trading sessions. Vodacom fell 0.3 percent.

“I think Vodacom could be fully valued at current prices and MTN could be viewed as cheap,” Peter Takaendesa, a money-manager at Mergence Investment Managers in Cape Town, said by phone. “MTN’s earnings were double that of Vodacom’s earnings and I think the fine and management uncertainties are strongly playing into current evaluations."

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