MTN Gains as Investors Look Beyond Losses Led by Nigeria Fine

Updated on
  • Phone company reports first-ever per-share loss after penalty
  • Mobile carrier’s profit weakened in home South African market

MTN Group Ltd. shares gained the most in more than five weeks after Africa’s biggest mobile-phone operator booked the full value of a 330 billion naira ($1 billion) fine in Nigeria, drawing a line under a 10-month saga that wiped a third off the share price.

The wireless carrier made a first-ever per-share loss as a public company in the six months through June, partly caused by a provision for the penalty in Africa’s biggest economy, Johannesburg-based MTN said in a statement on Thursday. The margin for earnings before interest, taxes, depreciation and amortization also weakened in South Africa, its biggest market after Nigeria.

“MTN pushed the value of the entire fine onto the income statement,” Byron Lotter, a money manager at Vestact Ltd., which holds MTN stock, said by phone. “This is a once-off and expectations are that they will recover in the next year.”

The levy of the Nigeria fine sent MTN’s shares tumbling when it was made public in October, firing the starting gun on months of negotiations with local authorities and prompting the departures of company officials including Chief Executive Officer Sifiso Dabengwa. A deal to pay a reduced fine over three years was eventually struck in June, while MTN also agreed to list its Nigeria unit on the country’s stock exchange.

MTN’s shares jumped as much as 4.4 percent on Thursday, the most since June 28, and traded 2.2 percent higher at 135.42 rand as of 4:14 p.m. in Johannesburg. The stock had declined as much as 4.3 percent in early trade after the loss was reported. The shares are still 29 percent below their level when the penalty was announced.

“The market possibly recovered because many believe this is the bottom in terms of MTN’s earnings performance,” Peter Takaendesa, a money manager at Mergence Investment, said by phone from Cape Town. “The market will still be shocked if the company decides to significantly cut its dividend” when it reports more detailed earnings on Friday.

The first-half loss will be between 2.85 rand and 3.15 rand per share, MTN said. The so-called headline figure, which excludes one-time items, will be a loss of between 2.55 rand and 2.85 rand per share.

Losses from mobile-phone towers and digital businesses also contributed to the first-half performance, as did the foreign-exchange impact of weaker operating currencies against the U.S. dollar.

Turning around the Nigeria business will be a top priority for incoming Chief Executive Officer Rob Shuter, who will join the company from Vodafone Group Plc by July 1, 2017.

“MTN still has a lot to do and it will be all about implementation,” Lotter said. “That’s up to management. Vestact is very excited about the company’s new management team.”