MTN still a good bet
Writing in its commentary, Alan Gray said MTN was a "high quality company with good management whose earnings are likely to outperform the market and which can still be acquired at reasonably attractive prices".
As far back as July 2003, MTN was already a top 10 holding in the Allan Gray Equity Fund. At that stage, the market was awash with opportunities. Stephen Mildenhall – then Allan Gray Equity Fund's only manager – said it was finding an "increasing number of intriguing investment opportunities." More recently though, a combination of global and local factors has made the market jittery and there's uncertainty about returns in 2008.
Another supporter of MTN is Old Mutual's Steve Minnaar, who manages the Old Mutual Industrial Fund.
Although small cap-focused funds have pipped all the others to the top spots over the last five years, Minnaar's more broadly focused fund is one exception.
According to Equinox data, the fund has been the 11th best performer out of all the funds over the last five years to date, despite not performing well over the last 12 months, 12.6% of the entire fund was invested in MTN shares at the end of the third quarter.
Writing in featured article as part of his company's January 2008 quarterly newsletter, the Renaissance View, fund manager Khulekani Dlamini said shares including MTN, Telkom, Naspers and to some extent Dimension Data stood to benefit from Africa's "great and sustained" technological awakening, in particular the potentially "massive" uptake of mobile broadband.
Mobile users
Dlamini quotes International Telecommunications Union (ITU) figures showing that African internet users account for only 4.8% of the population, compared to 37.6% in Europe and 37.1% in the Americas. But, although telephony penetration remains very low in Africa, the growth in mobile subscribers has risen by 50.9% over the last five years, according to the ITU.
Dlamini argues that the low penetration of fixed lines and fixed-line broadband has "catalysed a different kind of growth trajectory for African data services: mobile broadband".
He says simple mathematics shows that Africa has easily 230 million mobile subscribers at current penetration levels. But, the world average penetration is more like 45%, which would amount to 419 million subscribers, or growth of 80% from the current levels, if the continent catches up to world averages.
Broadband penetration is in its infancy. According to Dlamini, Vodacom boasts 140 000 3G subscribers off a base of 23 million subscribers: "Throughout the continent, broadband penetration within mobile subscriber bases is infinitesimal. As mobile coverage grows and as users' knowledge of mobile broadband expands, we should see strong growth".
After acquiring Investcom in 2006, and launching in Iran, MTN now operates in 21 countries in Africa, Asia and the Middle East. It had 54.2 million subscribers at the end of September 2007 and will release full-year results to December toward the end of March.
MTN shares rose as high as R137.60 last November, shortly after the company withdrew its talks with Telkom around buying some of its fixed-line assets. It has been a bumpy ride since then and MTN fell back as far as R111.50 recently.
The share had risen 3% to R114.50 in morning trade today.
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