How a R1,000 South African telecoms investment performed over 3 years – and it is not good

If you invested R1,000 in South Africa’s major telecommunications companies three years ago, your shareholding would only be worth R648 today.

South Africa’s mobile operators are often painted as companies which print money thanks to exorbitant prices.

This may have been the case 15 years ago when they showed strong growth and enjoyed excellent margins on voice calls, but the game has changed.

They have to work much harder than before to sign up new subscribers and need to invest billions in their networks to serve the growing demand for data.

Mobile data and voice calling are becoming commoditised and telecoms players now look towards financial services, content, and IoT for future growth.

Vodacom, MTN, and Telkom are still excellent companies with a great future, but the days of easy organic growth and rapidly increasing profits are over.

The changing telecoms environment is clearly illustrated in the share price performance of prominent South African operators.

Sasfin Securities deputy chairman, David Shapiro recently pointed out that while a 1-year performance of MTN appeared good, it changed when looking at their 3-year performance.

“I thought MTN was crushing the other telecom players. Yes, over the last year. But over 3 years, R100 in Vodacom [is now] worth R83, in MTN R80, in Telkom R69 and Blue Label R35,” he said.

The chart below, courtesy of David Shapiro, shows the change in the share price of MTN (blue), Vodacom (green), Telkom (red), and Blue Label Telecoms (yellow).

It is, however, not all bad news. Shapiro said MTN’s latest results show a promising trend.

MTN’s results for the first quarter of 2021 revealed service revenue grew by 17.8% and earnings before interest, tax, depreciation, and amortisation (EBITDA) rose by 21.3%.

MTN South Africa recorded a particularly strong performance, with growth across its consumer, enterprise, and wholesale businesses.

MTN SA’s mobile data revenue grew by 18.5% driven by robust data traffic growth, which increased by 76.3%.

Vodacom’s interim results for the six months ended 30 September 2020 also showed a big increase in revenue and operating profit.

Revenue was up 7.8% to R47.8 billion while operating profit increased 12.3% to R14.5 billion.

The company added 4.1 million customers which means it now serves a combined 120 million customers across all its operations.

FNB Cell C Vodacom Telkom MTN

To see how South Africa’s top telecommunications companies performed over three years, MyBroadband looked at their share price performance between April 2018 and April 2021.

As Shapiro highlighted, Vodacom was the top performer although its share price declined by 18% over the last three years.

Blue Label Telecoms, which is a large shareholder in Cell C, performed the worst with a share price decline of 65%.

MTN and Telkom, which showed strong growth over the last year, lost around 30% in share price value over the last three years.

The table below provides an overview of the share price performance of JSE-listed telecoms companies between April 2018 and April 2021.

R1,000 investment over 3 years
Company April 2018 April 2021 R1,000 investment now
Vodacom R153.48 R125.73 R819
MTN R125.24 R91.62 R732
Telkom R56.82 R39.21 R690
Blue Label Telecoms R12.43 R4.35 R350
Average R86.99 R65.23 R648

Now read: MTN grows subscriber base and revenue in South Africa

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How a R1,000 South African telecoms investment performed over 3 years – and it is not good