Most valuable telecoms companies in South Africa

With a market capitalisation of R213 billion, Vodacom is South Africa’s most valuable JSE-listed telecommunications company in November 2024.

Much of 2024 was tough for the local telecoms industry, with the combined market caps of the top six listed companies declining 14.2% from R450 billion to R386 billion.

The two biggest players experienced slowed revenue growth due to constrained consumer budgets, rising inflation, and high interest rates.

2024 also comes off the back of several challenging years with regard to severe load-shedding and infrastructure crimes, requiring significant capital expenditure.

Despite these significant challenges, Vodacom’s share price declined by less than 4% year-to-date.

From around August to October 2024, a share was trading higher than at the beginning of the year — coinciding with positive indications that a major deal in the fibre-to-the-home market could get the go-ahead from the Competition Tribunal.

Vodacom plans to acquire a 30% stake in Maziv, a holding company for CIVH’s fibre businesses — including Vumatel and DFA.

However, the tribunal blocked the deal towards the end of October 2024, to the shock of many industry experts.

The promise is that the merger will boost broadband connectivity in South Africa, as Vodacom’s funding will provide an additional cash injection for Vumatel’s bold township expansion.

Vodacom and CIVH are considering whether to appeal the ruling following the tribunal sharing its reasons for the decision.

While the transaction could also deliver dividends for Vodacom, its fundamental performance metrics have remained very strong.

In its last interim financial year ended September 2024, its operating profit grew by 2.4% to R9.84 billion compared to the same period a year ago.

The Vodacom share price also remains stronger than its average level from February to mid-August 2024, indicative of the company’s resilience in a tough economic environment.

The table below shows key financial performance metrics from Vodacom’s last reported interim financial results.

MTN’s big Nigerian headache

Matters are far less positive for Vodacom’s main rival, MTN, which saw its market cap plummet from around R210 billion to R152 billion between January and November 2024.

MTN’s struggles are largely due to headwinds in its biggest market — Nigeria.

The country’s economy has struggled, and its currency, the Naira, has weakened substantially over the past two years.

Buying a rand in January 2024 cost in the region of 50 Naira, compared with over 90 Naira in November 2024.

MTN reports its results in rands, which means despite Nigerian revenues increasing in constant currency terms, its reported revenues have plummeted.

For example, in the third quarter of 2024, MTN group service revenue declined 18.5% from R156.3 billion to R127.4 billion.

In that same period, revenue had increased 12.9% in constant currency terms.

Good year for smaller players

South Africa’s two smaller mobile networks with associated listings — Telkom and Cell C — have had a more comfortable year.

Telkom’s market cap increased from around R15.3 billion to R16.39 billion as its share price surged after the company reported a strong set of interim results for the period from April to September 2024.

Telkom’s adjusted earnings before interest, taxes, depreciation, and amortisation increased by 18.3% to R5.6 billion, while revenue also climbed 1.9% to R21.4 billion.

In addition, the company has improved its balance sheet substantially, with free cash flow turning positive at R768 million, compared to a negative R478 million in the same period last year.

Several analysts believe that Telkom could give investors good returns if it continues to execute on leveraging its significant fixed network infrastructure with a more prudent network expansion strategy.

Although Cell C is not listed directly, it has a significant impact on the performance of its largest shareholder — Blue Label Telecoms.

Investors appear increasingly confident that Cell C’s turnaround is panning out and that it could return to growth under the leadership of Jorge Mendes and a roaming-focused network strategy.

The final two major telecoms firms listed on the JSE — Huge Group and TeleMasters — have been at opposite ends in terms of share price and market cap performance.

TeleMasters’ change was the most noteworthy, with its market cap increasing by about 25%.

One of the company’s biggest announcements in 2024 was that it had approached its two largest shareholders to sell their stakes to a BEE investor.

However, it should be noted that TeleMasters has a low share price of R1.00 and a comparatively small market capitalisation of R57.5 million.

Small-cap shares tend to be more volatile, as a few trades by a handful of shareholders could cause a big swing in its price.

Two other major telecom players in South Africa — Remgro’s CIVH and ARC’s Rain — are not listed on the JSE. Their only published valuations are based on calculations by their parent companies.

However, an analysis by Daily Investor showed these valuations may be inflated when considering how their price-to-EBITDA compares with competing listed companies.

The table below compares the market capitalisation of the six biggest listed telecoms companies in January and November 2024.