Top analysts prefer Vodacom over MTN

Wayne McCurrie from FNB Wealth & Investments and David Shapiro from Sasfin Securities said they prefer Vodacom over MTN as an investment.

Vodacom and MTN are South Africa’s largest telecom companies, and investors often choose between the two to gain exposure to the telecommunications market.

MTN has a much larger African footprint, while Vodacom has a stronger presence in the South African market.

Vodacom has a market cap of R229 billion, and its share price increased by 9% over the last year.

MTN has a market cap of R165 billion, and its share price has declined by 4% over the last twelve months.

The two South African telecommunications giants each have their own advantages and challenges.

MTN, for example, is highly diversified geographically. However, it is highly exposed to Nigeria, which has an unstable business environment and volatile currency.

Vodacom has an excellent local operation but is less geographically diversified and also had to deal with currency volatility in Egypt.

MTN is far cheaper when considering traditional valuation methods like price-to-earnings (P/E) and enterprise value to EBITDA.

However, there is a reason for that. MTN poses more risk, so many investors have hesitated to put their money in the share.

It raises the question of what South Africa’s top investment analysts think of investing in Vodacom and MTN.

Wayne McCurrie and David Shapiro, two of South Africa’s top experts, shared their opinions during Business Day TV’s Stock Watch.

McCurrie said he prefers Vodacom even though MTN is significantly cheaper. This is because of the risk associated with MTN.

He highlighted that the telecommunications industry is ex-growth and that their glory days in the 2000s are over.

“Twenty years ago, Vodacom and MTN used to be the AI shares of their day. You could not own enough of their shares,” he said.

However, this growth has slowed, and government interventions have put pressure on their pricing and margins.

McCurrie said Vodacom and MTN tried to find growth by expanding into other countries, but this strategy yielded limited success.

Shapiro also selected Vodacom over MTN as an investment in the JSE’s telecommunications segment.

He also highlighted that the industry is capital-intensive, requiring billions in network investments to keep up with new technologies.

Investors should consider this when looking at the telecommunications sector as an investment opportunity.

“Despite this large investment, everyone wants to get mobile data for free. They don’t want to pay for it,” he said.

“You have a product people want, but nobody wants to pay for it. This means your margins are cut down.”