{"id":579172,"date":"2025-01-21T14:56:52","date_gmt":"2025-01-21T12:56:52","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=579172"},"modified":"2025-01-21T14:56:58","modified_gmt":"2025-01-21T12:56:58","slug":"mtn-offers-great-value","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/telecoms\/579172-mtn-offers-great-value.html","title":{"rendered":"MTN offers great value"},"content":{"rendered":"\n

MyWealth Investments CEO Annatjie van Rooyen says that MTN share price offers great value at its current levels thanks to a swell in positive developments surrounding the company.<\/p>\n\n\n\n

Van Rooyen recently told<\/a> Business Day TV that MTN does well when there is positive news around the oil price, adding that she hoped demand from China for the commodity would increase.<\/p>\n\n\n\n

However, that was only a small part of the good news for MTN, she said.<\/p>\n\n\n\n

“I’m expecting broker and earnings upgrades for the company,” said Van Rooyen.<\/p>\n\n\n\n

“This is on the back of USSD platform revenues that will be back-paid by the banks in Nigeria and the revenue that will be received from those platforms in future.”<\/p>\n\n\n\n

She also said the possibility of tariff hikes in Nigeria bodes well for MTN’s revenue.<\/p>\n\n\n\n

“The forward price-earnings ratio of over 9 \u2014\u00a0I think it offers great value at these levels still,” she said.<\/p>\n\n\n\n

It should be noted that Nigeria’s regulator agreed to a 50% tariff hike yesterday \u2014\u00a0half of what operators asked for. It is the first time in 12 years the country has allowed telecommunications providers to increase tariffs.<\/p>\n\n\n\n

MTN’s share price has suffered in recent years. The company exp<\/span>erienced a\u00a0particularly torrid start to 2024<\/a>, as its share price plummeted by 28% due to the collapse of the Nigerian Naira.<\/p>\n\n\n\n

Nigeria is MTN’s biggest market and the one where it makes a large chunk of its money. In the 2022 financial year, Nigeria contributed 40% to MTN’s total service revenue.<\/p>\n\n\n\n

The country is even more important to MTN’s bottom line. MTN Nigeria contributed 46% to the operator’s earnings before interest, taxes, depreciation, and amortization (EBITDA).<\/p>\n\n\n\n

This explains why MTN remains committed to Nigeria despite the country’s numerous economic and political challenges.<\/p>\n\n\n\n

Over the years, Nigeria has been a troublesome region for MTN investors who have endured big swings in the share price.<\/p>\n\n\n\n

For example, MTN’s share price traded between R200 and R250 a share from 2014 to 2015, and the company was doing well.<\/p>\n\n\n\n

This ended abruptly in late 2015 after the Nigerian Communications Commission (NCC) handed MTN a $5.2 billion fine for non-compliance with SIM registration regulations.<\/p>\n\n\n\n

MTN negotiated the fine down to $1.7 billion, but it was still significant for the South African operator.<\/p>\n\n\n\n

Between 2015 and 2023, there were many further fines and disputes between MTN and Nigerian authorities, which hurt the company.<\/p>\n\n\n\n

Its most recent beating came from the rapid decline in the value of the local currency, the Nigerian Naira,\u00a0although MTN assured that this would be short-term pain for long-term gain.<\/p>\n\n\n\n

\"\"
MTN’s share price from 2020 to 2025<\/figcaption><\/figure>\n\n\n\n

To understand the situation, it is valuable to delve deeper into the Naira’s problems.<\/p>\n\n\n\n

Nigeria has historically struggled to increase the liquidity of the Naira. It has not been easy to sell the Naira at its listed exchange rate value.<\/p>\n\n\n\n

The low interest in the Naira has a few different dynamics. The Nigerian central bank pegged the currency to the US dollar to strengthen the Naira.<\/p>\n\n\n\n

This move kept the Naira artificially inflated as its price was not determined by market forces but by a predetermined rate that constantly had to be managed.<\/p>\n\n\n\n

Because the Naira’s value is artificially inflated, outside investors have little confidence in buying the currency at its official “predetermined” valuation.<\/p>\n\n\n\n

A result was that many more individuals and businesses wanted to sell their Naira than those who wanted to buy Naira.<\/p>\n\n\n\n

The lack of demand for the Naira means that Nigeria’s central bank cannot allow all the Naira sellers to act on their wishes and sell their currency.<\/p>\n\n\n\n

This is because it must keep the Naira at a predetermined rate. Excessive selling of the currency would cause that rate to drop significantly. This is what causes the low liquidity.<\/p>\n\n\n\n

This dilemma created a secondary black market for the Naira where it could be bought and sold informally at a much weaker rate than was market-determined.<\/p>\n\n\n\n

The black-market rate is typically the exchange rate used within Nigeria between its citizens. However, foreign investors and businesses must pay the official exchange rate.<\/p>\n\n\n\n

The black-market rate is known by investors, further lowering their confidence in the Naira.<\/p>\n\n\n\n

\"\"
Naira\/Rand exchange rate from 2016 to 2025<\/figcaption><\/figure>\n\n\n\n

In June 2023, Nigeria lifted the US dollar peg, and the Naira was allowed to trade freely.<\/p>\n\n\n\n

However, government-regulated and multinational corporate transactions still had to be done at an official exchange rate.<\/p>\n\n\n\n

The official Naira exchange rate lost 27% of its value overnight.<\/p>\n\n\n\n

At the end of January 2024, the Naira experienced another extreme currency devaluation, where it fell by 40% relative to the US dollar in a single day.<\/p>\n\n\n\n

This was due to the central bank revaluing the official exchange rate, bringing it closer to the black market rate.<\/p>\n\n\n\n

MTN was a victim of the rapid currency devaluation and poor liquidity. In its 2023 Q3 trading update, it said the availability of foreign exchange has been constrained in Nigeria.<\/p>\n\n\n\n

The company also stated that the previous official currency devaluation had a material impact on its results.<\/p>\n\n\n\n

The Naira’s devaluation following that financial report was much more severe. As such, it put significant pressure on MTN’s finances, impacting its share price.<\/p>\n\n\n\n

The recent positive news out of Nigeria bodes well for MTN’s future financial performance, which is being reflected in its share price.<\/p>\n\n\n\n

Since last week, MTN’s stock has shot up from around R88 to over R104 per share.<\/p>\n","protected":false},"excerpt":{"rendered":"

MyWealth Investments CEO Annatjie van Rooyen says she reckons MTN’s share price is great value at its current levels.<\/p>\n","protected":false},"author":15,"featured_media":579175,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[19,3],"tags":[94421,42,94423,33657],"class_list":["post-579172","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-telecoms","tag-annatjie-van-rooyen","tag-mtn","tag-mywealth-investments","tag-nigerian-communication-commission-ncc"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/579172"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=579172"}],"version-history":[{"count":2,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/579172\/revisions"}],"predecessor-version":[{"id":579195,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/579172\/revisions\/579195"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/579175"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=579172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=579172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=579172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}