MTN Group announced on Thursday a $1 billion divestment programme over the next three years that will slim down Africa’s biggest mobile phone operator and refocus it on high-growth markets on the continent and in the Middle East.
Founded with Pretoria’s help after the end of white minority rule in 1994, MTN has been one of South Africa’s biggest corporate success stories, but clashes with regulators in Nigeria, Uganda and elsewhere have crimped growth. Chief Executive Rob Shuter, hired from Vodafone in 2017, has drawn up a turnaround plan that includes shedding loss-making e-commerce assets and exiting countries where MTN has no prospect of reaching second position by market share.
At the same time, Shuter is pushing the company into mobile financial services, music streaming and mobile gaming, betting on a burgeoning young tech-savvy population to offset falling prices for basic telecoms services. “What we really want to say to the investment community is that we’ve got a company with very good growth prospects and a very specific plan to simplify and modernise the group,” Shuter told Reuters.
As part of the review, the South African company has agreed to sell its minority stake in Botswana’s Mascom for $300 million. It sold its sole European unit in Cyprus last year. Shuter has not named the countries that MTN was preparing to exit, but his suggestion that it would focus on high-growth, stable geographies suggest smaller businesses in Liberia, Guinea, Guinea-Bissau, and worn-torn Syria, South Sudan and Yemen might be cut, analysts said.
MTN said its investments in tower companies and e-commerce platforms like African online retailer Jumia were valued at 40 billion rand and would be sold over time as they were not long-term strategic assets. Shares in the company surged 15 percent to 87.39 rand, on course for their biggest one-day rise in since 2008. “They are focusing more on telecoms, which is the business that they do, and they are trying to stay away from everything that distracts them. I don’t think that’s a bad thing,” said Bright Khumalo, an analyst at Vestact in Johannesburg.
PROFIT LEAPS
In the last financial year MTN reported an 85 percent surge in headline EPS, the main profit measure in South Africa, to 337 cents. However, the bottom line is still not at even half the level MTN reported in 2015, the year before it agreed to pay a $1.7 billion fine in Nigeria for missing a deadline to cut off unregistered SIM card users.
The fine was reduced from $5.2 billion after MTN made concessions, including a promise to list its Nigeria unit. The flotation of MTN Nigeria, which accounts for a third of MTN’s core profit or EBITDA, is likely to take place by the end of June, the company said.
The unit has also been embroiled in other rows with the Nigerian authorities. It agreed to pay $53 million in December to resolve a dispute with the Central Bank of Nigeria and is involved in a court battle with the Nigerian attorney general over $2 billion in back taxes. MTN has also faced run-ins with authorities in other countries, including Uganda, where four senior executives were deported in recent weeks on accusations of compromising national security. Reuters
