MTN takes R171bn hit
Publish date: 19 April 2017
Issue Number: 1679
Diary: Legalbrief eLaw
MTN's market capitalisation has taken a R171.5bn hit since 2014, despite the mobile giant growing subscriber numbers across its key territories over the past five years. The telecoms operator recently released its integrated report for the financial year ending 31 December 2016 and along with it a detailed review of the operator's financials over the past five years. In the two years between 31 December 2014 and 31 December 2016, the market cap dropped almost 42%, from R409.bn down to R237.7bn. This as the share price dropped from R221.41 at the end of 2014 to R126.17 at the end of last year. Year-to-date, the stock is up by just 0.25% and yesterday morning was trading at around R125.82 a share, putting the market cap at R237.6bn. ITWeb reports that the stock took a further hit when news surfaced in October 2015 that MTN was facing a $5.2bn fine from the Nigerian Communications Commission for failing to disconnect 5.1m unregistered SIM cards in the country. After months of negotiations, MTN last year agreed to pay $1.671bn to the federal government in six instalments over three years, to settle the fine.
The recent downgrade of SA's credit rating to ‘junk’ by both Standard & Poor's (S&P) and Fitch has seen the ratings of local companies, including telecoms operators, tumble in its wake. Another ITWeb report notes that MTN is the latest to be hit, with its outlook downgraded to negative by Fitch after S&P pushed both MTN and Telkom to negative. On 3 April, S&P lowered its long-term foreign currency sovereign credit rating on SA to BB+ from BBB- and maintained a negative outlook. On 7 April, Fitch followed suit, downgrading SA's senior unsecured foreign- and local-currency bonds from BBB- to BB+. This after President Jacob Zuma reshuffled his Cabinet and fired Finance Minister Pravin Gordhan. The sovereign downgrades saw local companies and parastatals come tumbling afterwards, with Eskom, Transnet, Telkom, MTN and five banks being downgraded or having their outlook moved to negative over the past week.
In other developments, the Competition Commission yesterday (Tuesday) said it will not prosecute a complaint lodged by Cell C against Vodacom and MTN. A report on the Fin24 site notes that the complaint relates to anti-competitive conduct and was lodged in 2013. However, the commission said there was insufficient evidence required to successfully prosecute. 'This decision follows a lengthy investigation which revealed that there were several features in the mobile telephony market which affect the ability of smaller mobile operators to compete in the market,' it said. Cell C accused Vodacom and MTN of engaging in pricing strategies that made it cheaper to make on-net calls compared to off-net calls. On-net calls are between users of the same network, while off-net calls are between people on different networks. While the commission said it did not have enough evidence to proceed with the complaint, it would engage with the Independent Communications Authority of SA (Icasa) to ‘explore regulatory interventions that may be necessary to make the market competitive’. Business Day reports that Icasa spokesperson Paseka Maleka said the regulator had made ‘serious inroads to ensure a drop’ in prices, specifically wholesale voice-call tariffs. He said the wholesale voice price, which operators pay to carry each other’s calls, had dropped from R1.25 to less than 30c and the regulator was looking at reviewing the regulations. On data prices, Maleka said ‘due to changes’ in the way data was being used, the emergence of new technologies and the rise of over-the-top-services such as instant messaging, Icasa was still conducting a study.