Investors drive MTN up despite headwinds

MTN’S share price continues to defy the onslaught of bad news.

This week, the JSE-listed cellular network provider revealed that its subscriber numbers had risen at the slowest pace in a year during the first quarter, as a weaker oil price rattled its biggest market, Nigeria.

MTN’s customer base grew 1.8% to 227.5 million people across 22 countries in the three months to March.

In Nigeria, MTN’s subscribers grew 2.1% to 61.1 million people, but only after it offered a raft of promotional deals to compensate for a drop in call volumes and lower spending by each user.

CEO Sifiso Dabengwa said MTN was “impacted by a weaker macroeconomic environment following the reduction in the price of oil in 2014 and continued price competition”.

Still, this has not dampened investor enthusiasm.

On Friday alone, MTN stock leapt as much as 3.8% to R239.75, underpinning a 13.6% jump in its value over the past month.

This sudden rise has caused MTN’s stock to shoot past many analyst targets for the year.

Overall, eight analysts rate MTN’s shares as “buy”, eight as a “hold” and three as a “sell”. JPMorgan, for example, advises buying, with a target of R258.

This is despite the fact that MTN is facing other headwinds from Nigeria, which have not been positive for the company.

Nigerians, furious about the wave of xenophobic attacks in South Africa against people from other African countries, have threatened to boycott South African companies operating there, of which MTN is the most visible.

MTN trades at a price-toearnings multiple of 15, cheaper than Vodacom’s 16.6.

Analysts seem less positive on Vodacom’s pricier stock. Only two rate it a buy, nine a hold and seven a sell, according to Bloomberg figures.

In South Africa, MTN faces intense pressure, where it has been cutting costs and exploring potential acquisitions as it revenue shrinks.

MTN trails Vodacom in market share at home though its customer numbers remained stable at 28 million and its revenue from data grew 22%. By contrast, Vodacom has 32.6 million subscribers.

Slashing costs is the main response.

MTN said in a statement its South African operation “continues to focus on cost containment initiatives and optimising its operating model”. — Bloomberg and staff reporter