Africa’s biggest mobile operator, MTN, yesterday received the green light to list on the Nigerian unit on the Nigerian Stock Exchange today to take the value of its biggest market to 1.8 trillion nairas (R71bn).
The group lists at a hefty discount as a result of unresolved regulatory disputes with Nigerian authorities and unpaid taxes.
However, the news of the Lagos listing lifted the group share price on the JSE 1.22 percent higher yesterday to close at R99.49, taking its total market cap to R187.13bn.
“The outstanding matter relating to the disputed claim by the Attorney General of the Federal (AFG) Government of Nigeria has created uncertainty over the valuation of MTN Nigeria,” the company said.
The AFG is claiming $2 billion in unpaid taxes against MTN for over a decade. MTN said the listing price of its Nigerian stock had been set at 90 nairas and no new shares would be issued to the public. It said existing investors could offer their shares to the public after the listing.
“MTN Nigeria’s listing deepens the equity capital markets base of the country, which makes it possible to broaden the shareholder base of MTN Nigeria over time,” the company said.
Peter Takaendesa, a portfolio manager at Cape Town based Mergence Investment Managers said MTN Nigeria’s valuation was 30 percent lower owing the ongoing tax dispute.
“The ongoing tax dispute with the Nigeria Attorney General and weaker Nigeria market conditions have likely resulted in this unusual type of listing shares as the uncertainty caused by the former makes it difficult to assign a clean fair value estimate on MTN Nigeria,” Takaendesa said.
“The proposed introductory listing price of 90 nairas per share materially undervalues the business if the dispute with the Attorney General does not result in material fines or payments by MTN Nigeria.”
Takaendesa said despite the problems, MTN Nigeria remained an attractive asset operationally with growing revenue and double digits profits.
He said the unit, which added 2.1 million active mobile subscribers in the first quarter, already had a 50 percent market share in Nigeria and was highly cash generative.
“Unfortunately the unpredictable regulatory developments over the past few years and weaker economic conditions have diluted investor interest in the Nigeria telecoms market,” Takaendesa said.
We expect investor interest to return post recent Nigeria national elections, strong recovery in telecoms growth and as the economy continues to improve.” The listing of the Nigerian unit is part of negotiations relating to the 2015 $5.2bn fine for the unregistered Sim cards.
Takaendesa said he expected MTN to offer some of its shares to the public over the next 12 to 18 months to increase the liquidity of the shares in Nigeria and to address some of the local regulatory concerns.
Ofentse Dazela the director of pricing research at Africa Analysis said the listing underscored MTN’s commitment to Nigeria despite disputes with authorities.
Dazela said while the market expected MTN to drift away from Nigeria because of the hostile regulatory environment, the group decided to stay as it saw the country as an important market.
“By taking this step towards increasing local ownership of the company and building equity capital markets in Nigeria, MTN group is also attempting to lessen regulatory scrutiny on this subsidiary, as increased number of Nigerians with vested interests in the operator would want to defend the company from perceived unwarranted attacks from the authorities in the future,” Dazela said.