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Consolidating telecoms revolution with public sale of shares

By Adeyemi Adepetun
15 December 2021   |   4:20 am
Telecommunications service, just as infrastructure, plays an important role in the economic, political and social development of any country.

Karl Toriola

Telecommunications service, just as infrastructure, plays an important role in the economic, political and social development of any country.
Like any infrastructure, it is expected to stimulate economic growth and development. It has been shown that telecommunications services are used in connection with a wide range of economic production and distribution activities, delivery of social services, and government administration.
Today, across the globe, telecommunication is now widely considered a strategic investment to maintain and develop competitive advantage at all levels – national, regional and firm. It constitutes the core of, and provides the infrastructure for the information economy as a whole. For instance, telecommunications service is the bedrock upon which information technology and its derivatives such as electronic banking and commerce are built.
Telecommunications facilitate market entry, improve customer services, reduce costs, and increase productivity. It is an integral part of financial services, commodities markets, media, transportation and the travel industry and provides vital links among manufacturers, wholesalers and retailers.

Indeed, with the world now more connected than before, enabled by the power of telecommunications, this revolution, which has spread nationwide, is in its 20th year in Nigeria. It has enabled many innovations, and brought up many investors, among which is MTN. 
After several years of hold on the Nigerian arm, the South African firm decided to reduce its 78 per cent hold on the Nigerian arm to 65 per cent. It offered 575 million ordinary shares to the Nigerian populace.
The offering of 575m ordinary shares
While 90 per cent of this public offer of 575 million shares in Nigeria went to retail investors, the telecoms firm has allowed individual investors to have a stake in one of the country’s most profitable businesses at an attractive entry price.
The public offer formed part of MTN’s way of broadening its local shareholder base, consolidating on the telecoms revolution in Nigeria, which it actually pioneered, thus providing the opportunity for many Nigerians as possible to become shareholders and share in the growth and value which the business creates.
MTN’s journey in Nigeria began in 2001 with a core group of Nigerian investors, who provided the seed funding and who have been partners over the years, watching the business grow and thrive. In this 20th year of its operation in Nigeria, in recognition of the part Nigerians have played in the success story of the company in the country, MTN has expanded its ownership structure and invited Nigerians in every part of the country to join it on the next phase of its journey.
MTN Nigeria’s public offer, which is the first to be delivered digitally in Nigeria, was sold to retail investors at N169 per share. The offer was the first from MTN since the 2019 listing on the Nigeria Exchange Limited (NGX) and the company seeks to take advantage of digital integration to ensure substantial participation from investors across Africa’s most populous nation.
The offer opened at 8:00 am on December 1, 2021, closed at 5:00 pm on December 14, with a minimum subscription of 20 shares and lots of 20 shares thereafter. Subscribers were also offered one free share for every 20 shares subscribed for. 
Going by the current market price of MTN Nigeria at about N175 per share, the N169 per share being offered to retail investors came at a discount. The telecoms firm made it possible for average Nigerians to own shares in it with as low as N3, 380, the price of 20 units of its shares at N169 per share.
MTN acknowledges the massive support and patronage it has received from Nigerians over the past 20 years, which was the reason it expanded participation of Nigerians in the shareholding.
As MTN Nigeria CEO Karl Toriola puts it, “We are successful because of our customers. People who queued at the very early days of GSM to spend N20, 000 to buy SIM cards because it was a scarce commodity then, people who started making their calls under the umbrella, which we called call centres but gradually started to own their own mobile phones as the economy and GDP of this country improved and they started migrating from the small voice phone to now smartphones.”

From analysts point of view
Investment analysts have described the MTN public offer of 575 million shares as a “good buy” for investors seeking higher returns – in the form of capital appreciation and dividend yield.
Research analysts at Coronation Asset Management believe MTN Nigeria’s offer represents excellent value for investors. At the offer price, they said the shares traded at a Price/Earnings (PE) ratio of 11.6x their forecast of 2021 Profits After Tax, and a PE of just 9.1x their forecasts of 2022 Profits After Tax. The historic dividend yield for the stock, according to Coronation, is 5.5 per cent and is expected to increase.
Wale Okunrinboye, an investment banker, described MTN as a company that has grown astronomically since it started in 2001 and is dominating the telecoms space.

“Its demand is inelastic as people always need to communicate and so the product will always be in demand. Also, you don’t have many players going into that space because the entry barriers are quite large,” Okunrinboye said during a Nairametrics Clubhouse show,” On The Money” series.

Implication and growth prospects
Okunrinboye said: “Also, in terms of growth prospects, besides the increasing Nigerian population, there is also the increasing data consumption. Going forward, data consumption will increase even more as we go more digital. The revenue from data consumption continues to increase quarter after quarter.”
The implication of the move by MTN to allow retail investors to own a share of its Nigerian entity is positive not just for the shares of the telecoms firm but also for the entire stock market, according to a poll of 10 market analysts.
According to the market analysts, the public offer will improve the liquidity of MTN shares on Nigerian Exchange Limited because diverse investors will hold it. The capital market is also expected to benefit from the improved liquidity on the stock, given it would be in the hands of many investors, thus aiding price discovery.
The liquidity of a market is one of the catalysts that attract foreign investors to an equities market like Nigeria’s – the ability to enter into the market and leave whenever they deem fit.
“We have always been clear about the future of the market – retail investors, wealth creation and capturing the larger demography of the Nigerian population leveraging technology,” Chief Executive Officer, Nigerian Exchange Limited, Temi Popoola, said at the recent Investor Forum by MTN to provide insights into MTN Nigeria’s investment case, the public offer and business outlook.
“I encourage you to encourage everybody to key into this MTNN offer – it’s a transaction that will revive the market,” Popoola said.
As reflected in its CAPEX investment in the Nigerian franchise, MTN Group is betting on Nigeria as one of its key markets.

The company, which extended its chief operating officer Jens Schulte-Bockum’s contract by two years to 2024, said it was targeting 2021 capital expenditure of ZAR31.1 billion, up from a prior outlook of ZAR14.8 billion.
Having listed its Nigerian business in Lagos two years ago, MTN has become the second-largest stock by market capitalisation on the Nigerian Exchange Limited.
MTN’s core profit jumped 24.1 per cent in the three months to September on robust demand for data and digital financial services. It added 0.2 million subscribers during the quarter, taking the total to 271.9 million.
Nigeria is MTN’s most profitable market, generating 32 per cent (R57.9 million) of revenues; MTN South Africa generates about 25 per cent (45.4 million) of revenues. Nigeria’s revenues for 2020 were up 14.6 per cent.
The MTN Group also allocated 38 per cent (12.64) of all CAPEX expenditure in FY 2020 to its Nigerian operations. Nigeria generates a humongous amount of cash for MTN Group, with cash generated at about 37 per
cent (ZAR17.23 billion), and also took on 37 per cent (ZAR17.23 billion) of all reported Group debt.
MTN is in the process of a strategic remake, tagged the “Ambition 2025”, that will see it focus squarely on Africa. The company wants to be the leading digital solution provider to drive African progress by 2025. This strategy will see the telco pivot from a “product” to a “platform” player.