South Africa: Under Ralph Mupita, MTN has dominated the stock market

By Quentin Velluet
Posted on Friday, 20 August 2021 09:49

Ralph Mupita in London in May 2019. © Chris Ratcliffe/Bloomberg via Getty Images

MTN is being celebrated by the markets, one year after Ralph Mupita - who is known for speaking the language of investors - took office.

The Johannesburg-based giant had not experienced such a surge for several years. The share price for MTN on Africa’s main stock exchange has been steadily improving ever since Mupita became its CEO in August 2020. After only one year in office, the new Zimbabwean boss has managed to achieve what his predecessor, Rob Shuter, failed to do in four years.

With 277 million customers in in 21 markets in Africa and the Middle East, the group’s shares are now approaching R134 (€7.65), up 103% year-on-year and 124% since the start of 2021.

This despite the recent announcement that MTN’s bid for a private telecom operator’s license in Ethiopia, which could have represented a huge growth opportunity for the group, has been definitively abandoned.

Solid results

Moreover Mupita on 12 August presented solid results. The operator recorded more than R86.7bn (nearly €5bn) in revenues for the first six months of 2021, an increase of 3%. Debt is also falling, to R139.5bn at the end of June 2021, compared to R165bn the previous year.

Its gross operating profit (excluding Covid-19-related donations) increased by 24.1%, compared to the end of 2020. It was driven by revenues from services – including its mobile money platform MoMo – which saw its transaction value jump by 88%, compared to the same period in 2020. Transactions on the platform, which has nearly 49 million active users, came to a total of $115.2bn.

In the days following these announcements, the pan-African company offered new prospects for diversification, particularly in insurance. MTN’s partnership with South African insurer Sanlam – which began in July 2019 – has deepened.

A joint venture will fully integrate Sanlam’s insurance and investment options into MTN’s fintech offering. The operation provides an opportunity for both companies to address a portfolio of about 100 million new customers.

Leaving the Middle East at all costs

Although these positive operational results are reassuring to investors, MTN still needs to reduce its risk exposure. Its initial desire to move into Addis Ababa would also have exposed it to more uncertainty, given the country’s political instability. However, MTN seems to want to reassure the financial markets at all costs, by distancing itself from these uncertain environments.

…how can the group’s withdrawal from Afghanistan […] be organised in a proper manner?

This is the case with its subsidiary in Syria, from which the operator has announced an outright withdrawal “given the actions and regulatory requirements that make operating in the market untenable.” MTN made this announcement while presenting its interim results for the first half of 2021, which were made public in August.

“We reserve the right to seek redress through international legal proceedings given the Syrian authorities’ actions, which have left us with no choice but to withdraw,” the company said.

Getting rid of the Middle Eastern subsidiaries is even more of a priority due to the insecurity and tense political landscape that has dominated the region ever since an ultraconservative president was elected in Iran (where MTN owns 49% of Irancell) and the Taliban reinstalled in Afghanistan, where MTN has been active since 2006. Not to mention Yemen, which is mired in a simmering conflict between militias backed by Iran and Saudi Arabia, where MTN has been present since 2001.

US dispute almost settled

Even though Mupita likes to point out that the dividends – frozen in principle until March 2022 – should amount to at least 260 cents per share, other obstacles remain. For instance, how can the group’s withdrawal from Afghanistan, from where a number of Westerners left in a hurry after Kabul’s takeover in mid-August, be organised in a proper manner?

Although the group won in a court ruling in Washington, D.C., which states that [the court] lacks jurisdiction over a dispute involving an alleged violation of US anti-terrorism law for supporting the Taliban in Afghanistan between 2006 and 2014, the US plaintiffs still have a right to object.

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