Stock market experts reassure local investors amid MTN-Nigeria woes

Market experts have reassured share holding investors in Crystal Telecom which owns a 20 per cent stake in MTN-Rwanda, that they will not be affected by the ongoing turbulence in the Nigerian operations of Africa’s largest mobile operator, MTN-Group.
Crystal Telecom workers sell shares in Remera, Kigali, earlier this year. (File)
Crystal Telecom workers sell shares in Remera, Kigali, earlier this year. (File)

Market experts have reassured share holding investors in Crystal Telecom which owns a 20 per cent stake in MTN-Rwanda, that they will not be affected by the ongoing turbulence in the Nigerian operations of Africa’s largest mobile operator, MTN-Group.

“I don’t see any spill-overs from Nigeria affecting investors in Rwanda,” Celestin Rwabukumba, the chief executive officer of the Rwanda Stock Exchange (RSE), said yesterday.

Shehzad Noordally, the chief executive of CDH Capital, also said it is unlikely that MTN-Group’s woes in Nigeria will have any effect on stock holders in Rwanda.

“It’s farfetched at the moment; I don’t think effects will be felt by investors here,” Noordally said by telephone, yesterday.

Both Rwabukumba and Noordally believe that operations of MTN Group in Nigeria will weather through the storm without having to burden its subsidiaries in other countries.

Crystal Telecom, a wholly owned subsidiary of Crystal Ventures, holds a 20 percent equity stake in MTN-Rwanda, which it manages on behalf of shareholders who bought into the firm after its successful public offer, mid this year.

The remaining 80 per cent of MTN-Rwanda is held by MTN Group Limited, the largest African mobile telecommunications company with operations in over twenty countries in Africa and the Middle East.

The $5 billion fine

Last month, MTN-Nigeria was slapped a record $5.2 billion (about Rwf3.8 trillion) fine after the telecom giant failed to adhere to the country’s sim-card registration laws that required the operator to switch off more than five million unregistered users before a September deadline.

The regulatory breach saw Nigerian authorities demanding that MTN pays the equivalent of $1,005 for each of the unregistered customers a bill that would total to $5.2 billion.

Effects of the fine were almost instant on the market and saw MTN shares on the Johannesburg stock exchange lose value by as much as 12 per cent, which market analysts noted was the biggest one-day drop for a listed company, since 1998.

The MTN share value is yet to recover since then as the matter takes centre-stage coverage in the financial market press; similar effects had been anticipated on the RSE, affecting the value of crystal telecom shares on the bourse.

“It’s not the case, so far, the crystal telecom share value is currently stable and if any reaction, it is not in response to the Nigerian woes,” said Rwabukumba.

As of yesterday, the value of Crystal telecom shares was stable on the bourse, shifting between Rwf104 and Rwf105, which was within five points’ gain this week after closing last month’s trading at Rwf100 per share.

Shortly after its first trading in July, the value of Crystal Telecom shares surged almost 40 per cent to trade at Rwf145 against the IPO set price of Rwf105; that movement has since calmed as the shares go through what market analysts describe as a ‘price discovery process.’

Backstage negotiations

Although MTN’s woes in Nigeria are not expected to directly disrupt its operations elsewhere, market analysts also believe that heavy turbulence in MTN’s largest market, Nigeria, where it has more than 60 million subscribers could eventually have negative effects on the brand.

The saga has already had an impact on the giant telecom’s top leadership with the resignation over the weekend of its Chief Executive Sifiso Dabengwa, who said he took responsibility for the heavy Nigerian fine.

It has since been announced that Dabengwa will be replaced, on temporary basis, of up to six months, by former chief executive and Chairman Phuthuma Nhleko as the company searches for a permanent successor.

But top on Nhleko’s to-do list may not be finding a new chief executive, instead, it’s how to negotiate a way out of the deadlock with the Nigerian regulators and calm the storm that threatens to sway Africa’s telecom giant off its feet as the continent’s market leader.

So far, according to reports in the international financial press, Nhleko is already leading backstage negotiations that could see Nigerian authorities softening their stance on MTN by reducing the fine which has, according to analysts, wiped at least 16 per cent off the firm’s value.

The news of a possible negotiation with Nigerian authorities helped calm the markets this week with MTN shares gaining value in Monday’s trading, to reverse earlier losses.

However, the alleged negotiation could all be speculation as no official of the Nigerian Communications Commission has been quoted on record acknowledging the new development.

This leaves MTN’s crisis leader with a November 16 (next Monday) deadline to steer the telecom out of trouble by making the payment, revised or not.

A fine of $5.2 billion could be a monstrous figure but to some observers, it’s not insurmountable for MTN which has more than 230 million customers in 22 countries, with 62 million of those in Nigeria alone making it the firm’s biggest market.

Valued at over $20 billion as of this week (value after Nigerian effect) MTN could afford to pay the $5.2 bilion fine, which could taper the company profits and investor dividends, in the medium run, but not enough to cripple the giant.

editorial@newtimes.co.rw

 

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