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Johannesburg - MTN’s [JSE:MTN] six-month battle with Nigerian authorities over payment of a record fine has cost the company its seven-year status as Africa’s highest valued telecommunications operator to rival Vodacom [JSE:VOD] Group.
MTN’s market capitalisation was R244bn at the market close in Johannesburg on Wednesday, trailing Vodacom’s R249bn.
This year marks the first time the rankings have been reversed since Vodacom, a unit of Newbury, England-based Vodafone Group, first sold shares in an initial public offering in 2009.
MTN’s shares have declined 31% since October 26, when the record $5.2bn Nigeria fine was made public.
While the penalty was later reduced to $3.9bn, the South African company has yet to agree to a payment. Chief executive officer Sifiso Dabengwa resigned in November, to be replaced on a temporary basis by his predecessor, Phuthuma Nhleko. Vodacom has gained 12% in the same period.
“The problem is all the uncertainties hanging over MTN’s head,” Irnest Kaplan, a telecommunications analyst at Vunani Securities, said by phone from Johannesburg. \ “The market needs to know who the next CEO will be, but most importantly the market needs to be updated on the fine negotiations and if there has been any progress. Markets do not like uncertainty.”
Both MTN and Vodacom are relying on growth in smartphone use in international markets amid weaker sales in South Africa, where tighter regulation and competitive pricing have hurt both companies.
MTN, which had 229 million customers in 22 countries at the end of March, had revenue of R146bn and net income of about R20bn in 2015.
Vodacom probably generated R82bn in sales in the year through March, according to the average forecast of 14 analysts surveyed by Bloomberg, and net income of R13bn. Vodacom reports full-year earnings on Monday.
Vodacom briefly overtook MTN for the first time on April 5, before MTN retook the top spot on April 8. Vodacom reclaimed the lead on May 6. MTN shares declined 1.3% on Wednesday, their seventh fall in eight trading sessions. Vodacom rose 0.5%.
“I think Vodacom could be fully valued at current prices and MTN could be viewed as cheap,” Peter Takaendesa, a money-manager at Mergence Investment Managers in Cape Town, said by phone. “MTN’s earnings were double that of Vodacom’s earnings and I think the fine and management uncertainties are strongly playing into current evaluations."
