A few years back, the question of where MTN would pop up next could have been a popular parlour game in the swish offices of corporate financiers seeking a slice of the expansion action.
Rob Shuter, MTN’s CEO since April, says he hasn’t put the brakes on the company’s expansion strategy, even as he goes about fixing its flailing operations in SA and Nigeria.
Specifically, he flags Angola and Ethiopia as two countries MTN is keen on entering.
"We’ve always kept a very close watching brief on those two markets, and if something emerged there, there would be good opportunities for MTN. It would be hotly contested."
Within a year, Angola’s political environment has opened up considerably. The new president, João Lourenço, has upended the notoriously corrupt and nepotistic administration of his predecessor, José Eduardo dos Santos, sacking Dos Santos’s daughter as head of the state oil company.
MTN has kept a close eye on Angola and is also looking at Ethiopia
— WHAT IT MEANS
Angola has now announced a public tender for a fourth telecommunications licence.
The state will have a 45% stake in the entity, according to Fitch’s BMI Research, which says suitors will need "robust financial backing" given the significant investments required.
"With an estimated market penetration of 49.4% by year-end 2017, there is considerable mobile market growth potential upon which [fixed-line incumbent] Angola Telecom and a fourth operator can capitalise," BMI says.
Shuter says mergers and acquisitions are also "a possibility" as some larger multinationals might retreat from some markets.
"We have an M&A team and they are scanning these markets. Of course it’s not exactly linear to say ‘when we’ve fixed everything, we can buy something’," since opportunities can come up at any time.
If it does decide to invest in something new, MTN should have the firepower
to do so.
Ralph Mupita, Shuter’s finance director, says MTN’s free cash flow should start to improve, as it scales back on its capital expenditure programme. In recent times, MTN has been investing about R3bn more per year in its SA network than Vodacom, which Mupita says "was necessary to close the gap on network performance".
This suggests MTN may now have the money for some bigger deals — especially since its debt levels are also falling.
In 2016, MTN’s debt soared 65% to reach R51.9bn — partly because of its spending requirements, as well as the need to repay the Nigerian fine. But with these out of the way, says Mupita, "over time we would like to see group gearing coming down".
"We would ideally like to see, where possible, the [operating companies] taking on their own gearing so that we don’t have as much at the group level."
To find more cash for a big deal — for example, were it to revisit its failed efforts to link up with Bharti Airtel or Reliance Communications in India — MTN could also sell part of its stake in tower management company IHS Holdings.
In June last year, MTN’s stake in IHS was worth a considerable R25bn. This was after MTN swapped its 51% shareholding in Nigeria Tower InterCo for more shares in IHS.
Shuter says this is definitely in MTN’s thoughts.
"It positions us to respond if there is a kind of monetisation event," Shuter says. "Ideally over the medium term we would like to realise some of that investment."
In other words — a deal could be on the horizon.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.