MTN Shares IPO 2021, Should I Buy or Not?

Lately, there has been a buzz everywhere about the MTN share offer.
Since Dec. 1st, 2021, it was announced publicly, I’ve got many of my friends and associates asking me if it is good to buy.

Before, I delve into if you should buy or not. I would like to give a background story.

So MTN has decided to sell 575m (representing 2.82% of the entire issued and fully paid-up Ordinary Shares of MTN Nigeria) of its shares to retail investors at a discount price of ₦169 per share.

Retail investors can only buy the shares in multiples of the 20s and will get 1 free share for every 20 shares bought with a condition that you have to hold the shares for 1year without selling. The free shares are capped at 250.

A good thing to know is that you can buy the shares online.

The offer is set to close on Tuesday, 14 December 2021.

After the announcement on Monday 1st 2021, MTN Nigeria’s share price fell from N187 to a five-week low of ₦167, this could have been as a result of some investors selling off to buy back the same shares at a discounted price.

As at the time of writing this article on Monday, 13th December 2021, the price has risen back to ₦174.

MTN has disclosed that if the 575 million ordinary shares are oversubscribed before the closing date, which will most likely happen as they are seriously publicizing the offer through every means possible. If it happens, another 15%, which translates to 86 million more shares, would be offered to the public.

𝐖𝐡𝐲 𝐢𝐬 𝐌𝐓𝐍 𝐒𝐞𝐥𝐥𝐢𝐧𝐠 𝐇𝐞𝐫 𝐒𝐡𝐚𝐫𝐞𝐬 𝐚𝐭 𝐚 𝐃𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐏𝐫𝐢𝐜𝐞?

MTN Nigeria is owned largely by MTN Group; the South African Giants. The discount offer is MTN Group’s plan to reduce its percentage ownership of MTN Nigeria over time. This current offer will drive down the Group’s ownership from about 79% to 65%. This move is also part of the Group’s plan to enlarge its market capacity to other African countries including Uganda and Zambia.

𝐑𝐞𝐚𝐬𝐨𝐧 𝐖𝐡𝐲 𝐢𝐭 𝐌𝐚𝐲 𝐁𝐞 𝐆𝐨𝐨𝐝 𝐚 𝐁𝐮𝐲 ?

MTN is the biggest telecommunication company in Nigeria, owning about 40% of the Telco market share. It is the second most valuable company based on market capitalization (₦3.87 trillion as at 1 December 2021) after Dangote and also the highest listed company by revenue (c. ₦ 1.35 trillion revenue as at 31 December 2020) on the Nigerian Exchange Limited.

MTN is also a profitable company and one of the very few companies that pays up to 100bn in dividends yearly.

The demand for MTN services will likely keep on increasing as Nigeria population increases.

In November 2021, MTN alongside Airtel was granted approval by CBN to operate as a Payment Service Bank – Mobile Money. This is a service that is already in existence in Eastern Africa indicates that there is a potential of it working in Nigeria as we have over 30 million adults that are unbanked.

𝐑𝐞𝐚𝐬𝐨𝐧 𝐖𝐡𝐲 𝐢𝐭 𝐌𝐚𝐲 𝐍𝐨𝐭 𝐁𝐞 𝐆𝐨𝐨𝐝 𝐚 𝐁𝐮𝐲?

It might interest you to know that NCC imposed a fine of ₦1.03tr on MTN in 2015 for failing to disconnect 5.2 million unregistered customers. The fine was later negotiated to ₦330bn with a condition that MTN must join NSE (Nigeria Stock Exchange) as at that time. In the heat of the NCC saga, the former MTN CEO, Sifiso Dabengwa had to step down for Phuthuma Nhleko who is now the current CEO of the company. The issue was quite big that even the Federal Government said the unregistered SIMS were being used by Boko Haram to communicate.

Another thing to note is that in August 2018, the CBN fined 4 banks for assisting MTN to repatriate $8.1bn from dividends accrued out of Nigeria between 2007 and 2015.

The telecommunication giant has also faced a tussle of evading tax with the Attorney General of the federation.

As part of a way to settling the long-running disputes with the Nigerian government, MTN agreed to list on the Nigerian Stock Exchange in May 2019. The above information is a pointer that anything can happen in the future between MTN and Federal Government that could impact the share price.

Another reason why you might want to consider not buying the MTN shares is that the economy of Nigeria is unstable and very unpredictable especially and might turn out worse in the coming year considering the 2023 election and the talks about fuel subsidy removal.

Also, there is a tendency for the incessant devaluation of Naira to erode the profit that might be made in holding and selling MTN shares. For example, MTN share price in Dec 2020 was ₦151, now it is ₦174 which is a paltry 15% increase. Meanwhile Naira has decreased by 22% in value (₦470/$ to ₦570/$) within the same period. So, supposed net profit is now a net loss with relation to the dollar if you had bought MTN shares Dec. 2020.

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