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Poor corporate governance beclouds MTN’s listing



MTN Nigeria secures approval to cancel 7.5bn unissued shares


It may have become a ‘one week, one trouble’ affair for the largest telecommunications firm in Africa, MTN which just listed on the Nigerian Stock Exchange seemingly to enable more Nigerians partake in the ownership of the money-minting company.

Barely few days after the speculation of the firm being investigated by the apex regulator of the Capital Market, the Securities And Exchange Commission, SEC(though this was denied), the Economic And Financial Crimes Commission has also swooped in on the firm to carry out a more through scrutiny on the firm’s processes of listing of its 20.345billion shares on the Premium Board of the Nigerian Stock Exchange (NSE).

This seems to add to the many headaches of the company which had also just signed a seven-year 200 billion naira medium term facility with a consortium of seven mostly local banks. The affected lenders are Access Bank, GT Bank, Zenith Bank, Fidelity Bank, First City Monument Bank, United Bank for Africa and First Bank of Nigeria Limited.

According to Bloomberg, the international news platform, EFCC stormed the head office of MTN in Lagos on Friday requesting responses to certain suspicious information related to its listing on the NSE on May 16, 2019.

Before now, MTN had reached a resolution to pay a N330 billion fine placed on it by the Nigerian Communications Commission (NCC) on account of its failure to disconnect improperly registered SIM cards within regulation time.

Also, Nigeria’s Central Bank, in August 2018, ordered MTN and four banks to bring back $8.1 billion into the country that it said the telecoms company had illegally repatriated abroad, and in breach of extant foreign exchange regulations. This challenge may have been settled in December when the company agreed to send back $53 million while also clearing itself of any wrongdoing.

Similarly, MTN is still trying to extricate itself from a Federal Government order insisting that telecommunications firm, must pay the $2 billion tax penalty slammed on it by the office of the Attorney-General of the Federation.

With this barrage of alleged breaches, industry analysts fear that underlying the situation may be the reality that MTN’s management team may be prone to circumventing rules even as the reported failings tend to be hinged on a generally poor corporate governance environment within the firm. Whereas the company has not been directly prosecuted over any of these alleged breaches, there appears to be enough doubts already about its ability to do things that will not raise the market community’s suspicions over its’ operational practices ever since the telecoms giant was established in Nigeria in 2001.

Indeed, one such expression of doubt that has stubbornly refused to go away at the moment, and which became much more obvious after its recent listing is that many people appear not to trust the MTN management’s position on its current listing exercise despite its being defended by the Nigerian Stock Exchange that it’s listing process was transparent. All these may have pulled down the stock price of the company for the first time after listing by N6.04 from N146.4 on Thursday May 23, 2019 to close at N140.00 per share on Friday May 24, 2019. Efforts to reach the EFCC to shed more light on its reported raid proved abortive as Wilson Uwujaren, its spokesperson did not pick his calls or respond to text messages sent to his phone.

At the other end also, Funso Aina, MTN’s spokesman, equally failed to respond to BH calls and text messages as at press time.

Investors’ concerns

Grave controversy trailed the listing of MTN Nigeria Communications Plc shares on the Nigerian Stock Exchange (NSE) at the share price of N90.00 per share. Not long after the company listed a total of 20.34billion of its shares on the bourse, shareholders, stockbrokers and other stakeholders became enraged by what they saw as the seemingly limited number of shares on offer.

Myriad of accusations were directed at the management of MTN and the NSE alleging unapproved concessions and waivers to MTN.

Investors  were dismayed to see that only about 5,541,4 00 million shares were released for trading from about 700 existing shareholders of the firm who held strongly to their holdings on the first day of trading, leaving other investors to scramble for the few units that were released to be traded. However, the volume of shares that exchanged hands on Friday May 17, 2019, the second trading day after its listing, increased to 48.358million shares at N108.90 per share.  The volume of shares and number of trades have however been rising since the first listing day.

Listing lifts market, but controversy persists


Despite serious misgivings that still trail the listing of  MTN Nigeria Communications Plc shares on the Premium Board of the Nigerian Stock Exchange (NSE), that singular exercise which took place on Thursday  May 16, 2019 has significantly lifted the equities market.

The market which had remained weak since the beginning of the year felt liberated  when the largest telecommunications firm in Africa listed 20.34billion shares at the price of N90.00 per share even as it was valued on the listing day at N1.831trillion. From Thursday May 16, 2019, when the big company entered the market to Friday May 24, 2019 the major index, the All share Index ASI, which measures how well the market is performing had already jumped 8.5% while the market capitalization is up 27% from N10.626trillion on Wednesday May 16, 2019 to N13.601 trillion on Friday May 24, 2019.  BH investigations show that the equities market has in fact turned from the negative position to some impressive performer. BH observed that MTN’s listing has turned around the market from a negative position to 1.7 per cent year- to-date.  Investors in MTN stock which have remained on an upswing have gained 55 per cent (N50.00) per share in just one week.

Analysts believe the positive impact of MTN’s listing on the market has been massive and has lifted it out from the negative region to an unprecedented height in recent times. Some market observers also acknowledged the rise in daily volumes and value.

‘’The impact of the listing of the telecoms giant has been massive. It lifted the market from decline into serious appreciation. Now an average daily value has increased from N3billion up to N10billion daily value. In fact, the listing of MTN has deepened the market,’’ says David Adonri of High Cap Securities Limited.

However, there have been subtle doubt as to whether the market lift would be sustained and not just be a flash in the pan. Industry observers appear to be heaping the blame on the weak market situation or the weak fundamentals of the economy.

Whereas it is difficult to predict with certainty the direction of the market, analysts believe that the sudden market appreciation may not be sustainable given the vagaries of the unstable macro- economic environment.

Already BH research reveals that the growth which has been noticed after the listing of MTN shares has not been holistic and is probably not driven by strong market fundamentals. A reflection of the partial effect of the giant telecoms listing is clearly noticed in the slow or mixed performance of the sectoral indices.

While both major indexes have significantly moved higher, the sectoral indices are in fact still struggling. For instance, the NSE Banking index, an index of the most active and arguably liquid sector of the market fell from 355.67 on Thursday May 16, 2019 by -0.02 per cent to 347.85 points on Friday May 24, 2019.

The NSE Pension Premium lost -0.005 percent from 1,066.87 to 1,046.31. For the NSE ASEM Index investors in that sector are not happy that it also slipped by -0.20 from 806.91 to 805.27 points.

Similarly, the NSE Consumer Goods Index eased by -3 per cent from 642.05 to 622.76 points, while NSE Oil and Gas Index also dropped -1.2 per cent from 259.82 to 257.07 basis points. In the period of review, BH investigations also showed that while the industrial index surged, the Insurance sub sector also went up 1.5 per cent within one week after the listing of MTN shares

There is also a clear reflection of the weak market performance on the individual stocks in the market. Details show that Zenith Bank fell by 2.81 per cent, UBA lost -4.16 per cent, Access Bank lost 10.7 per cent, Seplat was flat, Guinness Nigeria Plc dropped 2.9 per cent and NBPLC depreciated by 7.2 per cent. On the contrary, Dangote Cement gained 13.4 percent while FBHN chalked up 0.3 per cent.

However, many industry analysts believe that what has boosted the market was the strong brand equity of MTN in addition to its strong fundamentals.

Managing Director/ CEO, Compass Investment told Business Hallmark that though the market slipped today by 1.8 per cent, it needed more companies like MTN to list and boost the market.

Those who invested in the company’s stock price are already smiling to the banks as its shares price has already appreciated by 55 per cent in one week from N90.00 to N140 per share.  With the price of MTN’s stock price leaping higher – which may  favour an IPO (Initial Public Offering) if it comes anytime  soon – its first quarter unaudited results reveals that total revenue rose 13.3 per cent from N249billion in 2018 to N282 billion in the first quarter of 2019.

MTN also increased its operating income in the review period by 22 per cent from N123billion to 150 billion in 2019.

Its year on year EBITDA also jumped 44 per cent from N104billion in 2018 to N150billion in Q1 2019.


As the largest telecommunications operator in Nigeria, MTN boasts of 60.3million subscribers’, 20.4million active data users, and 50 per cent of the telecoms market revenue.

Though investors scrambled for the few units of shares that were floated, many of them are still patiently waiting for the company’s IPO which will come at a future date.

With a record performance of N453.1 billion Earnings Before Interest, Taxation, Depreciation And Amortization in its 2018 full year report, MTN Nigeria is certainly looking poised to increase its growth trajectory on a sustainable basis.

To its credit, the company achieved this record performance despite the challenges it has had with the Nigerian government which almost snuffed life out the giant telecoms firm that doubles as the biggest of its type on the African continent.

Breaking down the numbers, service revenues increased by 17.2 per cent, data revenue also rose by 39.3 per cent, digital revenue decreased by 58.1 percent and Fintech revenue increased by 32.7 per cent.

It also showed an EBITDA margin increase by 4.5 per cent to a total 43.6 per cent ( excluding CBN Payment).

Many stakeholders believe the company has in fact scored a great point that will further attract investors and make its shares eventually.

To be sure, industry analysts’ prediction of the impact of MTN’ s listing in the market has come to pass as the market has been nudged to higher height.

The company is the biggest telecoms firm in Nigeria, placed against the likes of Glo and 9Mobile.

How sustainable is the market growth induced by MTN?

Looking down the line, economists do not expect any magic from a country with a mono-economy and which is yet to cultivate other sectors enough to grow her economy.

With a dismal growth of 2.1 per cent in q1 2019, the Nigerian economy lost out on meeting the set target of about 3 per cent growth. In a mono-economy that is substantially dependent on the vagaries of the price of crude oil for revenues, not much has been put in place to galvanize productivity in other sectors for significant growth.

Sadly, this is even when the country’s population growth rate is put at above 3 per cent annually alongside a corresponding unemployment rate of 23 per cent. These continue then to defy the Economic Recovery and Growth Plan (ERGP) which industry analysts also doubt is not even being implemented even as it betrays no clear vision.

Both international and domestic investors have also complained about multiple exchange rates and multiple taxation and even higher taxation on tobacco and alcohol that have bruised firms in that sector among others.

Whereas the government under President Buhari believes it has delivered on its three major promises, namely security, tackling corruption and growing the economy, analysts are quick to point out that there are still mounting incidents of escalating acts of aggression by the Islamist sect, Boko Haram, alongside the menace of the Fulani herdsmen which has barely been tamed.

In addition, they observe, the economy still lacks the deserved propulsion to grow evenly while the anti- corruption war is just a surface move. There is therefore strong discomfort that significant growth cannot really be achieved by firms that are operating in an economy that is barely growing.


Regulators’ intervention as temporary relief

One of the strong allegations that has been raised in the saga by aggrieved would-be investors was that MTN Nigeria did not meet with the statutory free float requirement of a minimum of N40 billion. While the Securities And Exchange Commission (SEC) denied that it is investigating the process of MTN’s listing, the NSE quickly came to the firm’s defense through a statement that affirmed that MTN Nigeria had not only met the free float requirement, but also adding that, in fact, the free float of MTN Nigeria at the time of listing was in excess of N90 billion.

NSE explained in the statement signed by its spokesmen, Olumide Orojimi and Media Relations Officer, Joseph Kadiri, that the Exchange’s rules for listing on the Premium Board (which is the board in which MTN Nigeria is listed) requires a Company to have a minimum free float of twenty percent of its issued share capital or that the value of its free float is equal to or above N40 billion on the date the Exchange receives the Issuer’s application to list.

“According to Rulebook of The Exchange, free float is defined as the number of shares that an Issuer has outstanding and available to be traded on The Exchange. It includes all shares held by the investing public, and excludes shares held directly or indirectly by promoters, directors and their close relatives; strategic investors holding five percent (5%) and above of the issued share capital; or government”.

NSE further clarified that MTN Nigeria Listed by Introduction and that this route was different from doing an Initial Public offering.

“Where a company lists following an Initial Public Offering, shares are expected to be available for trading on the day of listing.  In a Listing by Introduction, however, no shares have been offered for subscription by the company prior to listing.  Thus, without any intervention, it is possible that there will be no shares available for trading on the listing date. Indeed, currently, no rule of The Exchange compels shareholders in a listed company to tender their shares for trading’’, NSE said.

And shedding more light on the subject, the NSE statement added that: “there appears to be a misconception that a concession was given to MTN Nigeria on the minimum free float required for companies listed on The Exchange’’.

All of these had been triggered by the fact that the stock gained 10 per cent in the first few seconds after it was listed, rising from N90 per share to N99.00 per share. Further, it also gained 46.3 per cent in four trading days (to close at N131.70). This phenomenal surge then provoked investors to become mad at the company, and they went on to accuse MTN of deliberately keeping their floatation size in such low volumes as to deny them opportunities of becoming part owners of the juicy firm, despite going through the motions of formally listing its shares on NSE.

Challenges that could get messier

Overall, and perhaps even beyond the grouse of angry investors seeking a piece of the juicy pie, the recent EFCC raid seems to suggest that MTN is still battling to save its life from the numerous challenges facing it.

When it is placed side by side the fact that listing on the NSE was one of the conditions reached in the resolution of a N330 billion fine placed on MTN by the Nigerian Communications Commission (NCC) for its inability to disconnect improperly registered SIM cards, some analysts are inclined to believe that the last may not have been heard of the saga of the troubled South African-originating telecommunications giant. And they may have a point.


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