Should MTN list on the Nigerian Stock Exchange?
Africa’s biggest telecoms operator, South Africa‘s MTN Group Ltd., has recently had a few mishaps in Nigeria, its most lucrative market. In February, its headquarters in Abuja was vandalised by protesters, possibly in retaliation for xenophobic attacks on Nigerians in South Africa. Earlier, in 2016, the company suffered its first-ever loss after Nigeria’s telecoms regulator, Nigerian Communications Commission (NCC), slapped down a $5.2 billion fine for its failure to disconnect 4.5 million unregistered customers. The loss temporarily cost MTN its place as Africa’s most valuable telecoms company.
Even before that, in September 2016, Nigerian lawmakers accused the company of illegally repatriating $13.9 billion from Nigeria. The claims sent the stock price crashing. In one particularly painful 18-month window, uncertainty swirled around the future of its Nigerian entity. As a result, the group's share price dropped 40 percent, wiping $10 billion off its value.
MTN eventually reached a deal with the Nigerian authorities to reduce the fine to $1 billion. Subsequently, the company announced its intention to list on the Nigerian Stock Exchange (NSE).
To List?
On the surface, a public listing makes sense given the gains for the different stakeholders. MTN would receive a significant injection of additional capital from new sharehoders, which would improve its liquidity and finance expansion. From a non-financial angle, listing on the NSE could also make the company less of a target for itchy regulators and crucially, potentially reduce local antagonism.
Before the aforementioned record fine imposed by the NCC, MTN had already been fined by the commission for poor service quality. Unsurprisingly, there were calls from Nigerians for stringent punishment for the company – ranging from nationalisation to outright shut down – after the sim registration debacle. Enabling Nigerians access a stake in the company through a local listing would go some way towards generating goodwill within its largest market. Indeed, many Nigerians still perceive the company as a foreign entity which makes enormous profits at the expense of ordinary Nigerians.
The NSE also stands to benefit, especially as it has not fully recovered from its 2008/09 crash. Last year, the NSE All-Share Index was the worst performer among 94 indexes tracked by Bloomberg, at least in dollar terms. A listing of a multibillion-dollar company like MTN would help revitalise the exchange and send a signal to other large private companies. Where MTN goes, other telecom and digital giants may follow. For the investing public, public listing of the company’s stock would present a rare opportunity to invest in a well-managed, profitable business with bright prospects.
Or Not to List?
On the flipside, public listing is trailed by several drawbacks. Publicly listed companies are generally subject to increased regulatory oversight, public disclosure of dealings and accounts, as well as exposure to stock market fluctuations. A listing would require the company to abide by stock exchange rules on disclosure and corporate governance.
In this case, MTN’s longstanding dispute with regulators creates a cloud of uncertainty which could negatively affect its share price. Furthermore, Nigeria’s current chaotic economic situation is not particularly ideal for IPOs, with the country battling its worst economic crisis in decades. Thus, the exposure of publicly listed companies, prevailing economic conditions, and MTN's peculiar regulatory profile combine for an unattractive valuation (for MTN) and represent potential hindrances for the proosed move.
This explains the news that MTN may defer its listing plans, at least until some of these isues are addressed. Given the current state of the economy and the impasse in resolving the company’s issues with regulators, a deferral of the company’s plan to go public might be in the best interest of all stakeholders.
Public Listing by Coercion?
Another salient issue is that the decision to go public seems to have come at the behest of Nigerian authorities. Prior to the agreement with the Nigerian authorities and the consequent reduction in the fine, MTN gave no inclination about listing in Nigeria. According to Reuters, the agreement between the Nigerian authorities and MTN Group mandated the public listing of the company as soon as is commercially and legally possible.
Therefore, there is a suspicion that the Nigerian government might have forced the company’s hands to go public as a precondition to reducing its fine. This is not particularly ideal as it might not be in the overall best interest of the company, particularly if the company directors had not considered a public listing necessary prior to the deal with the authorities.
Therefore, although every party involved has a lot to gain from MTN’s public listing on the Nigerian stock exchange, it is imperative that such move should take place only when the country’s economic outlook improves and solely at the company’s discretion.
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