Telecoms giant plans $500m financing from Nigeria’s stock market

Stakeholders in the Nigerian capital market have described the move by the telecommunications giant, MTN, to raise about N153 billion ($500 million) from the sale of shares in its Nigerian business during the first half of this year as a positive development.

They said it would deepen the market and encourage the active participation of individual consumers in the company’s wealth creation process.

The telecom firm, which controls about 39 per cent market share, currently service about 57 million customers in Nigeria, at the weekend, pledged to take immediate steps to raise about N153bn ($500m) from the sale of shares in its Nigerian business during the first half of this year

Capital market analyst, operator and Nigerian investors are full of expectations that the sign is a step towards the firms’ overdue listing which market participant had anticipated in the past few years.

The move is to enable the company in fulfilling the terms of a deal struck with the Nigeria to settle a record fine imposed on it in 2016 over SIM registration default.

Indeed, there have been growing agitations for multinationals in the telecoms and oil and gas companies to list on the nation’s bourse by way of public offer to accommodate members of the investing public.

Analysts have agreed that compelling big corporates that control nitch sectors of the Nigerian economy, especially the telecoms and oil and gas will significantly raise the capitalization of the stock market which is currently estimated to slightly above N15 trillion and low when compared to peers in other emerging markets.

However, sectorial analysis of the market shows that, the telecommunication sector is under-represented. It is even more disheartening that, none of the major national telecom company’s shares are traded on the NSE.

Indeed, the Nigerian Stock Exchange (NSE) since 2012 have made efforts to roll out initiatives that will compel multinational firms to list on the Nigerian Stock Exchange.

Specifically, to engender a willingness to participate in the market, the listing rules of the exchange had been reviewed so as to make it easier for these companies to access the Nigerian capital market and eventually list their shares.

NSE had also provided a legislation that covers incentives, unbundling of stringent eligibility requirements that create high barriers for potential entrants and hinder participation by willing businesses, adopting of options that promote foreign investment in the economy under terms that support national interest without exposing the market to the dangers of the past.

There is no gainsaying the fact that the listings of these telecom and aviation giants would ultimately shore up the liquidity of Nigerian capital market, which will in turn restore the much-needed investors’ confidence.

For instance, MTN has close to 50 per cent of the subscriber market in Nigeria. But its dominance is way deeper than that. Investigations revealed that MTN has more than 80 per cent of the revenues of all telecommunications companies in Nigeria.

It recently reported worldwide profit of $6 billion in 18 countries of operation of which roughly half of it comes from its Nigerian operation. 99per cent of MTN Nigeria’s workforce is Nigerian, and that 98per cent of senior management is also Nigerian, in line with MTN’s robust local content policy.

MTN Nigeria contributes about 5 percent of the nation’s GDP, with about 5000 employees in an emerging market where the lifespan of most businesses is 5 years. Revenue also increased from N793.6 billion in 2013 to N824.80 billion as at December 31, 2014, just as its subscriber base rose to 59.9 million whilst retaining the top spot in the 21 countries where the group operates.

In 2013, the Nigerian Communications Commission (NCC), the telecoms industry regulator, studied six markets in the Nigerian telecoms sector, and declared MTN as a dominant operator in one of the markets studied, precisely the mobile voice market, based on its 44 per cent market share on mobile voice alone.

The NCC also declared MTN and Globacom as joint dominant operators in the upstream segment market that has to do with wholesale lease lines and transmission capacity, because MTN and Globacom jointly controlled 62 per cent of the public terrestrial infrastructure, which is a bottleneck resource in the provision of voice and data services.

MTN became a dominant operator in mobile voice and wholesale lease lines and transmission capacity, through hard work and aggressive marketing strategy, coupled with the advantage it got for taking a bold step to operate in the Nigerian telecoms market since 2001, when other operators feared to invest initially.

With over 55 million subscribers, MTN Nigeria Communications Limited (MTNN) provides cellular network access and ICT solutions to millions of Nigerians, connecting whole communities with each other and with the rest of the world. It is also the largest subsidiary in the MTN Group – a multinational telecommunications group offering world-class cellular network access and business solutions to over 210 million subscribers in 22 countries across Africa and the Middle East.

Since inception in 2001, MTNN has led the growth in the voice market to become the biggest mobile operator in Nigeria and West Africa. It is now pursuing new growth opportunities in the data and ICT space. This lead position is evident in a differentiated and attractive array of product and service offerings, as well as a growing bouquet of ICT products.

Reacting to the development, the Head, Research and Strategy of Codros Capital Limited, Christian Orajekwe in a telephone interview said it is a welcome development for the market because it is a company with strong values and fundamentals.

“More Nigerian investors would have the opportunity of participating on the company’s wealth creation. The company is known to be a profitable firm and Nigerian investors would benefit from the capital appreciation and robust dividend that the company is bringing on the table.
The President, Constant Shareholders Association, Mallam Shehu Mikail said the listing would help deepen the market, while urging other telecom and oil firm to join the league.

“It is very welcome development, it would deepen the market. It is to the advantage of operators. We expect other telecom, as well as major oil companies and power sector to join the train,” he added.

The Managing Director of high Cap Securities, David Adonri said the shares, which is expected to be over subscribed will deepen the market if it is subsequently listed on the floor of the Nigerian Stock Exchange.

“It is positive for the market. It will deepen the capital market if they list would help to stimulate other telecom and oil giant to be listed on the market.”`