MTN Group is once again worth more than rival Vodacom Group after a surge in the former’s share price following publication of solid interim results last week.

MTN’s shares jumped more than 8% on the JSE on Monday, lifting its market capitalisation to R233.39-billion, just above Vodacom’s R233.33-billion, according to data sourced from Yahoo Finance.

The rise in MTN’s valuation since the start of the year has been spectacular as investors warm to the group’s value-unlock strategy, which includes exiting risky markets in the Middle East, not bidding for an operating licence in Ethiopia (which would have required billions of rand in investment), and plans to spin off its fintech and fibre units into separate businesses. The group is also in talks to sell some of its South African tower portfolio.

Despite running into troubles in the Middle East — not least, being forced to exit and write off its Syrian business and being exposed to the current instability in Afghanistan — the group’s largest businesses, in Nigeria and South Africa, have performed well.

The South African business reported strong margin expansion and good sales growth in the financial first half to 30 June 2021.

Risk-off approach

South African service revenue at the unit climbed by 9.3%, with data revenue up 12.3%, while earnings before interest, tax, depreciation and amortisation (Ebitda) rose 16.4% to R9.8-billion, underpinning a robust 1.5 percentage point expansion in the Ebitda margin to 41.4%.

Investors appear to be warming to group CEO Ralph Mupita’s risk-off approach, which saw it walk away from a second go at bidding for a licence to operate in Ethiopia, which is seen as a high-risk market. Mupita said MTN doesn’t want to play second fiddle to incumbent Ethio Telecom and to a Safaricom-led consortium which successfully bid US$850-million for a licence and which plans to launch a network in the coming months.

Analysts polled by TechCentral said the group’s first-half financial performance beat their estimates. Debt at the holding company level – long a concern for investors – is also now under control, they said, which is positive for further share price appreciation.

Since 1 January, MTN’s share price has climbed by 112.7%, while Vodacom has gained 11.7%. Over one year, MTN is up 95.2% and Vodacom by 1.9%. Over five years, MTN has performed less well, gaining 1.7%; Vodacom, however, is down 12% over the same period. — (c) 2021 NewsCentral Media