MTN’s market capitalisation is in danger of falling below that of rival Vodacom as investors continue to fret about the unprecedented fine the group is facing in Nigeria as well as uncertainty about its operational performance.
On Friday afternoon, MTN’s market capitalisation was within a whisker of falling below Vodacom’s — R218bn versus Vodacom’s R217bn. This is despite the fact that MTN has nearly four times the number of subscribers.
A company’s market cap, which is calculated by multiplying its share price by the number of shares in issue, is the valuation attached to it by investors.
In afternoon trading on Friday, MTN’s share price slumped by more than 5%, according to data from Google Finance. It was last seen trading below R114/share — levels last seen in 2010. (It ended the session off its worst levels, at R117,79/share.)
Since its peak in April 2015 at R250/share, MTN’s share price has fallen almost 55%.
If MTN’s market cap falls below Vodacom’s, it will be the first time it has happened. MTN, which has in the past been more aggressive than its rival is pursuing international growth opportunities, has historically been valued at a premium to its competitor.
Not only is MTN’s market cap in danger of falling below Vodacom’s, but its price:earnings multiple — in large part, a reflection of investors’ faith in a company to grow its earnings — had slumped to just 6,8 times, less than half Vodacom’s 16,4 times.
It’s an astounding reversal in fortune for MTN, whose shares have fallen by more than a third in the past 90 days over worries about a record-setting US$3,9bn fine imposed on it by the Nigerian Communications Commission.
MTN has filed papers in a federal court in Lagos challenging the penalty. The court is expected to hear the matter later this month. — (c) 2015 NewsCentral Media