MTN Group’s record US$1,7bn Nigerian fine is about to get a whole lot cheaper.
MTN rose the most in a week on Friday as investors prepared for a slump in the Nigerian naira after Africa’s second-biggest crude producer’s central bank said it will let the currency float and weaken next week.
A devaluation will result in a significant discount to the 330bn naira fine that MTN agreed for missing a deadline to disconnect unregistered users in Nigeria, its biggest market.
MTN rose as much as 5,3% in Johannesburg and advanced 4,3% to to R143,61 rand at 12.53pm, valuing the company at R265bn.
“Removing the currency peg will not only reduce the fine, but will improve MTN’s ability to do business in Nigeria in general,” said Mergence Investment Managers analyst Peter Takaendesa. “The company needed the liquidity to further expand its network in the country and move some money around to pay dividends.”
The timing of Nigeria devaluation is a boon for MTN, which reports its financial results in South African rand. The company reached the deal to pay the fine, one-third of an original penalty, after eight months of start-and-stop negotiations with local officials. MTN’s battle with Nigerian authorities had weakened the stock price by a third. The government originally issued the equivalent of a $5,2bn penalty and later lowered it to $3,9bn.
Free trade in the naira, set for Monday, will mark the end of more than a year of resistance by President Muhammadu Buhari. Nigeria has held the naira at 197-199/dollar since March last year even as other oil exporters from Russia to Kazakhstan and Angola devalued their currencies as crude prices slumped.
MTN said this week that it planned to significantly increase its capital spending in Nigeria to start a fibre network roll-out in six cities in the and extend 3G coverage to 90% of the country in 2017. — (c) 2016 Bloomberg LP
- Update: MTN Group head of investor relations Nik Kershaw has sought to add clarity with the following statement: “The fine we are paying is 330bn naira and therefore the currency movement has no impact on the amount of the fine due to be paid by MTN Nigeria. However, the translation into rand for our results would be impacted by the relative rand/naira rate at the time.”
