Making a Bold Statement

Ordinary Nigerians have seized the chance to own a piece of MTN. Chiamaka Ozulumba reports that the symbolic action and bold statement are testament to the future of the telecommunications company

When the parents of seven-month-old Abubakar Muhammad Jiddah and one-year-old Hamida Sulaiman purchased shares of MTN Nigeria Communications Plc in the names of their babies in Sokoto on December 2, they were making a bold statement. It was a symbolic action that spoke to an understanding that MTN is not just a company of today but also of the future. They, therefore, laid a solid foundation for the two children to partake in that future.

That action is also a testament to the grand reception that has greeted the ongoing MTN public offer. For clarity, MTN Nigeria has put up for sale to retail investors up to 575 million shares held in MTN Nigeria by MTN Group at the price of N169.00 per share, with a minimum subscription of 20 shares and lots of 20 shares thereafter. The offer opened on December 1 and will close on December 14.

To encourage investors, MTN is offering an incentive of one free share for every 20 shares purchased, subject to a maximum of 250 free shares per investor, but to benefit from this incentive, retail investors have to hold the shares allotted to them for at least 12 months after allotment. The offer is in line with MTN Group’s commitment to reduce its shareholding in MTN Nigeria from 78.8 percent to 65 percent over time.

The MTN public offer comes as a fulfilment of a promise made some two years ago when Africa’s leading telecoms group was listed on the Nigerian Stock Exchange, now Nigerian Exchange Limited.

“This is just the beginning, we still intend to pursue a future public offer giving more Nigerians greater access to the MTN opportunity,” MTN said in a statement in 2019 announcing the listing.

For a company whose “success and growth…are intrinsically linked to that of Nigeria and Nigerians”, according to MTN Nigeria CEO Karl Toriola, there is no better appreciation than offering “Nigerians the opportunity to own shares in MTN Nigeria”.

MTNN is the largest listed company by revenue on Nigeria Exchange Limited and the second-largest listed company by market capitalisation. It is a market leader with 39 percent of the market share which is ascribed to its superior performance among competing brands, according to industry data.

Since its inception, MTN Nigeria has paid out over N2.3 trillion as dividend, according to CEO Toriola. The telecom services provider recorded 127 per cent return on equity in the 2020 financial year, from 111 per cent in 2019, while earnings per share jumped to N10.08, from N9.99 in the same period.

Similarly, MTN Nigeria dividend payment increased to N9.40 in 2020, from N6.92 in 2019, and equity analysts are projecting a better dividend payment for the 2021 financial year. The recent approval-in-principle of Payment Service Banking (PSB) licence by the Central Bank of Nigeria means that MTN Nigeria will soon begin to accept deposits and facilitate payments across both local and foreign counterparties within Africa through its designated platforms.

There is no gainsaying that the telecoms services provider, which analysts at WSTC Financial Services have described as a fast-growing and high potential company, holds a lot of promise going into the future.

Having worked diligently in the last 20 years to connect 68 million subscribers onto voice and data networks and ensure delivery of the benefits of a modern connected life, according to MTN Group President and CEO Ralph Mupita, MTN Nigeria see the next 20 years being even more transformational than the first.

CEO Toriola speaks of this future when he says the essence of the public offer is to let every Nigerian in every part of the country “have a share in the wealth creation that MTN is going to take us through in the coming years”. It is the beginning of another journey, a new phase that would see the acceleration of MTN Nigeria’s transition from Telco to Techco, opening up new opportunities and possibilities.

“There is much more to do to support the evolution of an inclusive digital economy, and we continue to invest as we evolve into a truly digital operator, capable of seamlessly integrating value across the evolving telecommunications, digital and fintech segments,” Toriola says, giving a glimpse of that promising future.

In many ways, the MTN public offer is transformational and innovative. The MTN retail offer is the first in Nigeria to be delivered via a digital distribution platform. The use of such innovative technology indicates MTN’s intention to facilitate the maximum possible participation by Nigerian investors.

Similarly, by encouraging investors to hold shares for the long term through an incentive structure, MTN has shown that it intends to build a long-term relationship with its shareholders.

The MTN retail offer also presents a unique opportunity, one that millions of Nigerians have been looking forward to, to participate in the telco’s huge success. And MTN has shown sincerity of purpose. Rather than give a chunk of its shares to a few large institutions, it has opted to have as many Nigerians as possible partake in the offer.

So, Modupe Kadri, MTN Nigeria Chief Financial Officer, is right in describing the retail offer as democratized participation in share sales. Which explains why the telco is offering as low as 20 units of shares, a first in the Nigerian stock market.

“[W]e have never had an offer as low as 20 units” in the history of the Nigerian stock market, said Kasimu Garba Kurfi, Managing Director/CEO, APT Securities and Funds Limited, at an Investor Forum in Lagos, Nigeria’s commercial capital, on December 6. He added that the offer would “encourage retail investors”.

But it was not only Kurfi that is excited about the offer. At the Investor Forum which provided insights into MTN Nigeria’s investment case, the public offer and business outlook, Boniface Okezie, National Coordinator, Progressive Shareholders Association (PSAN), tipped MTN Nigeria as “still the best company to invest in” and asked investors to “go and invest in MTNN and keep your dividends rolling in”.

“MTNN is Nigeria’s strongest company in terms of dividend distribution and dividend policy. It is an increasing season of giving; if there is one gift you must give to a family member if there is one share they would buy, it is MTNN,” said Bolaji Balogun, CEO of Chapel Hill Denham, the Lead Issuing House and Bookrunner for the MTN Nigeria public offer.

For analysts at Coronation Asset Management, the MTN Nigeria offer represents excellent value for investors.

“At the offer price, the shares trade at a Price/Earnings (PE) ratio of 11.6x our forecast of 2021 Profits After Tax, and a PE of just 9.1x our forecasts of 2022 Profits After Tax. The historic dividend yield for the stock is 5.5 percent and this is expected to increase,” Coronation Asset Management analysts said in a December 6 note to investors.

There are indications that the objective to get as many Nigerians as possible to buy shares in MTN Nigeria and so fundamentally transform the telco’s ownership structure is already being achieved. Chapel Hill Denham’s Balogun gave this indication when he spoke of the influx of applications within the first few hours after the public offer opened.

“In my 30 years of issuing shares, I’ve never seen this number of applications in the first few hours. People typically wait until the last few days to start buying. It shows that there’s a huge benefit in doing this digitally,” he said.

MTN may have envisaged this. The telco indicated earlier it would offer another 15 percent, which translates to 86 million more shares, to the public if the 575 million ordinary shares already on sale are oversubscribed before the December 14 closing date. The numbers are not yet in, but the signs point in that direction. By the time the process is complete, MTN would have the largest retail shareholder base of any company in Nigeria, and Nigerians would be the better for it.

Quote

The essence of the public offer is to let every Nigerian in every part of the country “have a share in the wealth creation that MTN is going to take us through in the coming years”