MTN Nigeria plans to list on the Nigerian Stock Exchange. I have done the numbers, and if the rumors remain, the stock would be cheap. Yes, using numbers on what is happening on the sale of 9Mobile, I do think MTN Nigeria would be good for investors. Here are the two techniques, relying largely on public information.
Method A: Using 9Mobile Value to Extrapolate
9Mobile is considering selling itself for $500 million which means the value is about $1 billion since the buyer would assume about $500 million of debts. This is still overly optimistic until the deal closes [yes, we cannot take it for granted that 9Mobile deal is done until the buyer pays].
On Thursday, PREMIUM TIMES reported that two of the interested bidders, Teleology Holdings Limited and Smile Telecoms Holdings, were submitted to the NCC as the selected preferred bidder and reserved bidders respectively on the recommendation of Barclays Africa, the transaction financial adviser appointed to monitor the sale of the company.
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While Teteology made an offer of $500 million, Smile Telecoms reportedly offered $300 million, with their status subject to NCC’s final confirmation.
Teteology was however given 30 working days within which to pay the offer or forfeit its position to the reserve bidder. The deadline for the payment is expected to lapse sometime in the middle of March.
So, if 9Mobile which has about 17 million users command about $1 billion, MTN Nigeria with nearly 57 million users should command around $4 billion. I have taken the intrinsic value of the market positioning of MTN Nigeria when compared with 9Mobile. In other words, a user in MTN Nigeria brings more value than 9Mobile. So, largely, we can say that MTN Nigeria is worth about $4 billion.
According to the Guardian, MTN Nigeria would list around June 2018.
In Nigeria, MTN has set a June 2018 deadline for its IPO which is expected to be the biggest on the Nigerian Stock Exchange (NSE). The decision to list on the NSE was reached in June 2016 during negotiations on the industry record fine slammed on the operator after it failed to disconnect unregistered subscribers from its network as directed by the Nigerian Communications Commission (NCC).
The NCC recently disclosed that MTN has only paid one-third (N110bn) of the sum (N330bn). Regional media have reported that the company could raise at least N153bn through the local bourse – although the operator has refused to confirm this
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Bloomberg reported that Standard Bank Group and Citigroup are advising MTN on selling 30% of MTN Nigeria on the NSE.
So, if MTN Nigeria should sell 30% of its value and MTN Ghana sells 38% and both generate $1 billion, I would see that as a discount. Let us assume that MTN Ghana brings in $300 million while MTN commands $700 million. Using that we can say that 30% of MTN Nigeria is $700 million. (Bloomberg noted $500 million for 30% though that was not the most current number on this).
But from 9Mobile sale price (not certain until it is done), I had modelled 30% of MTN Nigeria to command $1.2 billion. So, if they are going for $700 million, it means MTN Nigeria is coming at a big discount. If that is the case, investors would go for it.
Method B: Using MTN Group User Base
MTN Group has a market capitalization of $17 billion (around 244 billion rand).
About 33% of MTN Group revenue comes from Nigeria. Also, Nigeria commands more than 25% of its total subscriber base. Largely, Nigeria is perhaps the most profitable market for MTN Group. If you take the subscriber base alone, you can put MTN Nigeria at a market cap of $4.25 billion (25% of the $17 billion). By the time taxes are taken, the value of MTN Nigeria can down as $4 billion.
All Together
So, MTN Nigeria is worth $4 billion. If they sell 30% for $500 million-$700 million, it is coming at a big discount. That makes it a BUY. I do believe that if there would be 1-2 telecom operators that would survive anything in Nigeria (WhatsApp, satellite Broadband, etc), MTN Nigeria would be among.
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