Stock market today: S&P 500 rides Apple-led tech rally to close higher
* Company could list fintech or fibre assets, CEO says
* Fibre, fintech value trapped in core business, CEO says
* Suspends dividend to lower debt and save cash
(Recasts with assets spin out)
By Nqobile Dludla
JOHANNESBURG, March 10 (Reuters) - South African mobile
operator MTN Group MTNJ.J is considering spinning out its
fibre and financial services units and potentially list one of
them to unlock value trapped in its core business, the company
said on Wednesday.
MTN, with 280 million subscribers across 21 countries in
Africa and the Middle East, has been diversifying from its core
business of connectivity to financial services and digital
offerings such as instant messaging in search of higher returns.
But it believes some of those businesses can thrive and be
valued better if they are spun out from the core business, such
as its fintech, fibre and data centre assets, Group Chief
Executive Officer Ralph Mupita said.
"MTN Group has enormous value that is not currently
reflected in the share price," Mupita told Reuters in an
interview after the group reported a surge in 2020 earnings.
"Within the core (connectivity business) there are some
infrastructure assets and platforms that we believe the market
is putting little to no value on," he said, adding that those
assets are valued at low EBITDA (earnings before interest, tax,
depreciation and amortisation) multiples.
The company also suspended its dividend for the year
despite the rise in 2020 earnings to focus on faster debt
reduction at its holding company and due to uncertainties around
repatriating funds from Nigeria, the timing of proceeds from its
asset sale programme and the impact of COVID-19.
PARTNERSHIPS
MTN is open to third-party capital and partnerships in those
fintech and fibre businesses over the medium-term, "with the
potential of either, in due course, that some of these assets
could be listed or remain unlisted", Mupita said.
Africa's mobile phone operators are ramping up plans to
bring banking to millions of Africans after the coronavirus
crisis caused a surge in use of digital financial services led
by a faster than anticipated switch to e-commerce and mobile
banking. In the year ended Dec.31, MTN added 11.7 million mobile
money users to reach 46.4 million, while fintech revenue rose by
23.9%, although capped by reductions in transaction fees to
support customers during the pandemic.
The company is in the middle of a 25 billion rand ($1.63
billion) divestment plan launched in March 2019 aimed at
simplifying its portfolio over the next three to five years.
Over the past year it received about 4.3 billion rand in
proceeds.
The board expects to announce a revised medium-term dividend
policy in 2021 results in March 2022, said Mupita.
During the transition, MTN said the board anticipates paying
a total ordinary dividend of at least 260 cents per share for
the 2021 financial year and will consider returning further cash
to shareholders in the form of special dividends or share
repurchases after the release of its 2021 results.
It posted headline earnings per share (HEPS), the main
profit gauge for South African firms, of 749 cents compared with
468 cents in the previous year.
($1 = 15.3611 rand)