Behind the PIC’s splurge on MTN shares
The corporation, which is already the company’s largest shareholder, has lifted its stake to 25.6%
The Public Investment Corporation (PIC) has been on a buying spree of MTN shares, taking advantage of a sharp decline in the mobile operator’s market value that was triggered by regulatory woes in Nigeria.
Despite an ongoing dispute in MTN’s biggest market — authorities in Nigeria have demanded as much as $10.1bn from the company — SA’s state-owned investment manager says it is bullish about MTN’s prospects.
The PIC, which manages about R2-trillion on behalf of government employees and other social funds, is already MTN’s largest shareholder. It has lifted its stake in the company to 25.6%, from about 18.7%, according to Bloomberg data.
Since MTN has about 1.9-billion shares in issue, the transactions would have cost the PIC at least R10bn based on Thursday’s closing price of R89.80 a share.
“We believe MTN has a strong set of assets and competencies, which can be optimised and better utilised to capitalise on an abundance of consumer and enterprise opportunities across the company’s footprint and beyond,” Deon Botha, the PIC’s head of corporate affairs, said.
“We further believe that MTN has the potential to become the digital and communications powerhouse in Africa and be an international emerging markets icon,” Botha said.
MTN’s share rout began in late August when the Central Bank of Nigeria said it wanted the group to return $8.1bn of “illegally” repatriated dividends. Soon after, the country’s attorney-general said MTN owed $2bn in taxes.
MTN shares were trading at R107.99 prior to the announcements.
However, even as reports emerge that the company is close to reaching a resolution with Nigeria’s central bank, many analysts remain wary.
US bank JP Morgan said in a research report earlier in November it maintains an “underweight” recommendation on the stock because a resolution could extend into 2019 and “there is still a meaningful downside case associated with these risks”.
The bank expects MTN’s share price to decline to R82 by the end of 2019.