Adjournment of court case is 'positive' sign for MTN
Nigerian judge adjourns hearing over dispute between MTN and central bank until January
The adjournment of a court hearing between MTN and Nigeria’s central bank is a “positive” signal for the mobile operator, analysts say.
On Wednesday, a Nigerian judge adjourned a hearing over a dispute between MTN and the central bank until January 22, at the request of the parties.
The dispute relates to the “illegal” transfer of $8.1bn, though MTN has denied any wrongdoing.
The adjournment “is positive news for the mobile network, as it appears that the two parties are approaching an out-of-court settlement”, said Paul Chakaduka, a senior trader at GT247.
If that happens, “we anticipate that the fine would be adjusted lower”, Chakaduka said.
“The ceiling in terms of the fine has been defined. What this creates is an opportunity for the two parties to find middle ground and negotiate a deal that will save them from going through a protracted legal battle,” he said.
Rob Pietropaolo, a private client trader at Unum Capital, said that since Nigeria was MTN’s biggest market, contributing a third to profits, “it is in both MTN and the Nigerian central bank’s interest to settle the matter”.
The court adjournment “creates slightly more certainty than if it were left entirely up to the courts”, Pietropaolo said.
“I am of the belief that a settlement will take place. I don’t see MTN being liable for the full $8.1bn... there will be a deal struck.”
For the time being, the issue will remain “an overhang” on MTN’s share price, said Chantal Marx, head of research at Ashburton Investments.
“The share price is unlikely to move meaningfully higher until the matter is resolved — or at least until there are rumours of a pending resolution,” said Marx.
JP Morgan, which has an “underweight” recommendation on MTN’s shares, said in a recent report the best-case scenario would be a withdrawal of the $8.1bn with no penalty and no restrictions on future dividend repatriations.
“If the central bank’s claim is withdrawn with no restrictions and no penalties, we see scope for MTN re-rating towards R100 a share in the near term," the US bank said.
However, JP Morgan said its base-case scenario assumed a $500m settlement, including legal costs, for both the central bank’s $8.1bn claim and the attorney general’s $2bn tax claim.
“A downside case would emerge if the central bank settlement was more than $500m.”
On Thursday, the mobile network’s shares closed 0.9% down at R85.14. In late August, MTN was trading at R107.34.