MTN continues to make good on its promise to exit non-core businesses and investments. Analysts say this could cause the company to lose out on the potential long-term growth of entities such as the newly-listed Jumia from Nigeria but ensure returns to shareholders as the operator attempts to boost its return on equity (ROE).

Africa’s largest mobile operator said it will raise R1.2bn by selling its interests in investment fund Amadeus and online travel platform Travelstart.

Peter Takaendesa, portfolio manager at Mergence Investment Managers, said MTN has already reduced its overall gearing “to comfortable levels but they want to reduce [US dollar]-denominated debt to reduce risk of currency devaluations”.

The mobile operator said in March it planned to raise R15bn through asset sales over three years. It said on Tuesday it will sell its interests in Amadeus and Travelstart to HarbourVest, a global private equity firm.

The disposals announced on Tuesday follow the sale of their shareholding in Botswana operator Mascom. 

Takaendesa said the initial R15bn asset disposals programme is not just to raise cash to reduce gearing but also to increase the group’s return on equity towards the 20% target as most of these assets are not contributing to group profits.

“The asset disposals will also help the achievement of the 10%-20% dividend growth guidance near term as they finish paying the Nigeria fine,” he said.  

The transaction is expected to close within the next three months. MTN will maintain its commercial relationship with Travelstart after the sale, it said.

The operator has continued to look for non-core businesses to exit.

Takaendesa said the group may consider reducing its 29% stake in IHS towers and its 78.8% stake in MTN Nigeria. Over time it is also likely to reduce or exit some of its Middle East and North Africa operations.

MTN’s strategy could cause the group to lose out on possible revenue growth in future from some of its investments such as Jumia, which listed on the New York Stock Exchange in April, raising about $200m.  

MTN indicated earlier in 2019 it is unlikely to hold on to its stake in the long term. 

“They could miss out on the potential growth of those assets but that also reduces risk for MTN and allows them to focus more on mobile data as well as digital and mobile money services in existing key markets,” Takaendesa said. 

“These are still a big growth areas for them in Africa,” he said. 

The funds raised could be used to fund the company’s other ventures. On Tuesday MTN revealed plans to roll out a “financial services marketplace” where customers will be able to buy everything from banking and insurance services to consumer goods.

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