MTN’s poor shares performance a sign of a deeper problem

This time last year MTN Uganda had fulfilled all the requirements desired, and was listed on the Uganda Securities Exchange (USE), the morning of December 6 2021.

This issue was welcomed with razzmatazz on account of Anne Jjuko CEO to the transaction adviser of the IPO — Stanbic bank calling it “not only the largest IPO in the history of Uganda, but also the largest IPO in Africa,” a statement recorded on the ministry of ICT and National Guidance website.

This Initial Public Offering (IPO) gave the impression that after 23 years in operation in Uganda, MTN saw it fit to give 15 per cent ownership to the locals. Nevertheless, it came to light that the telecom company went public giving equity to locals, not out of the goodness of its heart, but as a fulfilment of a condition set by Uganda Communications Commission (UCC).

In the article: MTN Uganda lists its shares on the USE and commences trading today, on their website; MTN confirms this by mentioning the following about the listing: “This aligns with the Uganda Communications Commission’s new licensing requirement for broad-based ownership by Ugandans, with a compliance deadline of mid-2022”.

That being the case, with a year removed from Uganda’s biggest taxpayer’s listing on USE, it’s imperative that an audit of the telecom’s shares is made to find out if the listing has lived up to its billing.

Pristinely, it’s noticeable that the share price of MTN’s equity has nosedived by 10 per cent since the issuance of the IPO a year ago. The telecom’s IPO was at Shs 200 per share; as of 1 December 2022, each share is trading at Shs 180 on USE.

When the IPO was held, MTN floated 22.4 billion ordinary shares with the minimum number of shares (500) being bought at one hundred thousand shillings. To put it plainly, one million shillings worth of MTN shares bought at the IPO would be valued at nine hundred thousand shillings today confirming a 10 per cent loss to the IPO’s investor.

Paradoxically, the telecom’s financials are looking up as voice revenue has grown by 3.6 per cent, data revenue by 21.9 per cent, Fintech revenue by 10.2 per cent, and service revenue has swelled by 9.4 per cent raking in 2.04 trillion shillings as of audited results for the financial year ended 31 December 2021 released on March 7 2022.

However, this quantum leap in MTN’s financials means little to nothing to a Ugandan shareholder who would walk away with a dividend of Shs 4.766 a share as proposed by the board of directors.

To sum it up, as MTN Group wins since it owns 83.05 per cent of MTN Uganda and eats the lion share of the profits, the resident shareholders would be scraping the bottom of the barrel after their pint-sized dividend income is charged a withholding tax of 15 per cent — Part V of the Third schedule of the Income tax Act Uganda.

This doesn’t come as a surprise since similar charges were brought against MTN in Nigeria in 2018 by the country’s Central Bank, which claimed that the telecom giant had repatriated dividends to a tune of $8 billion between 2007 to 2015 — a sum it (MTN) needed to refund to the Central Bank of Nigeria.

Later, MTN was directed to reverse placement of shares at a cost of $52.6 million. The low share price of MTN’s equity, can be explained by the lack of activity on the USE, or, by the bad publicity the telecom company has been getting for its unreliable internet connection, and excusable customer service as well as bewildering complaints about the increase of scammers on the telecom’s network.

Many of MTN’s 15 million subscribers have raised complaints on social media under numerous hashtags about being swindled out of their money on the company’s subsidiary — Mobile money. What the complaints have in common is that the scammers have the subscribers’ personal information — PIN numbers, account balances, and when they [subscribers] reach out to MTN, they’re given the run around! This has caused many complainants to suspect the gyps to be an inside job.

Because how else are the fraudsters privy to secret customer information only disclosed to the network? This increased bad press partly explains why MTN’s market share has dropped from 60 per cent to 47.5 per cent in the last five years — The East African July 02, 2022.

Add this to past accusations of being involved in activities that compromise national security that were brought against MTN’s top management which led to the expulsion of the company’s CEO Vanhelleputte and other senior managers in 2019.

This rap-sheet stacked up by MTN, slurs the image of the company, making it undesirable for shrewd investors who buy into the philosophy, business model; credibility, and management of a listed company because these show the corporation’s ability to do business ethically and profitably guaranteeing longevity while directly impacting the share price of an entity that trickles down to the investor.

On the other hand, a low share price gives a negative impression of the telecom’s management putting them under pressure from shareholders. Again, the value of management’s bonuses paid in the form of stock, and stock options shrinks with a plummeting stock price.

Therefore, MTN’s low share price on USE wrecks havoc more than it creates giggles for management. And to bump the share price up, the telecom company has got to change the negative rhetoric about it to win the goodwill of the people/investors by listening and acting on the gripes of its subscribers.

Until that happens, I’ll take a back seat, and wait on the sidelines; because not all heroes wear capes.

kimaona@yahoo.com