The South African telecommunications giant, MTN Group 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.
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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.