-Why telcos should join MTN, Airtel at the NSE
-Danbatta’s foresight paying dividends
By Prince Osuagwu
(Vanguardngr.com) Despite the ongoing crisis in the local and global markets triggered by coronavirus pandemic and unprecedented plunge in oil prices, the telecommunications industry has been tipped to balance the economy, post-COVID. In the first two months since the global lockdown went into effect, over 24,000 jobs have been cut in Nigeria. The Nigerian travel industry is said to have lost more than N180 billion and thousands of jobs. The country’s well known economic mainstay, the crude oil, which was predicated on 57 dollars per barrel for the 2020 budget has crashed to below 30 dollars per barrel. The International monetary fund, IMF has predicted there may be a global recession after the pandemic. With these available statistics, there’s no gainsaying, Nigeria’s economy may be worst hit after the pandemic.
Healthy telecom sector
However, Nairametrics Financial Advocates, a leading financial resource company, with special focus on financial literacy, investor advocacy and business intelligence, says the telecom sector is projected to stay healthier than most other industries that have received heavier blows from the impact of the deadly disease Although, Analysys Mason tipped that global telecoms operators may suffer a decline of 3.4 per cent, equivalent to $40 billion in revenue in 2020 due to challenges stemming from the Covid-19 pandemic, Nairametrics, sees the telecoms sector as a bright spot amidst the gloom. Its conviction that the telecom sector will stay afloat after the pandemic is on three factors- investments made pre-COVID, social media culture and data growths. Another is proactive reactions of some tech firms in listing on the stock exchange. Nairametric said: “We note that Nigeria’s key telecommunications companies have invested heavily in internet infrastructure in a bid to improve 4GLTE coverage across the country. Furthermore, increased competition among the providers has forced bundle prices lower, making internet usage very attractive to the average Nigerian. In addition, increasing smartphone penetration, increasing digitisation of the Nigerian economy and a fledgling social media culture are among many factors driving internet penetration within the country”.
It added that “considering the COVID-19 pandemic ravaging the country which has led to movement restrictions in various states and with key population centres like Lagos and Abuja seeing its citizens forced to stay at home, we expect a surge in data usage among the populace. We consequently expect better numbers from the telecom companies in the months ahead. In light of this, we see key telecom stocks like MTNN and Airtel Africa as good defensive stocks in this pandemic. A defensive stock is a stock that provides consistent dividends and stable earnings regardless of the state of the overall stock market.
Confirming that the data surge prediction has already come to reality, Chief executive officer, Internet Exchange Point of Nigeria (IXPN), Muhammed Rudman, recently, said a surge in Internet traffic was noticed immediately the lockdown took effect in selected states. He added that Internet traffic has increased at least by 10 per cent every week.
Investors’ favourite stocks
Since the listing of its 20.35 billion share units worth N1.8 trillion on the Nigerian Stock Exchange (NSE), MTN Nigeria’s stock has been described as one of investors’ favourites at the Exchange. Listing on the NSE premium board on May 16, 2019, as the first telco to do so, MTNN is said to have remained second most capitalised stock. The board is a listing segment for the elite group of issuers that meet the Exchange’s most stringent corporate governance and listing standards. Accordingly, the telco immediately, joined other elite stocks such as Dangote Cement Plc, FBN Holdings Plc, Zenith International Bank Plc, Access Bank Plc, Lafarge Africa Plc, Seplat Petroleum Development Company Plc and United Bank for Africa Plc. Recall that at listing, Chief Executive Officer of the NSE, Oscar Onyema, had described MTN’s listing as a promising development in the country’s telecommunications sector and capable of encouraging other players in the sector to explore the different opportunities in the capital markets for raising long term capital. He said: “As a listing platform of choice, today’s listing will add to our bouquet of diverse investment offerings to the public. Having MTN Nigeria listed in our market is a testament of The Exchange’s commitment to building a dynamic and inclusive market and creating channels for sustainable investment. “This listing will promote liquidity for MTN Nigeria, enhance its value and increase transparency, as our platform remains one of the best avenues for raising capital and enabling sustainable growth for national development,” he said.
Meanwhile, the irony of the telco’s presence in the domestic capital market is that it was not on its volition but as part of obligation mandated on it by the Nigerian Communications Commission (NCC), as atonement for SIM card registration infractions. In October 2015, NCC imposed a fine of N1.04tn on MTN for irregular registration of 5.2 million subscribers. However, after prolonged negotiation with both the regulatory agency and the Federal Government, the company had the fine reduced to N330bn. Public listing was one of the conditions arrived at with the telecommunications company before the Federal Government agreed to reduce the penalty to N330bn.
Telecom experts have described NCC’s role in MTN’s listing as unprecedented and creative; exploiting the then controversial situation to create investment opportunities for local and foreign investing communities. Seeing how stocks of listed telecoms companies are creating values for capital gains and wealth creation in the market, they are encouraging the Commission to make listing on NSE a precondition for issuing operating license to players in the telecoms industry.
A telecom engineer, Basil Nwanokwuru told Hi-Tech that “hearing that the telecommunications companies listed in the Nigerian stock exchange are touted to have the capacity of providing stability to the entire economy after COVID-19 is cheery news. It means that the foresight Prof Danbatta exhibited in exploiting the moment of MTN’s infraction to ask them to list is yielding dividends. Now, we need to take it a step further, by making it a precondition for issuing a new telecom license in this country” he added.
Culled from VANGUARD