January 18, 2008 2704 VIEWS
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INVESTMENT CASE

 

*  *    The relatively underserved mobile penetration would enhance MTN aggressive expansion strategy.

 

*  *    According to Pyramid Research, Nigeria's population is expected to grow by approximately 12% between 2007 and 2012 whilst mobile penetration is expected to reach 61% in 2012 (2006: 22%).

 

*   *   Mobile revenue is expected to hit $10billion by 2010 (2006:$5.1 billion). However, Average Revenue per user (ARPU) will decline to $ 10billion in line with general international trend.                         

 

 

NOMINEE STRUCTURE / CUSTODY OF SHARE CERTIFICATE

 

*  *    IBTC Asset Mgt has been nominated to hold the Linked Units on behalf on Beneficial Shareholders prior to the incorporation of the exit SPV. More so, the Nominee will receive dividends from MTN Nigeria for onward payment to shareholders.

 

 

*  *    Certificates for the allotted Linked Units will be issued in favor of the Nominee (IBTC Asset Mgt), and kept in safe custody.

 

 

*   *   A written statement confirming the number of units allotted to each beneficial shareholder will be forwarded by the Nominee.

 

 

*  *    However, certificates can only be released in the event of a transfer of allotted Linked Units amongst registered beneficiaries or third party provided necessary pre-emptive conditions have been satisfied.

 

 

 

EXIT MECHANISM

 

*  *    The objective of the offer is to expose Nigerian shareholders to long term investment. However, Potential Investors may exit through the following method.

 

*  *    Beneficial shareholders may sell their Linked Unit to other shareholders or third party investors during the 3-year Structure Period, provided a pre-emptive rights process is followed.

*  *   In the Second phase, the exit mechanism will be implemented at the end of the three year structured period. An exit SPV will be incorporated and the Linked units held by beneficial shareholders will be transferred to the exit SPV in exchange for ordinary shares in the exit SPV.

* *     Beneficial shareholders may offer their Linked Units to the Offerors prior to the transfer of their interest to the exit SPV

 

 

FINANCIAL PERFORMANCE

 

* *     MTN Nigeria's subscriber base is estimated above 14 million. Half year June 07 revenue of N173 billion is supported EBITDA margin of 58%.

 

*  *    Operating expense accounted for 38% of total revenue at Q2 07 (2006 FY: 38%).

*  *    Pre-Tax RoE stood at 28% while RoA was 16.69%.

*  *   Interest cover was healthy at 112.5x, and further justifies the Company's desire for dollar denominated financing with low interest rate.

* *     Estimated EPS for Q2'07 stood at N12.89.

 

 

 

QUICK OBSERVATIONS

 

* *     Dollar denomination dividends looks good but the nominee clause in the sale restricts custody on share certificate.

 

* *    The exit strategy with the SPV arrangement appears in need of further clarification.

* *     Forecast/Dividend projections not readily available.

* *    There are no known plans to list on the stock exchange.

* *    A different approach in the market for which investors would benefit from consultations with their fund managers, brokers and professional advisors.

 

 

 


ADVICE TO READERS

While this website is checked for accuracy, we are not liable for any incorrect information included. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions.

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