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MTN Zakhele tries to quell investor fears

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 05 Feb 2016
MTN Zakhele "continues to enjoy a solid performance", according to parent group MTN.
MTN Zakhele "continues to enjoy a solid performance", according to parent group MTN.

MTN has attempted to subdue investors' fears when it comes to its broad-based black economic empowerment (BEE) scheme, MTN Zakhele.

"We would like to reassure the market and Zakhele investors that Zakhele continues to enjoy a solid performance," according to an MTN statement.

The telecoms giant issued the press statement in response to "questions raised in the media and elsewhere about the financial performance of MTN Zakhele in light of the pressure on the MTN Group share price over the past few months".

MTN Zakhele's listing in early November 2015 was at a tricky time for the company, as its parent group had just announced it was facing a $5.2 billion (R83 billion) penalty in Nigeria for failing to disconnect 5.1 million unregistered SIM cards in the territory.

"Since its inception in 2010, shareholders in MTN Zakhele have realised compound growth of 23.1%. An investor who had invested R100 in 2010, would now have an investment worth R293.50 today; well ahead of inflation," according to MTN.

The last few months, however, have not been kind to the BEE share, which owns 4% of MTN. Zakhele listed at R75.20 on 5 November 2015 but at the close of trade on the JSE yesterday, it was worth only R63 a share, a 16% drop in a few months. Not to mention the drop from R102.30 per share, which was the last traded price when the company's OTC share trading platform stopped operating on 16 October.

"By their very nature, equity markets returns are not guaranteed, and MTN and MTN Zakhele are not exceptions. However, it is important to note the very positive returns generated by Zakhele," says MTN.

The BEE scheme's share price will continue to be affected by the movements on MTN Group's stock, which has faced a steady decline since news of the Nigerian fine broke last October. Before the fine was announced, the MTN group's share price was sitting at around R190 a share, but since then has fallen around 27%, putting its market cap at around R236 billion today.

This year has seen the telco's stock recover slightly, rising 4.4% year-to-date, as investors hope for an imminent resolution to the Nigerian saga.

Yesterday, MTN's stock closed almost 9% up, with shares trading at R138.77 apiece, aided by news that MTN had recruited former US attorney general, Eric Holder, to help negotiate a settlement of the telco's Nigerian fine, now reduced to $3.9 billion (R62 billion).

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