Bharti deal weighs on MTN

By Nicola Mawson, Contributing journalist

Johannesburg, 05 Jun 2009

Morgan Stanley has downgraded MTN to “hold” instead of “buy”, while Vodacom has been rated as a share to invest in after its recent listing.

However, while the US-based company has rated the company, the potential $23 billion Bharti Airtel share scheme deal may not yet have been fully absorbed by the market, causing the MTN share to be volatile, says independent analyst Irnest Kaplan.

Kaplan is more bullish on MTN than Vodacom on a three-year view, based on MTN's growth opportunities.

Yesterday, Bloomberg said MTN shares dropped R3.99, or 3.3%, to R117.01, which Bloomberg said is its biggest slide in almost a week. Africa's largest mobile phone company was cut to “equal-weight” from “overweight” by Morgan Stanley, which cited the impact of a stronger rand on earnings and the “overhang” created by a planned merger with India's Bharti Airtel.

However, Kaplan says it is difficult to pin share price movement on one opinion and thoughts about the deal are still being formulated. MTN has been tracking above the JSE's All Share index, while Vodacom is below the All Share since recently listing as the share finds stable ground.

Bloomberg reported that Vodacom improved R1.20, or 2.2%, to R55. Morgan Stanley rated the company overweight as a share to buy, saying the company will probably retain its dominant position in the country and offers access to other growing African nations.

Chris Gilmour, Absa Investments analyst, says the company is not that excited about Vodacom due to it having less growth potential than MTN, while MTN is a share that Absa enjoys holding.

Dot Field, chief communications officer of the Vodacom Group, says Vodacom does not comment on analyst research. MTN Group spokesman Nozipho January-Bardill says: “The MTN Group cannot comment on the decision of the rating agency.”

Imara SP Reid last rated MTN in March as “buy”, and has not yet rated Vodacom.