The impact of the MTN shut-down

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MTN has been in the news a lot lately – and for all the wrong reasons. The African telecoms giant was recently fined $5.2bn by Nigerian authorities for leaving unregistered users connected to the MTN network. There is also an insider trading investigation under way by the JSE.

Then, yesterday, trade in MTN shares was suspended. The JSE issued this tweet:

… followed a few hours later by this tweet:

The SENS* announcement referred to in the first tweet turned out to be a note asking shareholders not to react too strongly to the Nigerian debacle until MTN itself has released a statement about the affair.

“This has a significant impact on MTN and its shareholders. The fine represented around 20% of MTN’s market capitalisation prior to the announcement.” says head of trading at Easy Equities’ holding company, Purple Group, Nilan Morar.

“To add some perspective, this fine is roughly about the same value as group’s revenue for the first half of 2015 and more than the total revenue from MTN Nigeria for 2014. The MTN share price has, of course, dropped considerably since the Nigerian fine was announced – somewhere in the region of 22% - which is to be expected.” says Morar.

“Our advice to long-term investors on the EasyEquities platform is not to panic when something like this happens, but rather study the event, understand the implications and then re-evaluate if the very reason for the inclusion into your portfolio is still valid.”

“If not already included in your portfolio, one may also want to evaluate if this is not perhaps a good time to start.”

*SENS stands for Stock Exchange News Service, which you will soon be able to access via the EasyEquities platform. Please note that the views expressed in this blog do not constitute advice.