Hard times for MTN, Vodacom and Telkom

South Africa’s stock market may be reaching record highs, but this has not translated to the nation’s largest telecommunication companies.

Jason Swartz, Portfolio Manager at Old Mutual Investment Group, said that JSE-listed equities have seen a ‘tear’ recently due to buoyant domestic news flows and local investor sentiment, pushing higher share prices.

The JSE All Share even reached a record high in September.

The Bank of America Fund Manager Survey also showed that 89% of respondents were overweight in South African equities, with a particular focus on banks, apparel retail, and general industries.

The projected total returns for equities over the next 12 months are 17%.

That said, Swartz noted that international investors are taking a wait-and-see approach to local markets. International inflows will be needed to push local equities even higher.

Telcos not feeling the love

Notably, the joy seen in the rest of the market has not translated to the telcos sector.

MTN’s share price has dropped by 20% since the start of the year. The company had a dismal performance in the first half of 2024 following the devaluation of the Nigerian Naira.

The group’s service revenue (in rand terms) dropped by 20% from R107 billion to R85 billion in the year’s first half.

Although service revenue in South Africa grew by 3.3% to R21 billion, Nigerian service revenue decreased by 52.9% from R43 billion in the prior period to R20.5 billion.

Thus, the group recorded a loss per share of 409 cents, a 278% drop from the prior period.

The group’s headline earnings per share also declined by 198.5% to a headline loss of 256 cents per share. Therefore, the group did not declare a dividend.

Telkom’s share price has not performed much better, with the partially state-owned company’s share price dropping 11% since the start of the year.

In its most recent financial results for 31 March 2024, Telkom’s total headline earnings per share (HEPS) and basic earnings per share (BEPS) increased by well over 100% to 376 and 385.5 cents, respectively.

“From a loss position in the prior year, profit for the year also increased by more than 100% to R1.9 billion, boosted by the non-recurrence of once-off restructuring costs and lower depreciation, while higher interest rates increased net finance costs compared to the prior year,” said the group.

The group is also looking to return cash to shareholders, with its first year-end dividend payment targeted for this financial year.

However, this has not been enough for investors, with investing R1,000 at the start of the year being worth R887.40 today.

Vodacom has been the only stock to see a year-to-date change, with a measly 0.38% growth.

Vodacom’s latest financial results show that, for the quarter ended 30 June 2024, group service revenue dropped by R14 million to R28.962 billion on a non-normalised basis.

Vodacom is also intensely litigating Kenneth Makate in the Please Call Me case.

Makate’s legal team had demanded R20 billion to compensate him for the idea of Please Call Me, based on a calculation that the Please Call Me product had generated R205 billion in revenue since its implementation at the start of the century.

The performance of the three Telco’s over the last year can be found below:

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