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Tuesday, March 28, 2023

Tariff Hike Bolsters MTN Nigeria Buy Ratings

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This is the best time to add MTN Nigeria’s stock to your portfolio as it’s earnings will get a boost if the price of calls or tariff is raised by the regulator.

Telcos had recently written a letter to the Nigerian Communications Commission (NCC), seeking approval to increase their tariff due to the rising price of diesel and the general increase in the cost of doing business in Nigeria.

If the NCC approves the proposal, telcos will increase their tariff on voice, SMS, and data.

Interestingly, investment houses have placed Buy ratings on the company stock more than any other firm in Nigeria, as the rollout of 5G services will further deepen broadband penetration in the country and unlock new revenue streams from the numerous use cases 5G offers.

“Although we do not believe the NCC will approve the full 40% tariff increase ALTON is asking for, we see any partial approval as an upside risk to revenue,” said analysts at Chapel Hill Denham Limited.

It generated N218.84 billion in voice revenue in the first quarter of 2022, which is 4.68 percent higher than 2021’s N208.52 billion.

Revenue from data spiked by 54.49 percent to N163.30 billion in March 2022 from N105.74 billion.

The Nigerian telecommunication giant is profitable and efficient as its EBITDA margin margins is higher than South Africa’s Vodacom’s Group margins of 39.90 percent; Kenya Safaricom, 50.80; Airtel Africa, 46.10; Senegal Sonatel, 44.20, and Vodacom Tanzania, 35.30.

“MTN Nigeria is one of the stocks that has a bit of upside. There will be another initial public offering (IPO) by the parent company at most at a discount to the general public,” said an expert who doesn’t want his name mentioned.

Telecommunication companies have cried out about the high cost of doing business exacerbated by rising prices in the cost of diesel oil used to power plants.

MTN Nigeria’s share price closed trading at N230 per share in Lagos on Wednesday, valuing the company at NN4.68 trillion.

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