MTN Puts Out Fires in Benin, Cameroon to Shore Up African Base

(Bloomberg) -- Benin and Cameroon appear to have escaped MTN’s chopping block.

MTN Group Ltd. said Thursday it has all but resolved disputes with the governments and regulators in the two West African markets, suggesting they won’t be abandoned in a widespread review of its sprawling empire.

In Benin, which accounts for about 2 percent of the Johannesburg-based company’s subscribers, Africa’s biggest mobile-phone operator by sales agreed to pay 70 billion CFA Francs ($126 million) to settle a dispute over frequency fees and secure a five-year license extension. In Cameroon, MTN is on the verge of signing revised terms even after revenue in the country declined and rival Vodafone Group Plc pulled out.

MTN had been at odds with authorities in both countries over the terms of its licenses, and Chief Financial Officer Ralph Mupita said in March that the company could walk away if the situations proved impossible to resolve. That made both favorites for a potential exit by MTN as Chief Executive Officer Rob Shuter weighs whether the company really needs to be in all 22 of its markets across Africa and the Middle East.

The spotlight now turns to Yemen and Afghanistan, two of only four countries where MTN lost customers in the three months through March. The declines contributed to a 1.3 percent quarter-on-quarter slump in the company’s Middle East and North Africa region, and both nations have been beset by military conflicts that have hampered business.

“They will probably wait for those markets to stabilize to some extent and potentially exit at a good price,” Peter Takaendesa, a money manager at Cape Town-based Mergence Investment Managers, said by phone. “It’s too early for them to exit now.”

Overall, however, MTN painted a rosy picture in its first-quarter update released on Thursday. Subscriber numbers gained 1.9 percent -- compared with a fall in the same three-month period last year -- while revenue soared in Nigeria and Iran, two of the company’s three biggest markets. In South Africa, the profit margin widened even as the company lavished cash on its network.

The shares responded accordingly, accelerating as much as 5.5 percent to 133 rand, the highest in almost two months. That said, the stock remains about the half the value of a 2014 peak -- before a $5 billion regulatory fine in Nigeria heralded the start of more challenging times.

“The key positives is that their margins have recovered faster than expected in Nigeria and South Africa,” Takaendesa said.

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