MTN’s share price plunged nearly 10% this week, devaluing the company by more than R7,6-billion, as investors punished the company for sitting on their money.
MTN released spectacular annual results as expected late last week, much like the results Telkom released days before. Although Telkom’s revenues makes it a third larger than MTN, the two companies’ net profits are comparable after MTN made R6,4-billion in its past financial year.
But while Telkom treated its shareholders to a R9 dividend, paying about R5-billion to investors, MTN declared a paltry 65c dividend, totalling just more than R1-billion. Analysts were expecting a dividend of 69c.
The company generated more than R12-billion in cash during the year and despite big investments in equipment was sitting on more than R6,4-billion of cash at the end of the year.
As soon as the results and planned dividend were announced, analysts started asking hard questions, to which group CEO Phuthuma Nhleko reacted with barely contained irritation.
Nhleko argues that the company needs to hang on to its cash to enable it to expand into more African countries or even elsewhere in the world.
That was the same answer he gave last year when analysts raised the same questions. In the meanwhile, the cash pile has only grown.
The money MTN does plan to spend on capital expansion in the current financial year amounts to almost R10,4-billion, almost a third more than the R7,2-billion Telkom plans to spend in the same time.
Almost R7-billion of MTN’s investment is earmarked for Nigeria where it is still furiously growing its network.