MTN Drops After Return to Profit Falls Short of Expectations

JOHANNESBURG (Capital Markets in Africa) – MTN Group Ltd., Africa’s biggest mobile-network operator by sales, fell the most in more than a year after a return to first-half profit after a $1 billion regulatory fine fell short of analyst expectations.

Headline earnings per share, which exclude one-time items, were probably 2.10 rand to 2.30 rand in the six months ended June 30, the Johannesburg-based company said in a statement Thursday. Analysts at Citi expected 2.60 rand a share, they said in a note.

“The market expected a bit more, about 10 percent more in the numbers,” Peter Takaendesa, an analyst at Mergence Investment managers in Cape Town. “If you strip out the fine numbers and you just look at what they did operationally the numbers should have been a bit higher.”

The shares slumped as much as 7 percent, the most since June 2016, and traded 4.2 percent lower at 121.87 rand as of 9:19 a.m. in Johannesburg.

While the numbers may have underwhelmed, the return to growth allows MTN to start moving beyond a tumultuous period that began with the Nigerian fine in October 2015. Originally set at $5.2 billion, that led to the resignation of the chief executive officer and months of negotiations before it was eventually settled just over a year ago. New CEO Rob Shuteris focused on growing MTN’s largest markets including Nigeria and Iran.

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While MTN and cross-town rival Vodacom Group Ltd. are facing increased regulatory pressure in some African markets, both companies have the scale to benefit from some competitors beating a retreat from the continent. MTN is seeking to expand its services, and has held talks with Naspers Ltd.’s TV services Multichoice about sharing content sharing.