Geopolitical Instability And Rising Costs Will Hamper Prospects

Key Takeaways

• Geopolitical instability, currency devaluation, and regulatory headwinds pose major risks to MTN's cash flow, earnings, and ability to reinvest for growth.
  
• Intensifying competition and commoditization of core services are compressing margins and hindering long-term revenue and profit expansion.
  
• Expanding digital services, fintech growth, operational efficiencies, and strategic asset optimization are driving diversified revenues, margin stability, and stronger shareholder value for MTN.

Catalysts

Provides mobile telecommunications services in South Africa, Nigeria, South and East Africa, West and Central Africa, and the Middle East and North Africa.

• Persistent geopolitical instability and conflict, particularly in Sudan and other key African markets, threaten MTN Group's operational continuity, create expropriation risks, and make it increasingly difficult to repatriate profits, which can materially disrupt cash flows and restrict MTN's ability to reinvest for growth and maintain future dividend payments.
  
• Sharp and ongoing devaluation of local currencies-most notably the Nigerian naira-continues to erode reported service revenue and net earnings when consolidated in rand, making strong underlying market performance in constant currency insufficient to drive group-level bottom line growth.
  
• Surging global interest rates and tightening financial conditions will raise MTN's cost of capital at a time when refinancing obligations like the 2026 Eurobond are looming, potentially forcing the company to limit critical capex or refinance on unfavorable terms, constraining earnings and free cash flow.
  
• Regulatory risks are intensifying across core markets, with unresolved compliance issues, tax disputes, licence renewals, and new sector-specific costs in Nigeria and other jurisdictions likely to increase legal and operational expenditure, compressing net margins and exposing MTN to unexpected financial penalties.
  
• The commoditization of data and voice services, along with rapidly rising competition from Over-the-Top (OTT) providers and increased customer churn due to technologies like eSIM, will cap ARPU and put sustained downward pressure on industry-wide profit margins, limiting MTN's ability to grow total revenue and deliver long-term earnings expansion.

MTN Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on MTN Group compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming MTN Group's revenue will grow by 12.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -5.1% today to 10.6% in 3 years time.
• The bearish analysts expect earnings to reach ZAR 28.8 billion (and earnings per share of ZAR 15.26) by about August 2028, up from ZAR -9.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.2x on those 2028 earnings, up from -31.1x today. This future PE is lower than the current PE for the ZA Wireless Telecom industry at 16.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 16.74%, as per the Simply Wall St company report.

MTN Group Future Earnings Per Share Growth

Risks

• Strong secular trends, such as rapidly rising data and mobile penetration across Africa, continue to expand MTN's addressable market, which supports sustained long-term revenue growth as seen in accelerating data growth of over twenty-one percent and expanding active data subscribers.
  
• MTN's fintech operations, including mobile money and advanced financial services, are scaling quickly with high-quality revenue growth of nearly twenty-nine percent, helping the company diversify its income streams and enhance net margins beyond traditional telecom services.
  
• Operational efficiency initiatives, such as cost optimization, digitization, and expense reductions, are successfully containing costs and supporting margin stability or expansion, as indicated by meaningful margin improvements in the second half of the year and over three-point-eight billion rand in annual savings to bolster earnings.
  
• Strategic deleveraging and asset-light measures-including tower sales and network sharing-are improving free cash flow generation and lowering capital intensity, positioning MTN for healthier balance sheet metrics and increased capability to return value to shareholders through higher dividends.
  
• Broadening digital ecosystems and new partnerships (like Mastercard for fintech and engagement with LEO satellite providers) open additional channels for customer and revenue growth, potentially supporting improvements in both service revenue and medium-term profit growth as digital adoption accelerates in key markets.

Valuation

• The assumed bearish price target for MTN Group is ZAR82.68, which represents two standard deviations below the consensus price target of ZAR159.89. This valuation is based on what can be assumed as the expectations of MTN Group's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ZAR220.0, and the most bearish reporting a price target of just ZAR73.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ZAR271.7 billion, earnings will come to ZAR28.8 billion, and it would be trading on a PE ratio of 8.2x, assuming you use a discount rate of 16.7%.
• Given the current share price of ZAR165.0, the bearish analyst price target of ZAR82.68 is 99.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.