Enron prophet is shorting MTN on Nigerian, SA woes
MTN has received a $5.2bn fine in its biggest market Nigeria. (Bloomberg)
New York - Jim Chanos, founder and managing partner of Kynikos Associates, said he’s shorting MTN as demand in its biggest markets suffers from falling commodity prices.
MTN gets more than 60% of its sales from Nigeria, East Africa and South Africa, where declining oil and metals prices have slowed economic growth. Subscriber numbers have fallen in Nigeria, its biggest market, exacerbated by a government order to disconnect customers. There, the company is facing pressure from cash-strapped authorities looking for funds through fines, the hedge fund manager said on Wednesday at the Sohn Investment Conference in New York.
“Nigeria is a borderline failed state in our view," said Chanos, who predicted the 2001 collapse of Enron. Profits to MTN shareholders could be “eviscerated” by about 50%, he said.
MTN was fined a record $5.2bn (R78bn) in Nigeria last year for missing a deadline to disconnect subscribers, whom the government had deemed unregistered amid a crackdown on security. The company is still in negotiations about settling the penalty, which was later reduced to $3.9bn (R58.5bn).
"MTN does not share Jim Chanos’ views," MTN spokesperson Chris Maroleng said in an e-mailed response to questions. “Our views of the future prospects of MTN, as occasionally shared with shareholders, remain positive and unchanged,” he said.
MTN will shortly give its assessment of market conditions in sub-Saharan Africa and what the company’s plans are given the strident economic conditions that prevail in a number of markets, Maroleng said.
Sub-Saharan African nations are battling a decline in commodity prices as well as China’s retreat from the region by wrapping up several commodities-related projects, said Chanos.
MTN shares fell 4.9% to R132.37, a three week low, by the close in Johannesburg on Thursday. The stock has declined 45% over the past year.
While there are concerns about MTN’s share price because of the protracted negotiations with the Nigerian regulator, “we do not think MTN is a short-sell,” Fabian de Beer, chief investment officer at Cape Town-based Mergence Investment Managers, said by phone. “We expect the company to still deliver a decent dividend yield.”
In the past, Chanos has been outspokenly negative on China’s debt surge, likening it to that which preceded Japan’s lost decade in the 1990s. He’s said for at least six years that the country’s property market will slump, and that the nation is on a “treadmill to hell” because of its reliance on real estate for growth.