MTN gets upgrade, but Reliance talks hit share price

July 4th, 2008 - 9:37 am ICT by IANS  

By Fakir Hassen
Johannesburg, July 4 (IANS) South African mobile giant MTN Thursday got a boost with an upgrade from A+ to AA- by the Fitch Ratings Agency, but the silence on continuing talks with India’s Reliance Communications has seen the company’s share price see-sawing in recent weeks. With less than a week to go on the 45-day talks’ exclusivity agreement between MTN and Reliance Communications, MTN is still not saying anything about the proposed deal. Analysts have speculated that Reliance wants to buy out MTN.

There are now expectations in the market that MTN may extend the talks, increasing the uncertainty that has seen MTN shares going from its high of 165 rands three months ago, when there were rumours of an imminent deal with Bharti Airtel to, its current price of 118 rands.

After the Bharti talks fell through, the share price dropped to 140 rands.

MTN has also refused to comment in the wake of a letter last month to from Reliance Industries, led by Mukesh Ambani, the estranged elder brother of Anil Ambani, saying that under a family pact between them, his group had the first right of refusal to buy a controlling stake in Reliance Communications.

The Fitch upgrade has not made any significant difference to MTN’s price, even though the agency said it reflected MTN’s position as a telecommunications leader in emerging markets. A rider to the upgrade did mention that Fitch had taken note of the discussion between the management teams of MTN and Reliance, which could result in a review of MTN’s grading.

Fitch cited the 186 percent growth in MTN’s subscriber base in the Middle East and North Africa as showing that there was even more opportunity there, given the low market penetration. MTN operates in 21 countries in these regions, with a 53 percent growth in the last calendar year to more than 61 million subscribers.

Fitch said it had also taken cognisance of the high risk in developing markets where the economic, regulatory and political environments were often vulnerable.

Analyst Sisa Rafuza told the Afrikaans daily Sake24 here Thursday that the market was now getting very impatient and the share price of both MTN and Reliance Communications were losing value because of this.

“I hope that MTN makes an announcement on Wednesday (when the 45-day period ends) and gets done with it. The anticipation is causing so much speculation and uncertainty,” Rafuza said.

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