South African Telecommunications: Sector Keys: Our 2026 initiation highlights

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South African Telecommunications: Sector Keys: Our 2026 initiation highlights

Where could our thesis be wrong?

SA prepaid competition intensifies / goes on for longer: The risk would be that the competitive environment intensifies, with

MVNOs and smaller players gaining more share than we expect. Furthermore, MTN could be forced to respond through aggressive price

hikes or increases in value for the same price or increases in distribution incentive costs. This would have a negative impact on both ARPUs,

revenues and SA margins.

Execution risk in scaling its fintech business: MTN is the largest mobile financial services business in Africa, and given the rising

demand for financial services there have been many new fintechs entering MTN's markets, sometimes with much lower transaction costs.

This could make it difficult for MTN to scale its business as effectively as we expect and could put pressure on margins.

Execution risk re M&A: MTN is in the process of acquiring IHS, an infrastructure business largely operating across MTN's markets. The

timing is still uncertain; however, we would flag potential execution risk in re-integrating the business. Furthermore, it exposes MTN to

more currency risks as well as meaning that leverage will increase as a result, potentially putting a strain on FCF.

Deteriorating market conditions: There's risk of deteriorating market conditions across MTN's countries of operation, particularly in

Nigeria. This could have a negative impact on currency, which could see profits deteriorate and MTN potentially returning to a negative

equity position in Nigeria. This would negatively impact shareholder remuneration.

Increasing oil price: This could mean an increase in network costs, which could potentially affect margins.