Investors have rallied around the stock of telecommunication behemoth MTN Ghana, following an official communication that the GHC8.2 billion back tax liability case levied against the telco by Ghana Revenue Authority (GRA) has been withdrawn.
The news saw MTN’s share price appreciating 7.3% from GHC0.82 at end of January to GHC0.88 at beginning of the second trading week in February – the first trading period after the case was dismissed. The share appreciation translated to a market capitalisation gain of GHC738 million.
The GRA had faulted the telco for under-declaring its revenues by as much as 30% in the five-year period spanning between 2014 and 2018, resulting in penalties and charges.
Subsequently, MTN registered its disagreement with the assessment made by the GRA – disputing both its accuracy and the methodology applied during the audit process – adding that the taxes owed had already been paid during the period in question and it would challenge penalties imposed by the Authority.
Following extensive engagements between both parties, the case was dismissed on Friday, February 3, 2023 – with the company’s share price reacting positively at the beginning of this week.
Commenting on MTN’s performance, a senior analyst at UMB Brokers, Kofi Busia Kyei, said the development was not unexpected as the market is maturing and reacting quicker to available information.
He added that despite the general investor unease MTN remains an attractive stock, and news that an action which could impact its profitability has been resolved will inevitably result in positive market movements.
“The figure in question was quite substantial whether we looked at it in cedi or dollar terms, and investors were always going to react. Similarly, news that the case had been resolved was well-received by the market, and that is what we have seen in the price movement,” explained Kyei, who doubles as Executive Director of the Young Investors Network.
If successful, the GRA case would have seen MTN pay more than the GH¢7.7billion and GH¢2billion it made in revenue and post-tax profit respectively in 2021 – and more than 10 times the GH¢767million the telco reported as profit-after-tax for the first nine months of 2022.
Despite the wider macro-economic concerns and initially-feared impact of the E-levy on MTN’s performance, it exceeded expectations in its last audited results – quarter-three in 2022 – with revenue hitting GHC1.41billion and GHC4.09 billion for the quarter and first nine months of 2022 respectively, due to robust data and voice revenue growth.
Over the past three months, MTN has been the most actively traded stock on the GSE with a total volume of 29.7 million shares worth GHC26.1 million. On average, 471,702 shares have been traded per session; with a peak of 13.1 million on 23 December and a low of 100 on 10 January official data show.
Despite its unit share price being 20.7% lower than the GHC1.08 recorded a year ago, MTN’s stock has appreciated by 10% in the last six months.