March 2nd, 2009

Ok, todays stock-review is going to be short. Since I wrote about Millicom I've been a little curious if there are other companies like it, and possibly in better positions. Well, there are:
MTN is another company in the mobile-telephony business which is very strongly exposed to the african markets. Really all they have is exposition to Africa, and to a small degree, the middle-east. And as you might remember from my Millicom-exposé, Africa had the absolute best growth-rates of all the places where Millicom was active (~100%). In comparison of the two, Millicom has a p/e of ~10, and MTN has almost 14; the revenue-growth of Millicom is 29%, and MTN 35% - this compares Millicom for full year 2008 and MTN for only first half of 2008; MTN will release full year results on March 12.
The reasons for Millicom's lower valuation I suppose would be because of it's large dependence on the much more mature markets of Latin-America. MTN practically dominates african markets and are present in most countries there. The greatest revenues come from Nigeria and South Africa with 30% and 40% respectively. As is well-known, the economies of these two countries have been driven pretty strongly by high prices of oil and metals, but they are still showing better growth than Latin America (between 06-07 Nigeria had growth of ~40% and SA had ~18%).
We're all aware of the great instability that has plagued Africa for many years, and obviously this is very problematic. But if you consider the great growth and the great potential for continued growth and the very large number of countries where MTN is active, political problems might just represent minor bumps. Because of the great instability of Africa in the past it might just, oddly enough, represent the most stable place to be in right now and for a few years ahead - especially in a strongly growing sector like telecommunications. I might add that the middle-eastern countries where MTN is active also show very strong growth, like Iran's 485%! Don't worry - I'm not going to make some lame bomb-Iran joke...!
In conclusion, I would personally prefer MTN to Millicom, but only by a thin margin - african instability still makes me plenty nervous, but so does 'instability' of financial chaos...
(edit: Odd coincidence, Millicom had a minor crash today as they announced a change in management. That thin margin might just have switched in Millicom's favor.)

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