MTN stock rebounds on Ghana back-tax cancelation

Selorm Adadevoh, MTN Ghana CEO

Investors have rallied around the stock of telecommunication behemoth MTN Ghana, following an official communication that the GH¢8.2billion back tax liability case levied against the telco by Ghana Revenue Authority (GRA) has been completely withdrawn.

The news saw MTN’s share price appreciating 7.3 percent from GH¢0.82 at end of January to GH¢0.88 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 GH¢738million.

The GRA had faulted MTN Ghana for under-declaring its revenues by as much as 30 percent in the five-year period spanning between 2014 and 2018, resulting in penalties and charges.

The GRA did so on the basis of an alleged audit by a shady entity called Safaritech Ghana Limited, which was said to have used some unique methodology to arrive at the conclusions. The claims of Safaritech were at variance with the result of the independent assessment by a more reputable firm, KPMG.

MTN therefore 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 over a period of 21 days, 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 Mr. 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¢7.7 billion 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 GH¢1.41billion and GH¢4.09billion 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 GH¢26.1million. On average, 471,702 shares have been traded per session; with a peak of 13.1 million on December 23 and a low of 100 on January 10, official data show.

Despite its unit share price being 20.7 percent lower than the GH¢1.08 recorded a year ago, MTN’s stock has appreciated by 10 percent in the last six months.


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