MTN Group, Africa’s wireless telecommunications giant, had a rough start to the year.
Stiff competition, regulatory action, weakening currencies, and a labor strike in its home base, South Africa, conspired to slash the company’s first half earnings by 24.2%, and its shares have dropped 21% since their September high.
But don’t push the “sell” button quite yet.
I believe the stock is positioned to deliver solid returns over the next three to five years.
Here are seven reasons why:
1. Africa’s coming data boom
While the market for voice calls is all but tapped, Africa’s demand for wireless data services remains in its nascent stages.
Just 3% of the continent’s rural communities are connected to a fixed telephone network, and relatively few urban residents can afford the cost of a DSL or broadband cable connection in their home. Thus, for the vast majority of Africans, the easiest, most efficient way to use the Internet is with their mobile device.
And demand for internet access has thus far been limited only by wireless operators’ capacity to expand their 3G and 4G coverage areas. In 2006, MTN’s largest market, Nigeria, was home to 7.9 million internet users. Today, that figure stands at well over 79 million. Remarkably, this is still less than half of the nation’s total population.
As a result, MTN’s data revenue has soared, surging 33.2% in 2014 and 21.2% in the first half of 2015.
And it looks like this trend’s got legs.
Read more: 7 Reasons to Be Bullish on MTN Group