MTN's stock is a buying opportunity, according to analysts, after the telecoms giant finally reached a settlement on a drawn-out battle with Nigerian authorities.

On Friday, MTN announced it had agreed to pay $1.671 billion (R25.3 billion) to the Federal Government of Nigeria, over three years, in settlement of a fine from the Nigerian Communication Commission, levelled against it last year.

The fine was for failing to meet a deadline to disconnect 5.1 million unregistered SIM cards on its Nigerian network.

"I think this is very good news which will be welcomed by investors and the market as a whole. The news will give some impetus to the operator and its plans for the region, in terms of creating additional services and driving revenue growth," says Ovum senior analyst Richard Hurst.

He says we can expect to see interest in MTN shares increase as retail and institutional investors return to the stock.

"Given the current share price, the market capital and the number of subscribers and markets the company operates in, there is defiantly a buying opportunity on the table," Hurst adds.

Shareholders seem to agree as the stock closed over 13% up on Friday at R140 a share, on the back of the news. In early trade this morning, the stock was up almost another 1%.

'Ridiculous' fine

The original $5.2 billion (R79 billion) fine was slapped on MTN last October but was later reduced to $3.9 billion (R59 billion). After over seven months of negotiations between MTN's leadership and the Nigerian authorities, the final amount settled on is less than a third of the original fine and less than half of the revised amount.

However, BMI-TechKnowledge director Brian Neilson says in his opinion, the fine is "still ridiculously high" especially when "compared against fines on any operator by any regulatory authority across the globe".

"The company can probably afford to pay the fine, as the share price reveals, or it would have tanked. The share price went up because the certainty investors crave has finally been achieved," adds Neilson.

The looming fine has done some major damage to the MTN share price since it was announced last year. The stock dropped around 26% in value since October and around 30% over the past 12 months. However, the news of a settlement on the fine did help boost the stock, and the MTN market cap is back up to around R258.4 billion.

"I think there may have been some reputational damage but the key issue is that the management and leadership have moved to bring closure and clarity to the issue, which is something the investors and markets will want to see," adds Hurst.

A $250 million (R3.8 billion) "good faith payment" already paid by MTN in February will be deducted from the $1.7 billion settlement amount and the remaining penalty will be settled in six instalments over the next three years.

Listing promise

An additional provision in the settlement agreement was that MTN Nigeria promised to "take immediate steps to ensure the listing of its shares on the Nigerian Stock Exchange as soon as commercially and legally possible after the date of execution of the settlement agreement".

Neilson says the promise of a future listing is an "interesting move" and suggests MTN Nigeria will become more ring-fenced in future.

"It is notable the MTN Group states the Nigerian operation can afford to pay the fine under its own balance sheet, and will not impact the MTN Group's balance sheet. Ring-fencing the Nigerian business would give investors in MTN Group more certainty about the impact of the fine on the group dividend policy, including how the fine will be paid from a cash flow perspective," says Neilson.

The possibility of a Nigerian listing is not a new idea. At MTN's full year financial results presentation in March, executive chairman Phuthuma Nhleko indicated MTN could consider listing the local operation, MTN Nigeria, in the future.

At the time, the company also said around 10% of the shareholding in MTN Nigeria was available for over-the-counter trading.

Hurst says there could be several reasons why MTN would want to list in Nigeria.

"One could be to begin spreading the risk and reward among the Nigerian investors themselves, and the second, to give the sense that MTN is a Nigerian company of the brand and offer some local identity to the company."

However, he believes this could be "a double-edged sword in that it gives the operator a local foundation, so to speak, but it may detract from creating value for the group as a whole".

MTN says it will only list in Nigeria when it is "commercially and legally possible", after the date of execution of the settlement agreement. The final payment is scheduled for 31 May 2019.