Today's edition
Borrowed Time
Good morning. MTN spent a year lending people airtime and only getting about half of it back, but now says it is ready to give it another go. Bidcorp, which built itself by buying other people's businesses, says the buying is more or less done. And Northam Platinum, which three years ago was the one doing the chasing, has spent this week being chased.
Nobody is doing quite what they were doing last year. Let's get into it.
MARKETS
SIM AND SIM AGAIN
MTN spent a year lending less airtime, and now says it is ready to start again
MTN South Africa puts about 90 million prepaid SIM cards into a country of 65 million people every year, and reckons the industry as a whole pushes out 200 to 300 million. It doesn't take much napkin math to know that almost none of them find a new customer. They’re landing in the same hands, with people carrying multiple SIMs and jumping between networks depending on who has the best offer.
That became a problem for XtraTime, which lets MTN customers borrow airtime and repay it the next time they recharge. At its height, MTN was advancing up to R800 million a month. But if a customer borrowed airtime and then switched to another SIM instead of recharging with MTN, the money didn’t come back. So MTN's CEO deliberately turned the tap down.
What turning the tap down cost:
- Advances came down from R800 million a month to between R400 million and R500 million, and in-month repayments rose from about half of borrowers last October to about 70%.
- Naturally, the South African subscriber base fell 0.7% to 39.5 million in the six months to June, and the prepaid half of it shrank 4.5%.
- Prepaid service revenue also fell 3.3% over those six months. Cash recharges, with the advance repayments set aside, grew 9.4%.
South Africa puts no limit on how many SIMs one person may hold. MTN has capped itself at ten per registration, and MTN's CEO draws a straight line from a base turning over this fast to the syndicates taking over people's WhatsApp accounts.
OFF THE MENU
Bidcorp bought five businesses last year, and they added about one percent of its sales
A good chunk of the food on a restaurant’s shelves may arrive from what looks like a local distributor. But in more than 35 countries, many of those distributors sit inside Bidcorp, a South African group out of the Bidvest stable that got there mostly by buying other people's businesses. On Wednesday it reported R242.2 billion of food sales for the year to June, up 5.0% in constant currency, and told the market it would rather grow from here without buying much at all.
Last year's five deals show why. A seafood wholesaler in the north-east of England, distributors in Sardinia and Kuala Lumpur, a fish processor in Poland and Fridge Foods in the Cape added R2.7 billion of revenue between them, and R142 million of trading profit against R13.8 billion for the group.
What the buying actually buys is efficiency: Bidcorp takes on a local distributor, leaves the people running it in place, and moves compliance, finance, IT and hiring up to the group. Trading profit grew 8.2% last year, faster than revenue did. The group put money into its own shares instead, buying back 2.6 million of them at an average of R409.35 while they deemed the price weak.
The habit has not gone anywhere yet. Two more deals were struck after the year ended, both on ground where Bidcorp already trades.
BAGEL BITE
Which planet in our solar system spins on its side?
A. Neptune
B. Uranus
C. Saturn
DOING THE ROUNDS
Northam Platinum got an offer it did not ask for, and has invited everyone else to bid too. Three years ago, Northam was the one chasing an offer, and it never came through. This week an unnamed major South African platinum producer approached its chief executive, and the board's answer was to open a three-phase contest and invite every credible buyer in, the first approacher included. The share moved enough on Tuesday to trigger a short trading halt, valuing Northam at about R122 billion. Nobody has named a price. Full story →
Some of the world's biggest investors told Naspers how they would vote before the meeting, and it was against. Storebrand, Van Lanschot Kempen, New York City’s pension funds and California’s public employees’ fund all disclosed votes against directors ahead of Wednesday's annual meeting, over a structure that hands insiders including chair Koos Bekker a thousand votes a share while everyone else gets one. Norges Bank Investment Management and California's teachers went after the pay instead. The same objections have been raised before and overruled by those same votes. Full story →
Alibaba has raised $10 billion in Hong Kong to pay for artificial intelligence, and its own founder was buying days later. It sold 710 million new shares at HK$112.70 each, and the market read the dilution before the ambition and knocked the stock down 8.5% on Monday. Chairman Joe Tsai and chief executive Eddie Wu bought shares that same day, and co-founder Jack Ma followed with more than HK$600 million of his own. It is Hong Kong's biggest share sale since Prosus sold $14.7 billion of Tencent in 2021. Full story →
Bitcoin has broken back through $80,000 after its strongest week in about three years. The cryptocurrency touched $81,257 on Tuesday, taking its seven-day gain to 23% and wiping out around $7.2 billion of shorts along the way. The rally began after the US Treasury said it would buy back more long-dated bonds, helping push yields and the dollar lower. But even after this run, bitcoin remains more than a third below the $126,000 high it reached in October. Full story →
WEATHER
BAGEL GAMES
Have you got what it takes to win today’s Wordle? Play here →
THE ANSWER
As for the Bagel Bite, the answer is: B. Uranus
Most planets rotate with only a slight tilt, but Uranus is tipped almost completely sideways. Scientists are not certain why, although a massive collision early in its history is one leading explanation. Because of its extreme tilt, each pole can experience decades of sunlight followed by decades of darkness. Uranus takes about 84 Earth years to complete one orbit around the Sun.
That's your Thursday wrapped. Enjoyed it? Forward it on, a friend can subscribe in a click. Written by the Business Bagel crew.
