Casablanca – Maroc Telecom remains a compelling investment prospect, with BMCE Capital Global Research (BKGR) recommending the stock for accumulation. Setting a target price of $11.09 per share, BKGR sees a potential upside of 24% from its November 26, 2024, valuation, signaling investor confidence in the telecom giant’s long-term prospects despite ongoing challenges.
5G rollout: A catalyst for growth
The imminent deployment of 5G technology in Morocco is poised to be a game-changer for the telecom sector. Maroc Telecom, with its robust and 5G-ready network infrastructure, is well-positioned to lead this transition. Analysts predict that this advancement could drive a new wave of growth, opening up innovative service opportunities and revenue streams.
While BKGR’s current valuation does not include the potential financial impact of 5G, the firm believes this development will be a pivotal factor for future performance.
Financial Performance: Mixed Signals
- Revenue and EBITDA: By the end of September 2024, Maroc Telecom recorded consolidated revenue of $2.83 billion, a slight decline of 0.8% year-over-year, primarily due to competitive pressures in Morocco. However, African subsidiaries under Moov Africa mitigated the downturn, maintaining the group’s overall stability. EBITDA remained steady at $1.98 billion, though the EBITDA margin is projected to contract slightly to 52.4% from 52.7% in 2023.
- Net income: The group’s net income plunged by 64.8% year-over-year, standing at $191.75 million for 2024. This decline is largely attributed to the financial impact of the $618 million settlement with WANA, of which $422.68 million was a post-tax charge. Despite this, Maroc Telecom managed to return to profitability in the third quarter after reporting a deficit in the first half of 2024.
Dividend uncertainty amid financial constraints
Maroc Telecom’s dividend policy remains uncertain as it navigates a challenging financial environment. With distributable reserves at $958.76 million as of mid-2024, BKGR suggests three potential scenarios: maintaining the dividend at $0.41 per share, reducing it to $0.15 per share, or suspending it altogether.
This uncertainty adds complexity for investors, but the company’s ability to weather these challenges could determine its attractiveness as a dividend-paying stock in the coming years.
Regulatory and competitive hurdles
Maroc Telecom continues to face significant regulatory constraints, including asymmetric pricing policies and limitations on commercial offerings. These measures, in place since 2010, have hindered its ability to compete on equal footing with rivals.
In its African markets, particularly in Mali, intensified competition poses additional challenges. These pressures could impact the group’s market share and profitability, especially as it works to stabilize margins domestically.
A resilient investment outlook
Despite regulatory and competitive hurdles, BKGR remains optimistic about Maroc Telecom’s potential. The company’s stable operational performance, coupled with the upcoming 5G rollout, positions it for future growth. With a target price of $11.09 per share and expected revenue stabilization at $3.77 billion in 2024, Maroc Telecom continues to be a strong candidate for long-term investment portfolios.
As the telecom sector evolves, Maroc Telecom’s ability to navigate challenges and capitalize on opportunities like 5G will be critical to maintaining its leadership position in the Moroccan market and beyond.
