Maroc Telecom releases strong earnings

Maroc Telecom (IAM), a Moroccan telecom provider and the largest company listed on the Casablanca stock exchange has released a strong earnings report for the first half of this year. Earnings are carried by growth in the western African markets with averages around 17%.

Maroc Telecom has subsidiaries in a total of eleven countries in northern and western Africa. Its presence was cemented through the acquisition of local firms. This buying spree was made possible by the successful growth of the company in Morocco after the government sold most of its stake to bolster a more market-driven economy.

The company acquired additional African companies from its biggest shareholder Etisalat, the Emirati telecom provider, which holds 53% of its shares. This stake was previously held by French media company Videndi. The second biggest shareholder is the Moroccan government with a 30% stake.

The company has a significant presence in West Africa besides Morocco, where it is the major mobile service provider, with the largest market share in the mobile segment in three countries with respectively 57%, 51% and 46% in Gabon, Mauritania and Burkina Faso.

Market share by country

Source: Maroc Telecom

Three other countries are high potential markets where the mobile phone penetration rate is as low as 26% compared with the 124% of the relatively mature Moroccan market. Being strongly positioned there provides a significant potential for sales growth in the near future as the population embraces mobile telephony more.

Mobile penetration by country

Source: Maroc Telecom

This trend in mobile adoption is accelerating in poorer countries thanks to the increasingly lower prices offered by mobile phones company. Chinese manufacturers with a strong presence in Africa have introduced increasingly cheaper models to the sub-Saharan markets.

The African countries where the company is present showcase high one digit GDP growth rates and two-digit growth in the mobile phone market. The global revenue of IAM is expected to rise further by the end of the year.

The company's policy mirrors that of its country's foreign policy which is turned towards Africa. Casablanca, its largest city, is gearing itself into a financial and economic bridge between the continent and the rest of the world.

In Morocco, its base market, IAM faces the competition of Meditel and Inwi respectively the second and third telecom operators. Meditel was recently acquired by French operator Orange which intends to redesign its new subsidiary's look and marketing along its international guidelines.

The only potential risk facing Maroc Telecom's growth is the new development policy of Orange/Meditel. This policy is still unknown but is expected to be developed by the new CEO formerly CEO of Orange Egypt.

Global revenue in 2016 is up 6.1% from 2015 for the first six months and net income is up 3.2%. The origin of its sales is shifting away from Morocco thanks to the development of its other African markets. The share of revenues from the Moroccan market went from around 78% in 2012 to 60% today helping dilute its overreliance on that particular country.

Revenue by origin

Source: Maroc Telecom

The company is listed on both the Casablanca and Paris stock exchanges making it easier to invest in for investor not present in Morocco and the MENA region as a whole. This stock provides an opportunity to be exposed to the full potential of growth of African frontier economies. At the end of July 2016 the company had a market capitalization of 10.29 billion EUR.

Stock price

Source: Google

On a technical level, the stock price is breaking out of a bearish trend at 11.71 EUR and is still below its two years high of 12.45 EUR. The stock is in an uptrend since 2014 although still far from its ten year high of 18.15 EUR.