Mr. Nel, an entrepreneur who is currently 55 years old, took early retirement from his business which
he had started 30 years ago. He still wants to be involved in investments to keep his mind occupied
while on “permanent” holiday. While thinking about investment opportunities, he realised that one
of his most consistent expenses is his cell phone bill. He has a MTN and a separate VODACOM contract
which he pays monthly.
He thought to himself, “Why not invest in the company that I am contributing to on a monthly basis.”
He decided to conduct research on the two entities in order to assist him with his investment decision.
The following information was gathered regarding the two companies:
Vodacom is a leading African communications group providing mobile communications and related
services to 40.4 million customers. Its mobile network covers calls to a total population of
approximately 182 million people across five countries: South Africa, Tanzania, the DRC, Lesotho and
Launched in 1994, the MTN Group Limited (MTN Group) is a multinational telecommunications group
offering cellular network access and business solutions. It has mobile licenses across 21 countries in
Africa and the Middle East and has more than 98.2 million subscribers.
1. Calculate the standard deviation of both service providers and interpret which share carries
the most total risk? (7)
2. Which cell phone service provider should Mr. Nel invest in from a risk management
perspective and why?