MTN Group CEO Sifiso Dabengwa has arrived in Nigeria to negotiate with the Federal Government over the N1.04trn fine imposed on the telecom firm by the Nigerian Communications Commission (NCC) ) for violating its directive on SIM deactivation.
Dabengwa, who led a powerful team from South Africa, is currently in Abuja where he will be engaging Nigerian authorities concerning the company’s fine.
Dabengwa, who served as CEO of MTN Nigeria between 2004 and 2006, is expected to meet with the NCC Executive Vice Chairman, Umaru Garba Danbatta, National Security Adviser, Major-General Babagana Monguno (rtd.), and Chief of Staff to the President, Alhaji Abba Kyari, to negotiate a soft landing for the company.
“Any material developments in these engagements will be communicated to shareholders,” a statement from the company issued monday stated.
MTN has until November 16 to pay the fine, which relates to the timing of the disconnection of 5.1 million subscribers and is based on a charge of N200,000 for each unregistered customer not disconnected from its network.
Trading in MTN shares resumed yesterday on the Johannesburg Stock Exchange (JSE) after the telecoms firm issued a cautionary statement on its shares. JSE had temporarily suspended trading in MTN Group shares after the company’s stock tumbled last week following a $5.2bn fine by the Nigerian Communications Commission (NCC) for violating its directive on SIM deactivation.
JSE Director, Issuer Regulation, John Burke, had stated that “The JSE has halted all trading on MTN Group Limited. Trading will resume as soon as MTN Group Limited issued a SENS announcement.”
In a statement later, MTN Group Executive for Corporate Affairs, Chris Maroleng, said: “We take note of the JSE’s decision to suspend MTN’s shares.”
Trading in the shares later resumed after MTN issued the cautionary statement.
After declining by about 20 per cent last week, the company’s shares dipped further by about eight per cent monday.
Credit rating agencies Fitch and Moody’s have lowered MTN’s credit rating outlook to “negative” from “stable”, citing the regulatory fine. Standard & Poor’s also lowered the group to “BBB-” from “BBB” and placed it on credit watch with negative implications.
Nigeria is MTN’s biggest market with 62 million customers as of September. The stock has declined more than a fifth since news of the penalty was reported a week ago, and is trading at about three-year lows.
MTN could also face an investigation from the JSE to determine whether it, among other things, failed to inform the market timeously about its fine in Nigeria.
The fine was announced early last Monday but MTN informed shareholders only later that day, saying the fine was related to the “timing” of the disconnection of subscribers.
Under South African capital markets rules, companies are required to immediately warn shareholders of any materially price-sensitive information.
MTN is Africa’s largest mobile operator, with 233 million subscribers across the continent, with large market share in South Africa and Nigeria. It also has a large presence in the Middle East.
However, its stock began to tumble last week following a $5.2 billion (N1.04trn) fine by Nigerian regulators for not disconnecting up to five million unregistered SIM cards.
Giving reasons for the fine, NCC had said the commission had consistently engaged Mobile Network Operators, (MNOs) to strictly adhere to the regulations and its business rules in the registration of their subscribers. But despite all of these several engagements, the commission said it confirmed various cases of violations of the regulations and sanctioned appropriately.
“Given the recent security concerns in the country, government held several meetings with MNOs on the need to ensure only properly registered SIM cards are active on their networks,” NCC had said while announcing the fine slammed on the firm.
Meanwhile, it is being reported that the recent kidnapping of former Finance Minister and Secretary to the Government of the Federation, (SGF), Chief Olu Falae may have been the final straw that prompted the Nigerian Communications Commission (NCC) bare its fangs and slam a hefty $5.2billion fine on MTN.
According to a post from Johannesburg, South Africa, by Matthew Davies, BBC’s Africa Business Report editor, Nigerian authorities were miffed when they found out that the kidnappers, who abducted Chief Falae from his farm on his 77th birthday on September 21, where communicating with his family allegedly with an unregistered MTN SIM.
The kidnappers had initially demanded a N100million ransom before the chief’s family was able to negotiate a lower ransom, which they paid. According to the report: “It’s thought that at that point, the Nigerian government finally ran out of patience with the mobile phone operator.”
The NCC had repeatedly warned the mobile telecommunication firms to deactivate unregistered SIM cards, which the commission insisted would help reduce crime across the country.
However, according to unconfirmed reports, MTN, which is the largest telecoms firm in the country, had failed to de-register about 18million SIM cards on their network.
The company has publically said it had ‘complied’ with the NCC directive by deactivating over 5million unregistered SIM cards from its network.
The report further says that it is believed that MTN’s chief executive, Sifiso Dabengwa, who was in charge of the Nigerian operations before taking up the top job, has been in the capital Abuja trying to negotiate some sort of reduction to the fine.
Meanwhile, MTN said in a statement it was in talks with the Nigerian presidency, internal security agency and telecom regulator to resolve the matter, Reuters reports.
“The company reiterates that engagements with the Nigerian authorities are continuing,” MTN said in statement, confirming a Reuters report earlier. And in a related development, South Africa’s bourse briefly suspended trading in telecoms firm MTN Group on Monday, after the stock fell as much as 8 percent as Africa’s largest mobile telecoms operator battles to reduce a $5.2 billion fine it faces in Nigeria.
The stock has fallen more than 25 percent in the past seven sessions, wiping in excess of 60 billion rand ($4.4 billion) off its market value, after the Nigerian Communications Commission (NCC) imposed the fine last week for failure to cut off unregistered users. After trading resumed hours later, MTN shares were down 5.9 percent at 148.51 rand at 1200 GMT. They earlier touched a three-year low of 142.50 rand.
One trader said the stock tumbled due to speculation the company had agreed to pay the fine, which is equivalent to almost a quarter of Nigeria’s 2015 budget of $22 billion and would wipe out more than two years of MTN’s annual profits.
“There has been some speculation that the company has agreed to pay the fine, but we really want to hear it from the company itself,” said Afrifocus Securities portfolio manager, Ferdi Heyneke. t was unclear what would happen to MTN, whose Nigerian licence is up for renewal in 2016, if the company fails to pay the fine, but NCC’s powers include revoking licences.
Some analysts said the size of the fine risked damaging Nigeria’s efforts to shake off its image as a risky frontier market for international investors. Others said the fine showed Nigerian regulators were keen to enforce the law.
The fine, if imposed as it is, would leave MTN with little money to spend on its network in Nigeria, where it the biggest player, said Africa Analysis’ Dobek Pater “Nigeria is stuck between a rock and hard place.
It’s an astronomical fine that would not only hit MTN profits but also its ability to invest in network, which is vital to Nigeria’s telecoms infrastructure,” Pater said.
Investors also hammered MTN debt with yields on company’s eurobonds soaring to all-time high on Monday.
The yield on the $750 million paper due in 2024 climbed to a record 5.975 percent by 0905 GMT, extending gains to 129 basis points since last week.
ThisDay with additional report from Agency Report