MTN’s Nigeria fix promises longer-term headaches

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African mobile phone giant MTN has escaped from its $8 billion spat with Nigeria relatively lightly. But a token $53 million settlement shows the Johannesburg-based firm is prepared to pay to solve problems in its biggest market, rather than slug it out in the courts. And, while small, the payment may encourage further interference by cash-hungry politicians and regulators.

MTN lost $4 billion of its market value in September after the central bank accused it of repatriating $8 billion without the correct paperwork. Hopes for a negotiated outcome halved those losses, and to the relief of MTN shareholders the eventual settlement disclosed in late December was only a fraction of the $800 million originally touted in Nigerian media.

If this turns out to be the last regulatory hiccup MTN encounters, the payment will look like a bargain. In 2017, the Nigerian unit made $1 billion in earnings before interest, tax, depreciation and amortisation, nearly a third of group EBITDA. The prospect of launching mobile money services that could generate revenues of $1 billion a year, according to Breakingviews estimates, underscores the need to keep the central bank on side.

But staying out of trouble looks optimistic. Only two years ago, MTN had to pay a fine of more than a $1 billion for missing a deadline to cut off unregistered SIM cards. And it remains locked in another dispute over an alleged $2 billion in unpaid taxes. Moreover, the settlement itself may incentivise politicians to raid the MTN piggy bank in future. It’s not clear how the two sides arrived at the $53 million sum. And the relatively small payout is unlikely to do too much harm to Nigeria’s reputation with international investors.

MTN might take heart from the political cycle. With elections due in February, politicians may soon have less appetite for aggressive fines. There’s even a chance that business-friendly challenger Atiku Abubakar could supplant President Muhammadu Buhari. Still, by Wednesday MTN’s market capitalisation had surrendered most of the $935 million it gained immediately after the settlement was announced in December. That suggests the quick-fix remedy could create more headaches in future.

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