MTN takes fight over Nigerian fine to court

December 18, 2015, 8:45am

MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK

By Thabiso Mochiko, Bloomberg

MTN on Thursday said it was taking the Nigerian Communications Commission (NCC) to court over a $3.9bn fine imposed on the group for the alleged breach of rules on SIM-card registrations.

Its shares soared 6.31% to close at R138.20 on the JSE.

MTN was initially fined $5.2bn for not disconnecting 5.1-million unregistered subscribers as requested by the NCC. The fine has since been reduced and was due to be paid at the end of this month.

The initial fine was more than MTN’s total sales in Nigeria last year and the equivalent of about 37% of the group’s total revenue.

Nigeria is MTN’s biggest market by revenue and subscribers.

But on Thursday MTN said it had "thoroughly and carefully" considered all factors, including a review of the circumstances of the fine and subsequent letters from the NCC.

It said the manner of the imposition of the fine and the quantum was not in accordance with the NCC’s powers under the Nigerian Communications Act and therefore "there are valid grounds upon which to challenge the fine".

However, the group said it would continue to engage with the Nigerian authorities to "try ensure an amicable resolution".

Fallout from the fine forced MTN to overhaul its top team and operational structure.

The crisis forced Sifiso Dabengwa to resign as CEO and earlier this month MTN Nigeria CEO Michael Ikpoki and Akinwale Goodluck, the head of regulatory and corporate affairs, quit with immediate effect.

At the group level MTN reinstated the post of chief operating officer, previously held by Mr Dabengwa, and a search for a CEO is on.

MTN Nigeria’s chief financial officer, Ferdi Moolman, takes over as CEO of the Lagos-based unit.

MTN said it would revert to a structure used under the previous CEO, Phuthuma Nhleko, who has returned as executive chairman to handle the crisis.

The uncertainty over the fine has forced ratings agencies to review MTN’s credit ratings. On Tuesday Moody’s Investors Service lowered MTN’s credit rating to Baa3 from Baa2. The outlook is negative, signalling further rate cuts are possible. Fitch Ratings cut MTN’s rating one level to BBB-last week because of risks in Nigeria and SA, its two biggest markets. The outlook remains stable at Fitch. Africa’s largest phone company has a BBB-rating at Standard & Poor’s.

"The outlook could be stabilised if matters surrounding the Nigerian fine are clarified and resolved with limited or manageable implications to MTN’s Nigerian and group operations, as well as to their credit and liquidity profiles," said Ivan Palacios, an analyst at Moody’s in Madrid.

MTN operates in 22 countries across Africa and the Middle East.

On Thursday it announced that its Ghana operation, Scancom, had secured a 15-year fourth-generation (4G) or long-term evolution (LTE) licence in the 800Mhz spectrum. The spectrum was auctioned for $67.5m. LTE technologies provide superfast internet connections. The licence would enable MTN Ghana to launch 4G/LTE services to support the increasing demand for data services and improve customers’ data usage experience, said MTN.

MTN Ghana surpassed 15-million subscribers at the end of the third quarter this year. Data revenue increased 78.6% year on year for the nine months to September and contributed 28.7% to total revenue. Over the same period the operation had about 3-million smartphones on its network.

MTN said the licence and the spectrum would be awarded once the licence fee had been paid.

Many of MTN’s markets, including SA, are still at the early stages of rolling out the superfast LTE network. In SA, MTN provides 4G only in selected areas because of spectrum shortage.

Technology research and advisory group Ovum said in a report that the number of mobile broadband connections in Africa would reach 1-billion in 2020, up from 147-million at the end of 2014. The rapid growth of mobile broadband in Africa over the next few years will be driven by factors such as the roll-out of 3G and 4G/LTE networks and the increasing affordability of smartphones and other data devices.

With Bloomberg