MTN Shares Plummet for Second Day on NCC Fine

Shares of Africa’s biggest mobile operator, MTN Group, fell for a second day on Tuesday, easing 4.2 per cent to 159.98 rand on the Johannesburg Stock Exchange (JSE), as investors scrambled to cut their losses following the news of the N1.04 trillion ($5.2 billion) fine imposed on the company’s Nigerian subsidiary.
The decline saw MTN’s shares extend their losses to nearly 16 per cent over the last two days, wiping about 50 billion rand ($3.66 billion) from the company’s market value, reported Reuters.
The Nigerian Communications Commission (NCC) had slapped the N1.04 trillion fine on MTN Nigeria last week for failing to fully deactivate 5.2 million subscribers with unregistered and incomplete SIM card details on its networks within the stipulated deadline given all mobile phone operators in the country to comply with the directive.
Based on NCC regulations, the fine was based on N200,000 per unregistered subscriber. The company was given till November 16 to cough up the fine.
But in a bid to lessen the impact of the record fine on its business, the company was said to have commenced talks with NCC to try to reduce the fine, two sources familiar with the matter confirmed yesterday.
“MTN is talking to NCC with the view to revoking or reducing this fine,” one source was quoted by Reuters as stating yesterday. “There was a bit of misunderstanding around this issue.”
Another source said MTN had been in talks with NCC about the exact number of people using unregistered SIM cards when the deadline to disconnect them passed.
“MTN was under the presumption that it can carry on business as usual because it was still in discussion with the regulators,” the source said.
If it stands, the penalty will wipe out more than two years of MTN’s annual profits. Nigeria is MTN’s biggest market by subscribers, contributing to a third of the group’s revenue.
MTN spokesman in South Africa Chris Maroleng would neither confirm nor deny that the company was working on reducing the fine.
An NCC source said the commission’s decision was taken based on the advice from the Office of the National Security Adviser (NSA), which suspected unregistered SIM cards were being used for criminal activity.
The kidnapping of elder statesman and a former Secretary to the Federal Government (SGF), Chief Olu Falae, last month compounded matters for MTN when it could not provide information on its mobile numbers that were used by the kidnappers to negotiate a ransom with Falae’s family for his release.
However, analysts were of the view that the size of the fine risked damaging Nigeria’s efforts to shake off an image as a risky frontier market for international investors.
NCC initially asked MTN to disconnect between 10 and 18.6 million users but MTN told the regulator it had 5.2 million unregistered users on its network, the NCC source said.
The heavy fine has raised worries about doing business in Nigeria whose finances have been hit by falling crude oil prices.
Investors have seen risks growing in the West African country, as President Muhammadu Buhari shows little sign of following up on promises of economic reform.
“Nigeria stands to lose as much as MTN does if the fine stands as it is,” said BPI Capital Africa’s analyst Kate Turner-Smith. If MTN decided not to renew its licence or pull out of Nigeria, it would be “detrimental for Nigeria’s communication infrastructure and image among foreign investors,” she said.
Sasha Naryshkine, a fund manager at Vestact in Nigeria, said the fine highlighted the risks of doing business in countries that are not friendly to investors.
“If you want to attract capital to your shores, you had better think carefully how you treat businesses that promote the economy,” he said.
A source in MTN Nigeria’s office informed THISDAY that whilst his company would do all it could to plead for a complete waiver or reduction of the fine, he could not rule out some form of intervention from the government of South Africa if MTN fails to make any headway with the regulator.
He said Nigeria and South Africa, Africa’s two biggest economies, would be keen on avoiding a diplomatic row arising from the fine and yet another sanction imposed on the directors of another South African subsidiary, Stanbic IBTC Holding Plc, by the Financial Reporting Council of Nigeria (FRCN) on Monday.
“As you know, relations between both countries have been testy in the past and efforts are being made to improve ties. So both sides will seek to avoid another flare up,” he said.

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