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‘Impossible. MTN cannot pay N1.04trn NCC fine’

‘Impossible. MTN cannot pay N1.04trn NCC fine’
October 28
13:27 2015
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It is impossible for MTN Nigeria to pay the N1.04 trillion fine it incurred from the Nigerian Communications Commission (NCC) for alleged breach of SIM registration rules, TheCable has been told.

On Monday, Umar Danbatta, chief executive officer of NCC, approved punitive sanctions totalling N1.04 trillion ($5.2bn) against MTN Nigeria for SIM registration breach.

The sanction, which is the largest in Nigeria’s telecoms history, immediately affected the MTN group, as the company experienced a drastic decline in its stock, falling by over 12 percent in one day – the largest decline in 17 years.

MTN stock closed the day on Johannesburg Stock Exchange (JSE) at 167 Rand, its lowest closing price since June 2013, a feat which continued on Tuesday extending the stock fall to nearly 16 percent .

Speaking with TheCable, an expert in the telecoms industry revealed that it would be literally impossible for MTN, valued at $23 billion in 22 countries, to pay such a fine based on its annual revenue generation.

“The fine is definitely going to affect MTN. It is going to shake investors’ confidence in the business,” he told TheCable, asking not to be named.

“If you have a business that has less than a trillion naira, about N800bn as total revenue, and you’re fining them N1.4tr, that means there’s no profit in that business.

“It is really, really impossible for them to pay that kind of fine. If I were an investor in that business, I would sell my position. I would exit the business. You would have seen that their share price off the JSE fell by over 12 percent.”

On the breakdown of the fine, which translates to N200,000 for each unregistered SIM, the expert said the regulatory body acted well by imposing the sanction, but added that it was not commensurate with the offence.

“I do not think the NCC has overreacted, but I think the fine is grotesque. It’s unusual, it’s abnormal, you can’t explain it, and it’s clownish. This is not politics, this is business.

“Yes, placing sanction is in order; the fine is meant to be commensurate with the offence. If you are accusing them of not deactivating 5.1 million unregistered subscribers, in how many years will those five million subscribers give them N1trn, in terms of revenue and profit?

“What is the cost per user for those five million people? What is the profit and revenue they would have made from those five million – profile them and then calculate how to fine them.”

The case against MTN, the largest telecoms company in Nigeria, was further strengthened by NCC’s position that the telco was undermining the efforts of the Nigerian government in tackling insurgency and other security challenges.

Experts across the continent are also of the opinion that the fine is huge for MTN, and would not just affect the firm but also the Nigerian economy if MTN decides to pull out of the country.

James Faircliff, a money manager at Tower Capital Management in Johannesburg, had said earlier that events like this affect doing business in emerging markets and makes investors uncomfortable.

“Events like this, even if the final outcome, is a lesser fine, still highlight the unmanageable risk of doing business in highly regulated industries in emerging markets,” he told Bloomberg.

“We feel that uncomfortable relations with the Nigerian regulator could pose added risk to the pending license renewals in that country.”

MTN Nigeria, which controls 43 percent of Nigeria’s subscriber base, has been given till November 16 to pay up the fine.

Diplomatic ties between Nigeria and South Africa are also said to be suspect, following sanctions on South African businesses in Nigeria.

Stanbic IBTC, a subsidiary of South Africa’s Standard Bank, was sanctioned by the Financial Reporting Council on the same day MTN was fined by the NCC.

MTN is in talks with the NCC to review the fine.

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4 Comments

  1. guessedwho
    guessedwho October 28, 14:23

    In as much as we all know the fine is huge. The law also cannot be broken by investors. Its a national security issue we are talking about. the safety of over 170m people and somebody is saying if they pull out. if they pull out, 2 things. added advantage to their competitors, those guys will grown with market share which means, more people to hire on their payroll and more indirect employment by their suppliers and partners. secondly, MTN cannot risk leaving Nigeria, it will affect the group greatly. not to talk of more investors that are awaiting bench to buy-out their Nigeria business should they decide to leave. Alternatively, regulator agree to reduce the fine but request the group fire the Nigeria board. Nigeria cannot remain a lawless country. some people just have to be use as scapegoat to serve as detriment to others.

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  2. Emmanuel Maluba
    Emmanuel Maluba October 28, 14:28

    James Faircliff must be a backyard money manager. He should tell us how foreign investment means you should run foul of the laws of the land. He should tell us why other telcos complied and what motivated MTN not to comply. We are no longer in the clime of business as usual.

    Reply to this comment
  3. denrele oke
    denrele oke October 28, 22:38

    NCC should not compromise on this issue of this fine. If other telecoms company complied with the directives, why should MTN refused. The days of impunity is over. They had better pay or GO. The 43% they are controlling will be mopped off by other telecoms company and the soon to be revitalized NITEL. Let’s stop this sentiment. Can they do this in South Africa. We recently learnt that MTN is transferring huge fund to Dubai and Mauritius using phony business transactions thereby draining our economy altar of deception.
    Heaven will not fall please, those who working will them will get fixed up here or there. let

    Reply to this comment
  4. bisialagbe
    bisialagbe October 29, 09:34

    Let MTN go if they want to. Glo, Etisalat, Airtel, etc will mop up their business. For years they’ve been getting away with nonsense exploiting Nigeria’s lax law enforcement. They make a great deal of money and give horrible service. The money they make is taken out of Nigeria. The company is not even listed on our stock exchange. They just make the money and run. Real Nigerians get nothing. MTN should be made to pay that fine or leave, so Nigeria can make progress. DSTV should be next. Easy money, terrible service. Nigeria is changing, thank goodness.

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