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”. Its spokesman Chris Maroleng said “MTN Group acting on legal advice has resolved that the manner of the imposition of the fine and the quantum thereof is 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.” The company said it has followed due process and has instructed its lawyers to proceed with an action in the Federal High Court in Lagos seeking the appropriate reliefs.
It said: “MTN is advised that in the current circumstances in line with the lis pendens rule (pending legal action) the parties are enjoined to restrain from taking further action until the matter is finally determined.This is consistent with previous judicial decisions in Nigeria.
“Notwithstanding this action the company will continue to engage with the Nigerian authorities to try and ensure an amicable resolution in the best interests of the company, its stakeholders and the Nigerian authorities “Shareholders are therefore advised to continue to exercise caution when dealing in the company’s securities until a further announcement is made.”
But the Nigeria’s telecoms regulatory agency, NCC, said it has yet to see any letter from MTN’s legal team on the proposed legal tussle. Its spokesman, Tony Ojobo, told Daily Trust in a telephone interview yesterday that “the commission will surely meet MTN in court when we get the letter”. He said the institution of the legal case by MTN had shown it did not want to pay the fine in the first place.
“They have not written to us officially, but if they eventually do we meet them in court. The court is there for everyone and we shall meet them there. They want to test our legal and regulatory might and we are surely going to show them,” said Ojobo.
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.
