MTN-Ventures-Africa

 

South Africa’s Deputy President, Cyril Ramaphosa, has said that telecoms giant MTN must obey the laws of the countries where it operates.

Ramaphosa made the comment in Cape Town as the telecommunications parliamentary committee met over concerns that MTN’s reported violation of Nigerian laws could hurt trade relations between the continent’s two biggest economies.

 

Highlights

  • MTN Group, Africa’s biggest mobile phone company is facing a 5.2 billion dollars fine in Nigeria for failing to heed a directive to deactivate unregistered SIM cards
  • The Nigerian Communications Commission has set Nov. 16 as the deadline to pay the fine
  • MTN shares have slumped 14% since Oct. 26 when the fine was imposed
  • Analysts say South African authorities may be reluctant to confront their Nigerian counterparts following a series of diplomatic spats that have soured relations between Africa’s two biggest economies

 

Details

MTN, Africa’s biggest mobile phone company, was fined $5.2 billion by the Nigerian Communications Commission (NCC) for failure to cut off users with unregistered SIM cards from its network.

The Johannesburg-based company is said to be in talks with authorities in Nigeria, which surpassed South Africa as the continent’s biggest economy in 2014, in an attempt to have the fine reduced.

“It is important for South Africa to increase trade relations with other African countries but if something like this happens we get worried about our reputation and the impact that would have on South African companies wishing to expand on the continent,” head of the parliamentary telecoms portfolio, Mmamoloko Kubayi told Reuters.

Ramaphosa speaking
South African Deputy President Cyril Ramaphosa

Commenting on the matter, Deputy President Cyril Ramaphosa said, “We would like our companies to comply with the laws and regulations of countries where they operate, without violating those.”

 

Impact

Ramaphosa is however concerned about the possible impact of the fine.

“It does seem like in the case of Nigeria, there were issues, and those issues need to be addressed. If this fine is indeed imposed as it is, it is going to impact on South Africa as well, as our revenue fortunes from a taxation point of view are going to be lower,” the Deputy President told parliamentarians.

 

Caution

The comments by Ramaphosa, a former chairman of MTN, suggest South African authorities may leave MTN to fend for itself as it seeks to have the penalty reduced.

Apparently, South African authorities may be reluctant to confront their Nigerian counterparts following a series of diplomatic spats that have soured relations between Africa’s two biggest economies. The most recent occurred in April, when Nigeria’s government ordered its two most senior diplomats in South Africa to return home for consultations following a wave of attacks against immigrants, including Nigerians, in Johannesburg and Durban.

In its response to the recall, South Africa’s Department of International Relations and Co-operation had said that the decision by a ‘sisterly’ country was ‘unfortunate and regrettable’” though Minister in the Presidency, Jeff Radebe, later dissociated the government from that position.

“South Africa does not have a track record of defending its national company champions internationally,” says Nic Borain, a political analyst who advises BNP Paribas Cadiz Securities. “On the face of it, this fine seems seriously over the top. Ramaphosa’s words about the issue seem weak as they veer too much on the side of caution,” Borain proffered.

 

Summons

Meanwhile, lawmakers plan to summon MTN officials to explain why the company was fined, according to Nkhensani Kubayi, chairwoman of Parliament’s telecommunications committee. The panel also intends questioning the South African industry regulator to determine whether MTN is compliant with local rules, with hearings likely to take place next year, Kubayi said.

 

Criminal connection

Nigeria has been pushing all telecom operators to verify the identity of their subscribers, on concerns that unregistered SIM cards were being used for criminal activity in a country facing an insurgency by Islamic militant group Boko Haram.

The NCC said in October all telecom firms except MTN had complied with the directive which was first issued in August, when it warned of a fine of 200,000 naira ($1,005) per SIM card. MTN failed to disconnect 5.1 million subscribers in August and September, the NCC said.

The fine came months after Muhammadu Buhari swept to power in Africa’s biggest oil producer after a campaign in which he promised tougher regulation and a fight against corruption.

It also came after the kidnapping on Sept. 21 of Olu Falae, former Nigerian finance minister and former Secretary to the Government of the Federation, by kidnappers who the regulator said had used MTN phone lines to negotiate a ransom.

 

Corruption

MTN’s activities have also been under the spotlight in South Africa. Recently, an anti-corruption group, Right to Know (R2K) issued a notice of protest outside the ANC’s regional office in Cape Town to hand petitions to the African National Congress and Business Leadership SA calling on them to investigate corruption allegations against MTN and Cyril Ramaphosa.

Ramaphosa, MTN

 

The allegations were based on published evidence that MTN moved billions of rands out of Africa to avoid paying taxes while ANC deputy president Cyril Ramaphosa was chair of the MTN board.

 

 

Dwindling fortunes

MTN shares have slumped 14% since Oct. 26, when Nigeria’s industry regulator imposed the fine.

Also, South Africa’s bourse briefly suspended trading in MTN Group on Monday. The stock has fallen more than 25 percent in the past seven sessions, wiping in excess of 60 billion rand ($4.4 billion) off its market value, since the fine was imposed. After trading resumed hours later, MTN shares were down 5.9 percent at 148.51 rand at 1200 GMT. They earlier touched a three-year low of 142.50 rand. One trader said the stock tumbled due to speculation the company had agreed to pay the fine, which is capable of wiping out more than two years of MTN’s annual profits.

It is unclear what would happen to MTN, whose Nigerian licence is up for renewal in 2016 should the company fail to pay the fine. NCC’s powers include revoking licences.

Nigeria is Johannesburg-based MTN’s biggest market with 62 million clients as of September.

 

NP/Reuters/Bloomberg

Do you believe, like Nic Borain, that the fine seems “seriously over the top” or agree with analysts who believe it is necessary to demonstrate that it’s no more business as usual? Have your say.

 

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