African telecom giant battles Nigeria over $5.2 billion fine

AP News
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Posted: Nov 05, 2015 5:07 PM
African telecom giant battles Nigeria over $5.2 billion fine

LAGOS, Nigeria (AP) — Africa's biggest telecommunications company is locked in a nasty battle in powerful Nigeria, with billions of dollars at stake.

MTN Nigeria, MTN Group's subsidiary here, was fined $5.2 billion for failing to meet an August deadline to deactivate 5.2 million unregistered cellphone SIM cards — considered a security threat with Nigeria confronted by an Islamic uprising and rampant kidnappings and armed robberies.

The fine amounts to nearly two years' profits for MTN Nigeria, by far the company's most profitable subsidiary. It also equals nearly a quarter the national budget of Nigeria, which has been hammered by the global plunge in oil prices. Nigeria is Africa's biggest oil producer and President Muhammadu Buhari, who was elected this year, says he inherited depleted coffers as he struggles to create jobs and fulfill other campaign promises.

In a telephone interview Thursday with The Associated Press, Tony Ojobo, the spokesman for the Nigerian Communications Commission, said the regulator won't buckle to pressure from MTN shareholders to reduce the fine levied against the South African-based telecommunications giant.

Underscoring the perceived reliance on mobile phones by Islamic extremists in Nigeria's war, the military regularly cuts cellphone service in areas under attack by Boko Haram. Unregistered mobile phones can also be used by criminals to hide their tracks.

Ojobo said unregistered MTN SIM cards were used to make calls demanding ransom in the September kidnapping of former Finance Minister Olu Falae.

Institutional shareholders in MTN, the biggest telecommunications company in Africa, have complained that the huge fine is punitive, and warned it could hurt investor confidence in Nigeria, Africa's most populous nation of about 170 million people.

South Africa's Public Investment Corporation, MTN's biggest shareholder with more than 15 percent of shares, said Tuesday it is concerned about the fine and allegations that MTN did not immediately disclose it to shareholders, according to Daniel Matjila, CEO of Public Investment Corporation. The Johannesburg Stock Exchange is investigating.

Ojobo said Nigeria's four cellphone service providers signed an agreement that set the fine at 200,000 naira (about $1,000) for each unregulated SIM card in 2011. He said MTN was the only company not to comply and that the 5.2 million cards were actually deactivated by the regulator. Until a couple of years ago, people could buy SIM cards without producing identity documents. The regulations are aimed at helping law enforcement and security forces to track criminals.

Ojobo even said "there is an orchestration to try to blackmail the regulator," without offering details.

"MTN should operate in the rule of law — the same rule of law that protects ... investment," he told AP. He added that in South Africa, MTN has ensured 98 percent compliance in registering its SIM card holders.

In Johannesburg, MTN spokesman Chris Maroleng said the company is above board in its dealings with Nigeria.

"MTN is committed to engaging with authorities in Nigeria ... (adhering) to the highest principles of sound corporate governance and transparency," Maroleng said.

Nigerian Vice President Yemi Osinbajo late Thursday denied that he is heading the Nigerian team negotiating with MTN executives from South Africa, as the AP erroneously reported. His spokesman Laolu Akande said local reports to that effect were planted.

South Africa needs to intervene diplomatically, said Azwimpheleli Langalanga, a researcher at the South African Institute of International Affairs.

"MTN is a big player. It's a strategic company in South Africa, and it's big in Nigeria," he said. "It's an embarrassment to South Africa that MTN was found wanting in Nigeria."

South Africa's Minister in the Presidency Jeff Radebe told journalists the issue is between MTN and the Nigerian authority.

"Obviously, as government, we are concerned about this matter so we do hope that those talks between MTN and the Nigerian authorities will bear fruit," he said.

Despite the furor, the regulating authority in Nigeria agreed this week to extend MTN Nigeria's operating license until 2021 for $94.2 million. MTN shares gained 5 percent on Tuesday's news after losing nearly a quarter of their value over the fine.

MTN operates in 22 countries in Africa and the Middle East and reports having 233 million subscribers, more than 60 million of them in Nigeria.

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This story has been corrected to show that Nigeria's vice president says he is not involved in MTN negotiations about the fine.

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Chutel reported from Johannesburg.