MTN’s woes in Nigeria, Uganda, South Sudan proving costly for telco

Nigeria is MTN group's largest market with 62.8 million subscribers. PHOTO | AFP 

MTN’s full year results paint a picture of a firm caught in a regulatory and economic quagmire across its African business.

From South Sudan to Nigeria and Uganda, the telco is facing challenges that have seen its shares, listed at the Johannesburg Securities Exchange, take a 32 per cent slump since October, after it was slapped with a record $5.2 billion fine in Nigeria.

MTN’s 2015 earnings before interest, tax, depreciation and amortisation (Ebitda) decreased by 8.6 per cent to $3.84 billion as it lost more than 10.4 million subscribers in Nigeria and Uganda alone due to regulatory registration requirements. The telco’s group revenue remained flat at $9.49 billion, attributed to a fall in earnings in Nigeria — its biggest African business.

Last week, its South Sudan unit announced that it had been hard hit by a dollar scarcity and devaluation, forcing it to lay off staff and scale down its operations, which could lead to eventual closure in that market. The MTN head of corporate services in Juba, Khumbulani Dhlomo, confirmed that if the situation didn’t change, MTN would exit the South Sudan market.

“We are going to reduce our workforce by half from the current 170 to 80, with most expatriates’ jobs being taken over by locals. We have also shelved the expansion plans that included the building of 40 towers countrywide,” said Mr Dhlomo.

MTN has in the past two years spent $170 million on network infrastructure but has never made a profit since starting operations in 2012.

“The currency devaluation last year hit us hard because we import most of our equipment, and with the current currency situation we believe we are not in a position to make returns on these investments,” said Mr Dhlomo.

In Uganda, the firm lost 3.7 million subscribers last year, decreasing its market share after a forcible deregistration by the Uganda Communications Commission.

In November, Brian Gouldie, the chief executive officer of MTN Uganda, said that they had switched off 300,000 subscribers who had not taken part in the Sim card registration process, a far cry from the 3.7 million figure the parent company issued in its full year report in March.

“We have deactivated 300,000 Sim cards that had not been registered. We have at least 11.4 million subscribers who are both partially and fully registered,” said Mr Gouldie.

The Uganda Communications Commission had given telecom companies up to November 30, 2015 to switch off unregistered Sim cards in order to avoid being fined, which means that the more than 3.4 million subscribers could have been forcibly switched off.

In Nigeria, the country’s House of Representatives is considering tripling the fine the telecom was slapped with by the Nigeria Communications Commission in October last year.

Last week, the Senate recommended that the $3.9 billion fine be scaled up to $15.6 billion, a development that hit the firm’s stocks in Johannesburg.

In October last year, the Nigeria Communications Commission slapped MTN with a $5.2 billion fine for failing to disconnect its 5.1 million unregistered subscribers. The fine was based on $1,000 for each unregistered subscriber.

MTN’s share price lost 10 per cent of its value, forcing its temporary suspension from trading in the wake of the Nigerian parliament’s deliberations over the fine. MTN’s market cap currently stands at $15.25 billion, down from $23.13 billion in October last year.

According to Reuters, Nigeria’s House of Representatives has launched a probe into whether the Nigerian Communications Commission can lawfully reduce the fine slapped on MTN.

Last December, the commission reduced the fine from the original $5.2 billion to $3.9 billion, with MTN already having paid Nigerian authorities $250 million last month, which the firm said was a payment meant to show good faith.

The telco has also dropped legal proceedings against the regulator in an effort to reach an out-of-court settlement on the matter. Yakubu Dogara, Speaker of the House of Representatives, said that the Nigerian Communications Commission has no legal power to reduce any fines unless the laws are amended.

“For you to adjust the fine, you have to adjust the law,” said Mr Dogara.

Reuters reported that MTN Nigeria chief executive Ferdi Moolman also snubbed an invitation to appear before the Parliamentary Telecoms Committee, choosing instead to issue a letter telling lawmakers “appropriate government agencies... are in a position to furnish your committee with relevant information on this issue.”

MTN has reportedly offered to pay $1.5 billion to settle the fine through cash instalments, bond purchases and network access, but the Nigerian government has remained adamant that the full fine be paid. However, in its full-year earnings report early March, the firm made a $583 million provision towards the fine, which saw its group earnings per share decline by 51.4 per cent.

Nigeria is MTN’s biggest market, with over 60 million subscribers, but as at the end of last year, the telco had seen the disconnection of 10.4 million subscribers on the African continent due to regulatory registration requirements, with 6.7 million of the lost subscribers coming from Nigeria and 3.7 million from Uganda.

Late last year, the firm was again caught in another tax evasion storm after being accused of repatriation of millions of dollars earned in African countries including Ghana, Uganda, Ivory Coast and Nigeria to offshore accounts in Mauritius.

“MTN complies with all regulations and laws, including tax laws, in the countries where we operate,” the telco said in response to the accusations.

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