MTN tumbles on R7.5bn ‘typo’
Huge number of shares swap hands after announcement of a 35% reduction in Nigerian fine. It turns out the fine was reduced by 25%
Beleaguered mobile giant MTN gave shareholders a bit of shock treatment this week by first announcing that its massive fine in Nigeria had been reduced by 35% – and then announcing the next day that the reduction was actually only 25%.
The difference is R7.5 billion, and enormous numbers of MTN shares swapped hands on Thursday based on the incorrect information that day.
Nigerian Communications Commission spokesperson Tony Ojobo subsequently confirmed to Bloomberg that it had made a “typo” in its initial letter to MTN.
The correction on Friday led to another drop in the share price after many shareholders had taken positions based on what seemed like the final outcome of the fine saga. The share fell by 6% but recovered somewhat to close 3% lower, at R135.54 a share.
Before the fine, the company’s shares had been trading at R190 each.
The commission had apparently sent a first letter on Wednesday confirming a 35% reduction, then a second one on Thursday evening with the corrected figure, the company said in an early announcement before the JSE opened on Friday.
The company is already facing a JSE probe into the way it initially announced the fine – relatively late in the morning on a Monday after the news broke in Nigeria the previous evening.
The fear is that the relatively tardy announcement of the fine on the JSE’s news service allowed a window for insider trading.
This week’s back and forth would probably be open to even more scrutiny.
The incorrect announcement sparked massive trading in the company’s shares, with 15 million of them changing hands – the largest daily amount of trading since the week the fine was originally announced.
The original fine was for 1 trillion naira, worth about R75 billion.
It stems from MTN not disconnecting 5.1 million unregistered SIM cards on its network in accordance with the Nigerian equivalent of South Africa’s Regulation of Interception of Communications and Provision of CommunicationRelated Information Act, popularly known as Rica.
The first announcement this week said that the commission would cut its fine by 35% if MTN paid up before the end of the year – in effect a demand for R49 billion in a month.
That is more than half the group’s cash and cash equivalents, which stood at R87 billion at the end of June, and just slightly less than a year’s worth of revenue from MTN’s Nigerian operations.
The second adjustment to the fine on Friday morning amounts to R7.5 billion on top of that.
“Neither the first nor the second letter sets out any details on how the reduction was determined,” said MTN.
The group implied that it did not necessarily accept the new reduced fine, whether it fell by 35% or 25%.
“All factors having a bearing on the situation will be thoroughly and carefully considered before the company arrives at a final decision,” it said.
MTN chairperson Phuthuma Nhleko would “re-engage” with the commission, according to the company’s statement this week.
Nhleko is meanwhile entrenching his renewed control at the company he once ran. MTN this week announced a veritable purge of its management following the resignation with little notice of CEO Sifiso Dabengwa last month.
Nhleko has been holding the reins since then, and is now apparently reversing changes made at MTN since he gave up the CEO position back in 2011.
The company’s structure is going to be returned to where it was when Nhleko left, with the current four divisions restructured into three regional structures: west and central Africa, Middle East and north Africa, and southern and east Africa.
This involves the resignation of MTN Nigeria’s CEO, Michael Ikpoki, and head of regulatory affairs Akinwale Goodluck.
South African Ferdi Moolman is being promoted from financial chief to CEO in Nigeria, while MTN’s head of human resources in the country, Amina Oyagbola, will take over government relations.
MTN has also created the new management position of group chief operating officer – who will report directly to Nhleko. Jyoti Desai, previously technology head at MTN Nigeria and operations officer at MTN Irancell, started working in this new position on Tuesday.