Nhleko fixes MTN fine standoff with Nigeria
CEO keen to leave again after three tasks are carried out
MTN Group executive chairman Phuthuma Nhleko has told Business Times he would not consider returning as CEO after he resolved the company’s eightmonth-long dispute with Nigerian regulatory authorities that threatened the future of its biggest market.
On Friday, he managed to reduce the $3.9-billion (R15-billion) fine imposed on MTN in December by 40% to $1.7-billion.
Resolving the regulatory fine was one of three commitments Nhleko made to the board when he returned to the executive role after Sifiso Dabengwa quit in the storm over the fine.
More than 20% of MTN’s market value was wiped out.
Nhleko was group CEO for nine years until 2011.
“The arrangement was very clear. There were really three tasks that I had. The first one was to settle the fine and that is done today, albeit a month later than what we would have hoped,” Nhleko said.
The second commitment was to find a replacement CEO but that was “work in progress” on which Nhleko was unwilling to comment. At the company’s AGM in May he said a new CEO would be announced this month.
His remaining role was to bring stability to MTN Nigeria and he had done so by replacing its leadership. “Those tasks have been achieved. I basically would be complying with what the JOB WELL DONE: Phuthuma Nhleko brought stability to MTN Nigeria’s operations after his return as MTN Group CEO agreement is,” he said.
MTN has agreed to pay 330billion naira over three years to the Nigerian Communications Commission — equivalent to about $1.7-billion at the official exchange rate on Friday.
The Nigerian authorities had initially set a penalty of $5.2billion.
The settlement has been sanctioned by the attorney-general of Nigeria. Shares in the mobile operator rose as much as 21% on the back of the news, before closing just more than 13% higher at R140, their highest in just over a month.
Nhleko said MTN Nigeria was capable of servicing the fine from its own balance sheet.
Africa Analysis MD Dobek Pater said: “I don’t think it’ll be much of a problem for MTN to pay the fine. From a cash-flow perspective, a shorter period could have been a far bigger impact on the company.”
Vestact analyst Sasha Naryshkine said Nigeria’s margins were “comfortably ahead of the whole group”. MTN Nigeria makes up 46% of group ebitda.
On February 24, MTN paid 50billion naira “in good faith and without prejudice”. This has been included in the settlement. The balance will be paid in six instalments from July 8 this year until May 31 2019.
Nigeria’s government issued the penalty because MTN had failed to comply with a government order to disconnect 5.1 million unregistered subscribers.
Authorities aimed to cut off users who had not provided identity records in a bid to curb crime using cellphones.
MTN said on Friday it would also list its Nigerian operations as part of the settlement, but did not give a timeline. Nhleko said the company was still applying its mind to the details.
About 22% of the shares are already traded over the counter in Nigeria. Naryshkine said: “The Nigeria listing also gives people vested interest internally and that might be their positive in the long run.”
MTN Nigeria is heavily investing in infrastructure to cater for growth in smart devices on its network and in data use.
“Out of the R30.8-billion spent in authorised capex for this year, over a third of that was in Nigeria,” said Naryshkine.
MTN’s battle with the Nigerian authorities had increased the unit’s risk premium and cost MTN its status as the continent’s highest valued cellphone company as investor interest waned due to the uncertainty.
Risky emerging markets are central to the company’s business model.
Nhleko said MTN tried to anticipate risks and in the past year was highly focused on ensuring that it was compliant with regulatory requirements in other countries where it has operations.
I basically would be complying with what the agreement is