MTN may be both culprit and victim
Talk about the punishment not fitting the crime. The telecoms regulator in Nigeria has fined MTN in that country US$5,2bn — at present exchange rates, that’s more than the company’s annual revenue in Nigeria, and nearly double the entire MTN group’s net profit in 2014. The MTN share on the JSE dropped more than 12% on Monday and another 4% on Tuesday — a huge fall for such a big and reputable company, at a cost to its market capitalisation of literally tens of billions of rand.
The offence? According to the company, “this fine relates to the timing of the disconnection of 5,1m MTN Nigeria subscribers who were disconnected in August and September 2015” and is based on a fine of about US$1 004 for each unregistered subscriber. So the fine was not a thumb-suck (as those issued by the SA competition authorities often seem to be, so perfectly rounded are the numbers), but based on simple multiplication. The essence of the matter seems to be that MTN failed to disconnect customers with unregistered Sim cards, or did not do so timeously.
So the fine might be technically defensible, but is it fair? To address that question, several others need to be answered.
Are the Nigerians actually using the fine as a method of raising revenue for a fiscus that has been hammered by the huge drop in the oil price? Is that country sending a message to MTN, and other SA companies, that they should not behave like imperialists who are less rigorous and conscientious about compliance than they would be in their own countries? Is it more than coincidence that, also this week, the Nigerians instructed Stanbic, a subsidiary of Standard Bank, to restate its financials for 2013 and 2014? Such a request from the Reserve Bank to a major bank in SA is almost unthinkable.
Are the Nigerian telecoms regulations open to interpretation, and can sanctions that are based on them be appealed or challenged? MTN does say tersely that it is “in discussions with the Nigerian communications commission to resolve the matter in recognition of the circumstances that prevailed with regard to these subscribers”. That suggests the company believes there is room for negotiation.
Was MTN Nigeria simply ignorant or careless in not following the rules? Did it think the rules were collectively a dead letter? Or was MTN deliberately cutting corners to preserve revenue, taking a calculated risk that it would not be caught or that the authorities would be indulgent? In rugby terms, was MTN expecting a warning if caught, rather than a penalty with a yellow or red card?
It is hard to believe that a major listed company like MTN would have allowed this to happen through carelessness or calculation — hard, but not impossible. However onerous, frivolous or pedantic local regulations may appear to be, they have to be approached meticulously. Whatever the outcome of this matter — we can expect some hard bargaining and a reduced fine, but with the message regarding compliance remaining loud and clear — there will doubtless be some sharp questions put in the MTN boardroom.
If, on the other hand, the Nigerian regulators are being unreasonable and vindictive, then the message to investors is that, while there may be great opportunities in that country, the potential rewards must be sharply discounted. In this sense, punishment of MTN could mean winning a battle but losing a war.
There are some other lessons here. We like to see ourselves as the gateway to Africa for investment, while exporting quality in the products and services that SA companies bring to their operations in the rest of the continent. The recipients may not be as grateful as we tend to think. There is grudging acknowledgment of the excellence of our corporates, and disdain for the SA government’s reluctance to play a regional and continental role, especially in defence.
Africa is much less enamoured of SA, or even interested in the country, than South Africans tend to think. On the other hand, it’s often possible to discern a whiff of highhandedness regarding continental regulatory bodies on the part of SA companies. SA companies need to join with those of other countries to ensure fair treatment, but need to pay regulators due respect too.