Has MTN become synonymous with regulatory infractions in the markets, across Africa? Why is the MTN brand a consistent feature in every penalty notices on the continent? In this report Olubayo Abiodun reviewed the recent events from Nigeria, Ghana, Uganda and Cameroon, where MTN has continued to appear on the radar for infractions.
IN most countries where MTN is operating in Africa, it is almost certain, the brand always emerges as the dominant operator. That is the beautiful side of the story. That is where the beautiful story about the MTN brand begins to recline on the positive trajectories. The ugly part of the story is that MTN has continued to also appear in the bad books of the regulator and legal authorities in some countries. Is this just a coincidence or a fallout of the huge market size that the MTN brand has had to deal with in each of the markets?
The biggest story was the announcement on 26 October 2015 that MTN Nigeria (MTNN) was fined $5.2 billion for failing to disconnect about five million subscriber lines (SIMs) that had not been fully recorded on the biometric register as mandated by the Nigerian Communications Commission (NCC). While the MTN Group was still stuck on how to come out of that conundrum, a month earlier, the regulator in Ghana announced a fine on MTN Ghana among others for infractions on quality of service (QoS). The three leading telecom companies in Ghana were slapped with a penalty totalling GH¢250,000 ($63,928) by the industry regulator, National Communications Authority (NCA), for what it described as “various Quality of Service (QoS) infractions” after a QoS test for March 2015.
Those who came under the hammer were MTN, the industry’s market leader and second place Vodafone and Tigo. According to information posted on the regulator’s website, “MTN was penalised GH¢50,000 ($12,786) for call setup delays in the Central Region and a further GH¢100,000 ($25,571) for call congestion in the Brong Ahafo and Central regions”. This showed clearly that MTN Ghana bore the lion share of the penalty. Barely six months earlier, MTN was fined GH¢300,000 ($76,713) for poor quality service noticed by the regulator in the Upper East and West, Greater Accra and Brong Ahafo regions.
The story did not end there as the court in Uganda also slammed MTN Uganda with another fine in an unending wave of penalties. The Commercial court in Uganda ordered MTN Uganda to pay a sum of Shs 2.3bn (about $662,000) in damages to EzeeMoney Limited for sabotaging its business. In the ruling, Justice Henry Peter Adonyo on November 6, 2015 also ordered MTN Uganda to stop acting in unlawful and anti-competitive manner, which denies other businesses an opportunity to prosper. Justice Adonyo said MTN should pay Shs 800m ($237,779) to EzeeMoney in general damages for loss of business. It should also pay a penalty of Shs 1.5bn in punitive damages to deter not only MTN but also warn other companies against uncompetitive business tactics.
It all started when EzeeMoney, which runs an e-money business, obtained a contract from MTN for the provision of digital transmission [E1] and 30 fixed telephone lines to carry out its mobile money business. EzeeMoney then contracted Yo! Uganda Limited (YUL) to implement the service after Uganda Communications Commission, the regulator, approved it on December 2012, to use the 7711 short code to enable its customers to subscribe for e-money services. But in 2013, MTN cancelled the contract, saying EzeeMoney was a direct competitor to its mobile money business.
While the MTN Group was still grapplingwith the various negative news emanating from the different jurisdictions on the continent as 2015 ended, the brand was again rattled by another scandal in January 2016 when the authorities in Cameroon listed MTN Cameroon among companies that committed infractions on tax payment. Alongside two other operators, MTN Cameroon came under fire from anti-corruption regulators for allegedly defrauding the state of $289 million, according to a report published by Bloomberg in January.
“Market leader MTN, France’s Orange and state-owned CamTel are accused of evading taxes, royalties and receiving illegal tax rebates in a report by the National Anti-Corruption Commission (Conac). According to the report, released by commission chairman Dieudonne Massi Gams, the ministries of finance and post and telecommunications colluded with the operators by providing illegal tax rebates.
However, MTN in a swift reaction insisted “it is not and has never been implicated in corruption related actions.” In a statement, MTN, the country’s market leader, hit back, affirming that its “interactions with the government of Cameroon and its representatives have always been transparent, and in conformity with the laws of the Republic of Cameroon”.
The issue dates back to activities between 2010 through to 2014, with the telecoms regulatory board also accused of failing to act on the alleged wrongdoings. Conac’s Vice President, Garga Haman Adji, told Bloomberg the regulator expects that Cameroon President Paul Biya will order legal investigations over the matter to establish why “two ministries of his government can afford to grant rebates to the operators”. As at the time of writing this story, MTN and Orange officials were reportedly studying the report.
MTN which is the biggest telecommunications brand in Africa would seem to be living by its size as it continues to ‘enjoy’ substantial mention in cases of regulatory infractions in the markets where it is operating in Africa. MTN was South Africa’s second mobile operator when it was set up in 1994 after the fall of apartheid. It began its expansion across Africa four years later with operations in Rwanda, Uganda and Swaziland. Nigeria is MTN’s biggest market followed by Iran and South Africa. MTN has 231 million subscribers in 22 countries across Africa, Asia and the Middle East.
In what might seem a total contrast of its brand growth trajectories and ratings in recent time, the MTN brand had witnessed steady erosion of its high profile in the African market. For instance, in September 2015, the company was named as the most admired brand in Africa in the Brand Africa 100 awards. It was also awarded the continent’s most valuable brand – worth $4.6bn (£3bn). But following the huge fine imposed on its Nigeria operation in October, the MTN Group, Africa’s largest phone company, had its credit rating cut by Moody’s Investors Service because of the uncertainty regarding a $3.9 billion (Initial $5.2b reduced by 25 per cent by NCC following pleas by the Board of the MTN Group) fine in Nigeria, its largest market.
The rating was lowered to Baa3 from Baa2, Ivan Palacios, an analyst at Moody’s in Madrid, said in an emailed statement released in December 2015. And what does that mean for the MTN Group? The outlook is negative, signalling further rate cuts are possible. Similarly, Fitch also cut MTN’s rating one level to BBB- in the second quarter of 2015 because of risks in Nigeria and South Africa. The outlook remains stable at Fitch. In another breathe; the company also has a BBB- rating at Standard & Poor’s.
It is not only the rating agencies that are having a bad run on the MTN Group, the brand also lost top management staff in the aftermath of the crisis rocking its operation in Nigeria. Within the week that the sanction on the MTNN was published, MTN Group’s President and CEO Raymond SifisoNdlovu Dabengwa tendered his letter of resignation. The top management Staff of the Nigerian operations were also consumed. MTN Nigeria’s CEO Michael Ikpoki and the head of Regulatory and Corporate Affairs Akinwale Goodluck tendered their resignations with immediate effect. They were replaced by Ferdi Moolman as MTN Nigeria CEO and Amina Oyagbola as its head of Regulatory and Corporate Affairs. The losses of top notch management staff was at a huge cost to the brand.
More significantly, less than one week when the news of the sanction by the Nigerian regulator broke, the Johannesburg Stock Exchange (JSE) had initially halted trading in MTN Group after the stock fell 8 per cent. But as the company assured stakeholders that it was in talks with the Nigerian authorities on how best to reduce the $5.2 billion penalty, dealings later started again. The penalty sum amounts to double MTN’s annual profits for 2014 financial year. The company’s shares had fallen by about 25 per cent within one week, wiping about 60bn rand (£2.7bn) off its market value, with the company now worth about £13bn. The stock was down 5.5 per cent after trading recommenced. It was also reported that the company’s value has dropped by about a quarter since the penalty was announced in October and is heading for its first year of losses since 2008. In what looks promising, however, the Credit rating agencies have projected that an amicable resolution of the spat between MTNN and the Nigerian regulator could quickly fix the damaged MTN brand in the investment market profile. And hope seems in the horizon. One step in this direction is the decision of MTNN to resolve its legal tussle diplomatically. After its initial insistence of testing the case in court, MTN Nigeria has pleaded for out-of-court settlement in the case of the $3.9 billion fine imposed on the MNO by the NCC. At the resumed hearing of the matter at Federal High Court, Ikoyi, Lagos, Nigeria in January, MTN’s lawyer, Wole Olanipekun (Senior Advocate of Nigeria), who led other lawyers including 10 SANs (Silks) pleaded with the presiding judge, Justice Mohammed Idris, to give parties 60 days to explore the option of settlement out-of-court.
Perhaps, if the latest option sees the light of day, MTN might have commenced the rebuilding process of its brand in earnest. Then the MTN Group, formerly M-Cell, a South Africa-based multinational mobile telecommunications company, operating in many African, European and Middle Eastern countries, could just be on the road to rebound of its waning glory. And signs that there is silver lining in the horizon after the onset of the crisis rocking the MTN Group is the recent announcement that the Nigerian business is likely to report about $955 million in annual profit after tax. “Profit after tax figure for MTN Nigeria for the period ended 31 December 2015 being quoted in the press article, is 190 billion naira ($955 million), which is within the current estimate,” the company said in a statement.
So, it is not all about negative report of the MTN Group which makes about 37 per cent of its revenue from Nigeria.