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MTN seeks to reduce' $5.2bn Nigeria fine

28 October 2015, 13:13

Johannesburg - Africa's biggest mobile phone operator, MTN Group, is in talks with Nigerian regulators to try to reduce a $5.2bn fine, two sources familiar with the matter said on Tuesday.

The Nigerian Communications Commission (NCC) said on Monday it had imposed the penalty on the South African-based firm for failing to disconnect users with unregistered SIM cards.

"MTN is talking to NCC with the view to revoking or reducing this fine," one source said.

"There was bit of misunderstanding around this issue."

Another source said MTN had been in talks with the NCC about the exact number of people using unregistered SIM cards when the deadline to disconnect them passed.

Also read: MTN Nigeria fined $5.2 billion for failing to register users

"MTN was under the presumption that it can carry on business as usual because it was still in discussion with the regulators," the source said.

If it stands, the penalty will wipe out more than two years of MTN's annual profits. Nigeria is MTN's biggest market by subscribers.

An NCC source said the Commission's decision was taken based on advice from Nigeria's state security service which suspected unregistered SIM cards were being used for criminal activity.

However, analysts said the size of the fine risked damaging Nigeria's efforts to shake off an image as a risky frontier market for international investors.

News of the fine has pummelled MTN's shares, which fell for a second day on Tuesday, easing 4.2% to R159.98. That extended their losses to nearly 16% over the two days, wiping about R50bn from MTN's market value.

MTN spokesman Chris Maroleng would neither confirm nor deny that the company was working on reducing the fine.

NCC initially asked MTN to disconnect between 10 and 18.6 million users but MTN told the regulator it had 5.2 million unregistered users on its network, the NCC source said.

The heavy fine has raised worries about doing business in Nigeria whose finances have been hit by falling crude oil prices.

Investors have seen risks growing in the west African country as new leader Muhammadu Buhari shows little sign of following up on promises of economic reform.

"Nigeria stands to lose as much as MTN does if the fine stands as it is," said BPI Capital Africa's analyst Kate Turner-Smith.

“If MTN decided not to renew its licence or pull out of Nigeria, it would be "detrimental for Nigeria's communication infrastructure and image among foreign investors," she said.

Sasha Naryshkine, a fund manager at Vestact in Nigeria, said the fine highlighted the risks of doing business in countries that are not friendly to investors.

"If you want to attract capital to your shores, you had better think carefully how you treat businesses that promote the economy," he said.

- News 24

Tags mtn nigeria

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