Johannesburg - Africa’s largest cellphone company, MTN, is facing another challenge in one of its continental markets as it has now emerged that Uganda has fined it $662 000.
According to This Day, the country’s commercial court has ordered MTN pay damages to EzeeMoney for sabotaging its business. The court, the paper reports, also found MTN had engaged in an an unlawful and anti-competitive manner, which prevented other businesses from thriving.
This penalty - although a fraction of the fine MTN still has to pay in Nigeria - adds to its woes as it increasingly seeks growth in countries that are perceived as more risky.
Vestact analyst Michael Treherne says shareholders want to see companies making friends in the countries in which they operate, and not alienating international governments.
MTN operates in 22 countries in Africa, Asia and the Middle East and has 233 million subscribers.
Towards the end of last month, Nigerian authorities slapped it with a $5.2 billion fine for failing to disconnect some 5 million customers who had not registered on the network.
This record fine comes as Nigeria implements its own version of SA’s RICA law in a bid to clamp down on criminals using cellphones.
The fine - which MTN has won more time to pay - led to its former CEO resigning over the mess. CEO Sifiso Dabengwa resigned on November 9 and former CEO and then non-executive chairman Phuthuma Nhleko effectively stepped into his role as he moved into the executive chairman position in a temporary capacity for six months.
"Due to the most unfortunate prevailing circumstances occurring at MTN Nigeria, I, in the interest of the company and its shareholders, have tendered my resignation with immediate effect," said Dabengwa in a statement.
The fine, which was announced towards the end of October, has also resulted in the bourse instigating an investigation into whether any insider trading happened because of the timing delay between when it was imposed and MTN made it public.
Treherne notes, since the news became public, MTN has lost R100 billion of its market capitalisation. Its shares were trading at R141.80 this morning, up 2.68 percent on the day.
Treherne says, because of the fine, MTN’s growth has fallen below that of Vodacom’s. Vodacom only operates in a handful of countries in sub-Saharan Africa and is seen as a safer bet than MTN, which is riskier but offers better returns.
Among MTN’s operations is one in Iran, where sanctions have been imposed, and one in war-torn Syria.
Treherne explains MTN’s shares are up 140 percent over the past ten years, while Vodacom is up 160 percent over the same time.
He adds Vestact is giving MTN the benefit of the doubt before making a call as to whether it will recommend a sell on the stock. The best outcome, he notes, is that the Nigerian government agrees to take the fine in the form of infrastructure investment, as that would save the Nigerian government face, and avoid a cash hole for MTN, which will mean it cannot invest and satisfy its customers.
Nigeria is MTN’s largest operation and the fine amounts to two-and-a-half years’ profits.
In terms of the latest penalty, Treherne says “it never rains, but it pours” and he hopes this is the last of the bad news for MTN, but suggests it may not be.
The Ugandan matter, reports This Day, was over a deal EzeeMoney, which runs an e-money business, had inked with MTN which the operator subsequently cancelled.
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