Johannesburg - Phuthuma Nhleko, MTN’s executive chairman who yesterday assumed the de facto role of caretaker chief executive following the ousting of Sifiso Dabengwa, hopes to strike a deal with Nigerian authorities in two weeks time to resolve a hefty fine threatening to cripple the cellphone giant.
In an interview with Business Report yesterday, Nhleko refused to be drawn on details about the discussions currently underway with the Nigerian Communications Commission (NCC) over a $5.2 billion (R73.5bn) fine it had levied against MTN for the failure to disconnect unregistered users.
“The priority really right now is to get to some sort of resolution in Nigeria and we’re hopeful that will happen within a reasonable period, which hopefully you’re looking at two weeks or whatever, all things being equal. But as I have indicated, it can’t be guaranteed,” Nhleko said.
He declined to comment on the specifics and timelines, saying the negotiations were directly with the Nigerians and MTN would not negotiate through third parties. The NCC has given MTN until November 16 to pay the fine. It is possible that the deadline may be moved if more time is needed to arrive at some sort of a deal, according to analysts.
“I remain optimistic we’ll come to some resolution soon,” Nhleko said, adding that finding a resolution to the Nigerian fine was his number one priority. The second priority, he said, was to ensure “we provide, within reason, as much appropriate communication as we can reasonably provide, given our strain. And then thirdly, to commence the search for a replacement chief executive.”
According to MTN insiders, Dabengwa, 57, was informed of the intention to replace him on Thursday, leaving this past weekend to finalise the announcement and sort out his interim replacement. Even though his departure was greeted with some relief, a call emerged yesterday for more people to be held accountable for the series of strategic and governance blunders that have rocked MTN in recent months.
The fine
MTN shares briefly fell by 3.46 percent in the aftermath of the announcement of Dabengwa’s resignation, but recovered to close up 1.6 percent at R160.01. Analysts have said they expect MTN to lobby for a reduction of the fine, but how the company will arrive at that outcome still remains a mystery.
Nigeria is its biggest and most lucrative market on the African continent.
Nhleko, who previously led MTN for almost nine years until 2011, said he was not in disagreement with the Public Investment Corporation’s (PIC) call for more accountability.
“My view is that we are not necessarily at variance with the PIC that there needs to be accountability at the right levels where we prove wrongdoing. But having said that we also believe that we need to follow due process in looking at a situation like this, that’s quite complex and quite extraordinary in its magnitude,” he told Business Report.
Nhleko said “in the end once we have all the facts, the appropriate action will be taken where it’s due”.
The PIC, which is MTN’s largest shareholder with a 16.63 percent stake, said a lot more people needed to take collective responsibility for the MTN fine in Nigeria for the alleged failure to comply with regulatory requirements regarding unregistered users.
“In this regard, there remain questions as to the role of the board of directors, which is charged with exercising fiduciary responsibilities for the benefit of shareholders,” Daniel Matjila, the chief executive of the PIC, said in a statement.
Last week he had already indicated to Business Report that the asset manager would defer to its board of directors on whether Dabengwa should go or not.
Matjila said the PIC would be requesting a meeting with Nhleko to understand exactly how he planned to turn things around for the benefit of shareholders.
Even so, Nhleko sought to defend the board yesterday, saying: “I can assure you that the board will not be found to have (been) wanting in the way that it has gone about in trying to resolve this matter.”
He said he was confident that MTN would emerge even stronger from the setback. “MTN is a very robust company. I have absolutely no doubt that they will come out of it and be an even stronger company.”
Philip Short, an equities analyst at Old Mutual Investment Group said yesterday that replacing the chief executive, temporarily or permanently, would not resolve the operational issue in Nigeria any time soon.
“It is difficult to turn such a large company around, especially when you’re on the back foot. For example, in Nigeria, certain mobile operators have been successful in grabbing market share from MTN and have built up strong brand equity. In addition, MTN Nigeria will be facing a determined and invigorated regulator who will now feel it has the power to enforce its will on all the mobile operators,” Short said.
He said Dabengwa’s resignation came as no surprise, but came at a critical time.
“I would assume he was leading the negotiations with the Nigerian authorities. I expect local MTN Nigerian management will come under the spotlight as well, in not only their handling of the SIM deregistering issue, but also MTN’s general lacklustre operational performance over the past 18 months,” Short said.
He added that until the extent of the Nigerian issue was fully disclosed to the public it was difficult to say who exactly should be held accountable.
“For the time being, given Mr Dabengwa’s departure it makes sense for the current chairman, and former MTN Group chief executive, Phutuma Nhleko, to take over the interim chief executive role,” he said.
Brian Neilson, a director at BMI-Techknowledge, said the move would help manage perceptions. “I think the move addresses a problem of managing perceptions, especially for the company’s stakeholders such as (both private and public sector) investors, who have to see some kind of action being taken,” he added.
He said the share price reaction might be due to investors characteristic dislike of uncertainty, which would be reversed when a new chief executive was announced, with suitable credibility, along with statements by the incoming chief executive about the company’s future outlook.
Proactive move
Joanita Roos, an ICT industry analyst at Frost & Sullivan Africa, said Dabengwa’s exit, and the change in leadership were a proactive move by MTN to appease the market and an indication that MTN was serious about resolving its position.
“Nhleko’s key priorities will be to continue negotiations with the Nigerian regulator, as well as to find a suitable chief executive to move MTN forward. Nhleko is familiar with the group as he returned to the company as chairman after retiring as the chief executive.”
Meanwhile, Parliament has not changed its mind on calling MTN to appear before it, despite Dabengwa’s sudden resignation.
The chairwoman of the portfolio committee on telecoms, Nkhensani Kubayi, said yesterday that their position had not shifted regarding asking MTN to explain the $5.2bn fine.
No date has been found for MTN to appear before Parliament, but the committee is still trying to secure a date that will suit both parties.
* Additional reporting by Siyabonga Mkhwanazi
BUSINESS REPORT