Johannesburg - Telecoms giant MTN’s shares rose 1 percent yesterday after falling more than 10 percent last week, following reports that Nigeria’s parliament was probing the legality of the reduction of the mobile operator’s hefty fine in the country.
MTN shares closed 0.89 percent stronger on the JSE yesterday to close at R128.64 as the company moved to downplay reports of the possible increase in the fine.
Read: MTN fine should be doubled - lawmaker
Last week reports emerged that the Nigerian House of Representatives wanted to hike the fine by more than three-fold from $5.1 billion (R78.9bn) to $15.8bn in a move that local analysts said could be mere public posturing by the lawmakers.
‘Reduction illegal’
Business magazine African Review reported that the house ruled that the fine issued by the Nigerian Communication Commission for failing to disconnect 5.1 million unregistered and improperly registered SIM cards was “inadequate” and that the initial reduction of the fine was illegal.
MTN spokesman Chris Maroleng said the company had advised it shareholders not to make decisions based on unconfirmed reports. He said MTN remained optimistic that the resolution of the matter would be found soon. “We continue to engage with Nigerian authorities in an attempt to ensure an amicable resolution to this matter in the interests of MTN Nigeria, its stakeholders and the Nigerian authorities,” Maroleng said.
MTN has already paid $250 million to the Nigerian federal government. The “good faith” payment was part of the company’s efforts to settle the matter. MTN shares have slumped by more than 32 percent since the record fine was announced by the Nigerian Communications Commission in October.
The commission reduced the fine by 25 percent to $3.9bn in December, but lawmakers in Nigeria’s lower house of parliament say the original fine could not be altered unless the law was amended.
Analysts yesterday described the move as a gimmick to convey a message to MTN.
Africa Analysis telecoms analyst Dobek Pater said the lawmakers could be overstepping the mark. “I do know how much leverage parliament has over the executive on this matter,” Pater said. “My view is that this is posturing.”
He said it was imperative for MTN to resolve the matter soon. “If it remains unresolved for too long, there will be negative consequences, from an investor and lender perspective. The sooner MTN resolves this matter, the better. At the moment they are facing pressure from two fronts – increased market competitiveness and diminishing voice prices. They need to focus on these,” he said.
Utterances
Sasha Naryshkine of asset management firm Vestact said the utterances by the parliamentarians did not always reflect the view of the executive. “What is important is what happens afterwards. In this case, we should take guidance from the commission,” Naryshkine said.
He said the MTN Nigeria fine saga “and other cases elsewhere” could prompt companies to be careful in their foray into the rest of Africa in search of markets which offer higher margins. “Having said that, the outlook is still pretty good in Nigeria, because of a young and dynamic population.“
François Conradie, the head of research at NKC African Economics, said the respective legal powers of the institutions involved in the matter were not clear.
“The Nigerian Communications Commission imposed the original fine, and then MTN went to court to challenge its authority, because the law under which the fine was originally calculated says an operator will be liable for a fine ‘on conviction’, which implies that a court case is required before the NCC can demand a fine.
“The House’s authority is unclear in the same way – the motion it passed may be subject to a challenge in that it can be seen as an attempt to impose its authority on the courts.
“Given unclear powers, and the context of diplomatic relations which means the executive has become involved in this saga too, the issue can be expected to drag on for some time as different actors argue over jurisdiction,” he said.
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