The South Africa-based multinational mobile telecommunications company yesterday issued another cautionary announcement advising shareholder to tread carefully on its stock because of the ongoing dispute with the Nigerian authorities.
The group said its unit in Nigeria continued to engage with the authorities to find a mutually acceptable resolution with the Central Bank of Nigeria and the Attorney General of the Federal Republic of Nigeria.
However, the announcement raised fears that the parties were nearing an agreement on the $8 billion (R114bn) that Nigeria accused MTN of repatriating out of the country illegally.
Jordan Weir, a trader at Citadel, warned that the dispute could make MTN vulnerable in the immediate term
“There is common ground for both parties,” Weir said. “However, MTN shareholders may ultimately bear the brunt of any negative or positive moves that result from share price fluctuation and volatility should an agreement be announced. Operating in Africa is a totally different ball game to operating a business in many other regions.”
The Nigeria central bank slapped MTN with the fine in August for allegedly repatriating dividends illegally between 2007 and 2015.
MTN has denied the claims and said it was prepared to take the matter to the court and the case will be heard on October 30.
Weir said it would be shortsighted to assume that the fine would not happen again in the future.
He said the volatile global economy had made stocks vulnerable to politics.
In 2015, Nigeria slapped MTN with a $5.2bn fine by authorities for its failure to cut off 5.1 million unregistered SIM cards as required by the country’s laws. In December 2015 the fine was reduced to $3.4bn, then cut further in June last year to $1.7bn. The fine was largely responsible for the $200m loss reported by the group in 2016.
Weir said MTN shares could fall even further on the prevailing negative sentiment around its Nigerian business.
“Primarily seen as an emerging market company, the current economic climate also won’t work in MTN’s favour should the Nigerian authorities threaten to take further steps against the company,”he said.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the cautionary announcement underlined the extent of the dispute between MTN and Nigeria.
Takaendesa said the shares had also buckled on weaker global equity markets in general. He said the next few days would provide further clarity on MTN’s position in Nigeria
“There are a number of key events coming up next week that are likely to provide more information on the underlying operating performance as well as the key regulatory issues in Nigeria,” Takaendesa said. MTN closed 2.04 percent lower at R84.