MTN FINE: Don’t Bite Too Hard

This article is written by Azu Ishiekwen.  Azu Ishiekwene is the managing
director/editor-in-chief of The Interview and a member of the editorial board
of the Paris-based Global Editors Network.

MTN’s record fine in Nigeria might be a case of taking the punishment of
SA’s ‘Robin Hood’ too far.

In a week when it’s been pouring bad luck, the renewal of MTN’s licence
must come as a silver lining. It could have been worse. With the company’s
shares taking a beating and the JSE investigating it for possible insider
trading, who knows if the worst is over?

It all started last week when the Nigerian Communications Commission
(NCC) slapped a record $5.2 billion (R72 billion) fine on the company for
failing to shut out 5.1 million subscribers who had not registered their SIM
cards. With this fine, MTN toppled Siemens’ record $1.6 billion fine imposed by
US courts in 2008 for bribery and corruption cases involving the company in the
US and Germany.

If MTN had any reason at all to disregard the NCC’s deadline, it would
simply be because after more than 10 years of doing business in Nigeria, it
knows that the tail wags the dog.

Yet, the dog does not need to eat the tail to prove a point. It’s MTN’s
peculiar misfortune that the NCC appears to be waking up from a sleep of death
during which the commission’s self-inflicted shady deals and lawlessness in
spectrum management cost the country billions of dollars. Has the commission
turned the page? That’s a story for another day.

According to a Bloomberg report, full payment of the fine would amount to
half the ongoing value of MTN’s operations in Nigeria. Another estimate,
derived from the Central Bank of Nigeria, says the full penalty will exceed the
country’s income from oil in the second quarter of this year or amount to one
and a half times the annual capital expenditure.

Sure, Nigeria needs the money. With revenues down nearly 50% as a result
of the fall in oil prices and the economy in a near shambles because of the
theft and incompetence of the last administration, President Muhammadu Buhari’s
government cannot ignore any potential revenue source.

Other narratives have cited more than money to justify MTN’s current misery.
Unofficial accounts cite security concerns, including the kidnapping of a
former minister of finance and secretary of the government of the federation,
Olu Falae.

His abductors were alleged to have used unregistered MTN lines, which
made their arrests more complicated and dangerous than they should have been.

There’s also the unwritten – and unspoken – grouse.

Resentment for its own sake is the fate and abiding misery of all
businesses that do well, especially outside their native lands. Even in a globalised
world, such resentment remains a headache and MTN might well be the latest
victim.

With a phone licence of $285 million bought in 2001, MTN has returned a
six-fold yield on investment, emerged a market leader with 62 million
subscribers and nursed a craving for more business that landed it a hotly
contested $154 million pay TV licence in September.

Thousands of Nigerian subscribers who have watched the fortunes of the
company grow still regard MTN as a sort of South African Robin Hood, even
though Nigeria remains its biggest market.

Customers who struggle daily with poor-quality service – regardless of
what the company might justifiably say about outrageously high costs of doing
business – think the penalty is their revenge. Why should they care?

It’s a mild, but often dangerously popular, form of xenophobia; a
vicarious attack on a South African company loathed for “taking all our profits
away”.

Is there any basis for the widespread speculation that a competitor with
very strong political connections may be turning the screws on MTN?

It apparently does not seem that such sentiments played any role in the
MTN fine. Part IV, section 19 (1) of the NCC (Registration of Telephone
Subscribers) regulation 2011, empowers the commission to impose the exact
penalty it imposed. Has the regulator been fair and transparent – and been seen
to be so – in this particular case?

It’s hard to argue to the contrary. Common sense would, however, clearly
suggest that insisting on a crippling penalty could create the impression that
there’s more to all this than meets the eye.

For every MTN that succeeds, there are scores of businesses in the value
chain – base station construction firms, engineering companies, property
owners, suppliers, dealers and so on – that depend on it to create jobs. The
NCC or any other regulator cannot ignore the potential impact of a full penalty
at a time when investments are falling and the economy is hurting.

Even as a matter of self-interest, the regulator cannot expect to cripple
MTN and allow it to achieve its target of $160 billion in revenue in 10 years.

The NCC needs to review the penalty, not only because it’s the logical
thing to do, but also because it has a poor record of complying with its own
rules – whether in the sale of spectrum or even the registration of
subscribers, the very basis for the MTN fine.

Whereas part II, section II (2) of the NCC (Registration of Telephone
Subscribers) regulation of 2011 excludes the regulator from incurring costs on
subscriber registration, the government of former president Goodluck Jonathan
approved 6.1 billion naira (R427 million at the current exchange rate) for the
NCC in 2011 for SIM registration.

Its former executive vice-chairperson, Eugene Juwah, claimed at the time
that the money was “to register 80 million subscribers”. Well, that did not
happen.

The commission returned for more money in 2012, forcing Abike
Dabiri-Erewa, then a member of the House of Representatives, to insist that
“the commission must explain to Nigerians how the money was spent”. Well,
again, that did not happen.

If, after breaking its own law three years ago, spending 6.1 billion
naira and then leaning on the four other telecoms companies to spend about 45
billion naira more, the NCC still managed to get the registration done, the
entire subscription base would have been covered by now.

It’s just as well that the dog should wag the tail, but chewing off the
tail completely is another matter.