MTN stock takes a hit on $5.2bn Abuja fine

Mergers, Acquisitions and Financial Results

SHARES in MTN dropped more than 12%, the worst fall in more than 10 years — wiping off R44bn of the company’s market value — after the Nigerian regulator fined it $5.2bn for alleged breach of SIM cards registration rules.

The shares closed at R167, giving the company a market capitalisation of R308bn, down from R352bn before news of the fine filtered through.

According to reports, MTN failed to disconnect customers with unregistered SIM cards.

The group said the fine by the Abuja-based Nigerian Communications Commission (NCC) related to "the timing" of the disconnection. The NCC requires mobile network operators to register all customers in a bid to curb crime.

SA has a similar law.

Last week MTN said its total subscriber numbers in Nigeria had fallen to 62.5-million because of the 5.1-million customers that were disconnected during the registration process. Of those, 3.4-million had since been reconnected.

The fine is more than MTN Group’s net profit for the 2014 financial year, which was R37.7bn. NCC head of public affairs Tony Ojobo told Bloomberg that the regulator had acted within its mandate.

"It is only MTN for which we have been able to establish clear infractions and 5.2-million SIMs had to be forcefully disconnected by the NCC."

According to Nigeria’s Technology Times, MTN had allegedly refused to deactivate unregistered mobile phone lines on its network. The online news site reported that MTN might face more sanctions from other government agencies.

MTN on Monday said it was in discussions with the NCC.

The latest fine has raised questions about the effect this may have on the company as it renegotiates the renewal of its licence, which expires in February next year.

This is not the first time MTN has faced regulatory sanctions in Nigeria. In 2013 — together with its rivals — it was ordered to stop selling SIM cards as the company had "failed to meet network quality standard".

There is also speculation that the fine could be aimed at boosting depleted government coffers in Nigeria.

Farai Mapfinya, head of equities at JM Busha, said the fine was excessive.

"While it is too early to tell, we do not realistically believe that the fine will eventually pan out in this form or quantum," he said.

Mr Mapfinya said the state was obviously under pressure on the revenue side because of the decline in oil prices and "what comes to mind is the government positioning itself in a position of greater leverage pending the negotiations of MTN’s licence renewal."

The imposed fine is close to a quarter of MTN’s total value across all regions while the subscribers in question equate to about 2.1% of all of MTN’s subscribers across all regions.

"To our mind it is one of those instances where the numbers do not match the story behind it."
Source: Business Day Live 27 October 2015