Nigerian President Muhammadu Buhari’s rebuke to MTN Group Ltd. in front of South African counterpart Jacob Zuma shows the continent’s biggest mobile-phone company still has a fight on its hands to reduce a mammoth $3.9 billion fine.
In his first public comments on the matter, Buhari said Johannesburg-based MTN had been punished for being slow to disconnect phone lines used by Boko Haram insurgents, contributing to casualties in a conflict that has claimed about 10,000 Nigerians. While his comments to reporters in Abuja on Tuesday came in a press conference alongside Zuma, the South African president didn’t respond to the accusation leveled at his country’s third-biggest company.
MTN’s decision in December to challenge the fine in a Nigerian court was also criticized by Buhari, who said it was an attempt to “virtually disarm” the government. The phone company has since withdrawn the court case and made a 50 billion naira ($251 million) payment in order to continue negotiations on the penalty, which exceeds MTN’s revenue from the country last year.
“Everyone has gone back to playing hardball after MTN withdrew its court case,” said Dominic Cull, a regulatory lawyer at Cape Town-based Ellipsis Regulatory Solutions. “There’s still a lot of game-playing to be done before it becomes clear if the Nigerian government will be a bit more lenient towards MTN.”
MTN’s shares have fallen almost 25 percent since the fine — originally set at $5.2 billion — was made public on Oct. 26. They fell 2.9 percent to 144.05 rand as of 12:37 p.m. in Johannesburg on Thursday. The company made a provision of about $600 million toward payment at its full-year earnings on March 3, and the stock has risen about 6 percent since.
The penalty was set for missing a deadline to disconnect 5.1 million subscribers deemed by the government to be improperly registered in the country, which has been battling Boko Haram’s Islamist insurgency since 2009. While negotiations led by MTN Executive Chairman Phuthuma Nhleko led to a 25 percent reduction in the fine to $3.9 billion late last year, little obvious progress has been made in 2016.
“If there is no reduction in the fine, I think there will be a longer-dated payment,” said Sasha Naryshkine, a director of Johannesburg-based money-manager Vestact. “Also, there will be a push from MTN that a large portion of the fine gets paid through investment in infrastructure. This will be in the long-term interest of everyone.”
MTN’s problems in Nigeria have extended to the withdrawal of services by regulators for failing to meet phone-quality standards, which contributed to a 51 percent fall in 2015 earnings. Even so, the company agreed to buy Internet provider Visafone in Africa’s most populous country in January and said last week it would consider listing its local unit on the Nigerian Stock Exchange.