MTN pays R3.8bn to settle Nigerian dispute

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MTN has agreed to pay $250 million ( R3.87 billion) to settle dispute with the Nigerian authorities over the failure by the mobile phone giant to register subscribers. The South African-based telco said it made the payments to the Federal Government of Nigeria on Wednesday and anticipate that it will be taken as a settlement to the ongoing dispute. By Gugu Lourie


MTN was given a December 31 2015 deadline to pay the R59 billion ($3.9 billion) fine for its failure to disconnect 5.2 million subscribers who did not register their SIM cards. The payment deadline has expired.

But the South African-based telco hired seven Senior Advocates of Nigeria (SAN) to fight the fine in the Federal High Court in Lagos. The initial fine was $5.2 billion and was in December reduced to $3.9 billion.

However, late January 2016 it emerged that MTN and the Nigerian authorities may reach an out of court settlement over the dispute.

The hearings of the dispute were expected before the Federal High Court in Lagos, Nigeria in the morning, Friday, 22 January 2016.

However, MTN informed investors that the judge adjourned the matter to 18 March 2016 in order to “enable the parties to try and settle the matter. If the parties are unable to reach a settlement the matter will then proceed on that date”.

On Wednesday, MTN informed investors that it has paid the Nigerian authorities 50 billion Naira.

“MTN Nigeria has today made an agreed without prejudice good faith payment of 50 billion Naira ($250 million) to the Federal Government of Nigeria on the basis that this will be applied towards a settlement, where one is eventually, hopefully arrived at,” MTN informed investors on the JSE on Wednesday.

“In an effort to achieve an amicable settlement, MTN has agreed to withdraw the matter from the Federal High Court in Lagos.”

Phuthuma Nhleko, MTN executive chairman
MTN old hand Phuthuma Nhleko has been put back in charge for six months to steady the ship

The telco further advised its shareholders that its executive chairman, Phuthuma Nhleko, is continuing to lead the team engaging the Nigerian authorities with a view to settling the matter.

“Shareholders are therefore advised to continue to exercise caution when dealing in the company’s securities wuntil a further announcement is made.”

The news pushed up MTN share by 1.88% to R130.30 by 1423 on Wednesday, pushing the company’s market value up to R236 billion.

MTN is due to report its 2015 financial results on 3 March and has already warned that its profit will be hit hard by a number of factors with the operational underperformance in Nigeria, resulting from the subscriber disconnections and the withholding of regulatory services.

The company expects to report a 20% reduction in basic headline earnings per share (HEPS) for the full-year to end-December 2015.

The expected decrease in earnings for MTN will exclude the proposed R59 billion fine by the Nigerian communications watchdog, MTN explains.

The company said HEPS will be reduced to 307 cents for the year ended 31 December 2015 compared to 1 536 cents in the year to end 2014.

Earlier in January, MTN’s Nigeria CEO Ferdi Moolman told Leadership newspaper  that the $3.9 billion  fine imposed on MTN Nigeria by the Nigerian Communications Commission (NCC) could bankrupt the mobile phone operator as it represents 95% of its annual turnover.

The debacle has resulted in MTN Nigeria’s CEO Michael Ikpoki and the head of Regulatory and Corporate Affairs Akinwale Goodluck to resign.

MTN  Group CEO Sifiso Dabengwa also tendered his resignation.

 

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