Is MTN A Victim Of Regulatory Overkill? | Independent Newspapers Limited
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Columnists, Les Leba

Is MTN A Victim Of Regulatory Overkill?

Posted: Nov 11, 2015 at 12:00 am   /   by   /   comments (0)


Media reports, from both local and foreign sources, have lately suggested that MTN, arguably, Africa’s largest mobile telephone network, may be confronting, possibly, the greatest threat since its inception and its bountiful global success, particularly, in their Nigerian operations where they have registered over 62million subscribers. However, the mobile conglomerate’s well laid apple cart, presently appears threatened, by a $5.2bn fine imposed by Nigeria’s National Communications Commission(NCC) for the Mobile Network operator’s failure to deactivate the lines of over 5million of its registered subscribers, whose biodata were not captured as mandated by the Regulatory body.

The NCC has since set November 16, 2015 as the deadline for MTN to pay off the fine. The news of the sanction quickly shaved over 25% off the Multi-National corporation’s market value of over $25bn on the Johannesburg Stock Exchange; furthermore, trading on MTN stocks, was also temporarily suspended at the JSE to protect it from a free fall. Regrettably, when the dust settles, investors may have lost billions of dollars, with unpleasant individual and corporate consequences, because of this seemingly back breaking fine.

In view of the above circumstances, it is not surprising therefore, that NCC’s sanction of MTN was condemned, particularly in the foreign media. It is alleged that the fine is disappropriate to the offence, and worse still, it is speculated that its payment may ultimately wipe out over 2years of MTN’s annual profit; in a worst case scenario, there are fears that the company may go down, with potentially similar, socially destabilizing consequences for erstwhile shareholders and employees, including tens of thousands of Nigerians who make a living from its operations; conversely, however, hardline critics may suggest that in such a vibrant and lucrative market as Nigeria, any inheritor of the MTN business will quickly absorb the casualties from the erstwhile market leader’s demise.

There is, possibly, the danger, however, that foreign investors, particularly, would thereafter hesitate to bring their money to our country, for fear that they could equally become victims of similar draconian regulations. Consequently, some other critics may argue, that Nigeria’s economy and employment potential would be the ultimate losers if foreign investors stayed away.

Interestingly, although, there are favorable comments by some journalists and analysts in the media, there is clearly so far, no significant palpable, overwhelming public sympathy, for the MTN cause; in this event, cynics may suggest that millions of allegedly disgruntled subscribers probably consider the huge fine as payback time for the shabby services they have helplessly, endured for so long, from mobile phone operators in Nigeria.

Nonetheless, the question that inevitably pops up, is why MTN remained stubbornly recalcitrant as nothing so far suggests that the other major Telecom operators also blatantly disregarded the NCC’s directive, in August 2015, to deactivate all subscribers without Biometric verification. Conversely, could it be that the other mobile networks took the Regulator’s instruction more seriously and consequently recorded ‘minimal’ default on their registered lines?

Besides, there was no reported call by any of the Mobile Network operators for time extension on the Biometric exercise; so, the question is, why did MTN fail, big time, to respect the Sector Regulator’s policy directive? Clearly, the failure to deactivate over 5million lines without related biodata may not easily be explained away as the result of the proverbial printer’s devil; the question is, did MTN itself bring the notice of its failure to the attention of the NCC when it later discovered it was in default or did the NCC independently confront the company with incontrovertible evidence of their ‘crime’?

Furthermore, even if MTN claims that its poor compliance was not deliberate, was there, nonetheless, a commercial or revenue advantage that accrued from the omission of over 5million active lines from biometric verification of their onwers, i.e. was there an intention to defraud government of revenue on the part of MTN?

Incidentally, MTN has, not yet, proclaimed its innocence on the alleged violation of NCC’s directive in any public statement; neither has it claimed ignorance of the security implications for police investigations, that failure to deactivate related subscribers would cause; so the question remains, why MTN disregarded the Regulator’s very clear guidelines so brazenly?

Finally, what pro-active steps have been taken, before now, by the telephone company to resolve the issue to mutual satisfaction. Ironically, other phone companies who may have already paid the mandatory N200,000 per person fine for registered lines without biodata verification, may feel cheated if MTN’s penalty is subsequently, inequitably reduced on completion of the reported ongoing negotiations with the NCC.

clearly, the NCC, presumably set the penalty for infraction so high, so as to compel full compliance with its directive rather than as a covert strategy designed to fleece mobile network operators. Besides, the NCC sanction cannot be decried as selective, as the heavy penalty has not been challenged, as retroactive by any one; so, in view of the prevailing social culture of impunity, did MTN expect they could get away with breaking the law, despite being fully aware of the severe implications of a default of such magnitude on their credibility and their operations.

A $5bn fine is obviously no chicken change, but it is certainly not unusual, as billions more are paid for serious regulatory infractions in older, more successful economies where sentiment is no defense against the letters of the law. There is often the undeniable popular suspicion of the great promise of economic development and job creation that transcontinental investors bring to Africa; some reports have, however, suggested that significantly more funds flow out of Africa each year through myriad financial instruments than the actual inflow of real foreign direct investment and various aid interventions.

Nonetheless, despite their pervasive national presence, with enviable corporate success, and the numerous social interventions and billions of Naira paid as taxes over the years, MTN is probably still not integrated in popular consciousness as a Nigerian company; it is possible that a public listing in the Nigerian stock Exchange may enhance its local image; certainly, the voices of Shareholder Associations would have been more resonant in the defence of the company if they had a stake to protect in such circumstances.

Foreign investors are without doubt welcomed in Nigeria but they must respect our laws and respect our institutions; in the same manner, Nigerian companies operating abroad will also be expected to abide with the rule of law in their host countries, without expecting any special favours.

Clearly, if the NCC is unwilling to reduce the burden of MTN’s $5.2bn penalty, foreign direct investors will be served a strong notice that the Nigerian Administration has zero tolerance for any breach of our laws; conversely, a waiver of any kind to MTN may  encourage other corporations to further disregard the provisions of our laws and violate our national interest with impunity, in the expectation that penalty for any such policy violation can ultimately be ‘negotiated’ in their favour.

Nevertheless, in the spirit of African brotherhood, Mr. President should temper justice with mercy, especially in view of our collective desire as a continent to promote African interests. It is the company’s credit that they have since admitted their guilt and tendered apologies, besides they have so far not also chosen the combative path of unending litigation.

Thus, if MTN proposes a 5-6 year staggered payment plan that would ensure that it continues in business, the Nigerian authorities should look kindly at accepting such an offer.