N1trn Fine: MTN Group CEO Forced To Resign | Independent Newspapers Limited
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N1trn Fine: MTN Group CEO Forced To Resign

Posted: Nov 10, 2015 at 8:00 am   /   by   /   comments (0)

The $5.2 billion fine the Nigerian Communications Commission (NCC) slammed on telecommunication giant, MTN Nigeria, claimed its first victim yesterday with the forced resignation of the company’s Group Chief Executive Officer, Mr. Sifiso Dabengwa.

The NCC penalised MTN for failing to disconnect 5.1 million unregistered subscribers and it has up till November 16 to pay the fine.

Although a statement yesterday in Johannesburg, South Africa, by MTN quoted Dabengwa as saying he resigned “in the interest of the company and its shareholders,” investigations by New Telegraph showed that he was forced out.

Besides, more heads are to roll in the days ahead. Sources said MTN’s Board of Directors demanded Dabengwa’s repignation over his failure to persuade the Nigerian authorities to reduce the $5.2 billion fine. MTN is said to be seeking up to 60 and 80 per cent cut in the fine, according to Refinance Capital but talks with Nigerian authorities, so far, have not yielded any result.

“So, the board of MTN was not particularly happy with the adamancy exhibited by MTN management which is bringing great minus to the revenue to shareholders. The matter was exacerbated with the fact that so far, no positive compromise has been reached and yet the November 16 deadline is closing by.

So, he was advised by the board to resign, ” a source at MTN Nigeria’s head office in Lagos told New Telegraph yesterday. In addition, the largest shareholder in South Africa’s MTN Group, the Public Investment Corporation (PIC), said yesterday that it wanted more people to take responsibility for the $5.2 billion fine.

“A lot of more people need to take collective responsibility for the fine that was imposed on MTN Nigeria for alleged failure to comply with regulatory requirements in that country,” the Chief Executive of the PIC, Mr. Daniel Matjila, said in a statement. Dabengwa became the first casualty of the staggering fine slammed on MTN Nigeria by the country’s telecoms umpire, the Nigerian Communication Commission (NCC), for failing to cut off 5.1 million users with unregistered Subscriber Identity Module (SIM) cards after the expiration of a fixed date last month.

The regulation stipulates N200, 000 fine for an un-disconnected line, amounting to N1.04 trillion, almost half of its total investment in the country.

MTN Nigeria has slightly over $13 billion (over N2 trillion) investment to date in fixed assets and facilities nationwide to provide cellular network access and Information and Communication Technology (ICT) solutions to Nigerians.

“Due to the most unfortunate prevailing circumstances occurring at MTN Nigeria, I, in the interest of the company and its shareholders, have tendered my resignation with immediate effect,” Dabengwa said in Stock Exchange News Service (SENS) announcement yesterday.

While MTN said it would continue talks with authorities in Nigeria over the fine, a non-executive chairman and former CEO, Phuthuma Nhleko, has been appointed as executive chairman for a maximum of six months. Dabengwa had been chief executive of MTN since 2011 when he took over from Nhleko.

It was gathered that the MTN board was shocked that the Dabengwa management would allow such a heavy sanction to come the way of the Africa’s largest telecoms network. “Dabengwa cannot be said to be unaware of the beginning of this crisis.

As the CEO, the board reasoned that MTN Nigeria must have informed him of the regulatory actions on directive regarding need to deactivate the 5.1 million unregistered SIMs, but failed to act until the issue went out of hand,” one of the sources said. Dabengwa was one-time CEO of MTN Nigeria and was expected by the board to be able to broker a compromise with Nigerian authorities to cut the fine, but has failed since the announcement of the fine in October.

The priority for Nhleko will be trying to get a reduction in the fine. Nigeria, Africa’s most populous nation, is MTN’s largest market and contributes more than a third of its revenues. MTN currently has over 43 per cent market share and over 63 million of the over 150 million subscribers in the country.

The Nigerian regulator has been pushing cell phone network companies to verify the identity of their subscribers because of fears that unregistered SIMs were being used for criminal activities in a country facing battling Boko Haram’s insurgency. Shares in MTN have slid by nearly 20 per cent since October 26 when the charge was first reported, but were up 1.4 per cent at 159.65 rand by 1.49 South African time yesterday, following news of Nhleko’s appointment.

“The board chose Nhleko because of his vast experience in Nigeria and his in depth knowledge of the company,” MTN’s spokesman, Chris Maroleng, said. In his nine years as chief executive, Nhleko was largely credited with the company’s expansion outside its home market.

The firm spans more than 20 countries, including Iran. “Obviously having only six months, he’s there to do something about the fine,” Momentum SP Reid analyst, Sibonginkosi Nyanga, told Reuters. “He’s the guy, who built MTN into what it is.” MTN also faces a Johannesburg bourse investigation on the timing of its announcement of the penalty. South African lawmakers are also investigating the telecoms company over the unprecedented fine.

Ratings agencies Moody’s and Fitch lowered MTN’s credit rating outlook to “negative” last month flagging the risk of significant cash outflow and the likely damage to the Nigerian business due to lengthy talks. South Africa’s government has said it was concerned about the fine but said this would not affect relations between the continent’s two biggest economies.