NCC $5.2bn Fine: MTN Loses $4.7bn In 3 days

The telecom firm, MTN, seems to have run into more trouble as its stocks fell for a third day in Johannesburg to a three-year low.

The stock declined 2.6 percent to 155.85 rand by the close in Johannesburg, the lowest since October 2012. That values the company at 288 billion rand ($21 billion), about 63 billion rand less than at the start of the week. Almost 17 million shares were traded yesterday, or more than twice the three-month daily average.

Also, MTN is being accused of insider dealing because it failed to make the $5.2 billion fine public knowledge early enough, prompting a few that heard the news to gain advantage of others at the Johannesburg Stock Exchange (JSE) Monday morning.

It was further gathered that the MTN’s bigwigs flew into Nigeria in order to find amicable solution to the ongoing impasse.

The Nigerian Communications Commission (NCC) had on Monday imposed the heavy penalty on the South African firm for failing to disconnect users with unregistered SIM cards.

“MTN is talking to NCC with the view to revoking or reducing this fine,” one of the source told Reuters. “There was bit of misunderstanding around this issue.”

Another source said MTN had been in talks with NCC about the exact number of people using unregistered SIM cards when the deadline to disconnect them passed.

“MTN was under the presumption that it can carry on business as usual because it was still in discussion with the regulators,” the source said.

If it stands, the penalty will wipe out more than two years of MTN’s annual profits. Nigeria is MTN’s biggest market by subscribers.

An NCC source said the Commission’s decision was taken based on advice from Nigeria’s state security service which suspected unregistered SIM cards were being used for criminal activities.

“The problem is, it’s an open-ended risk,” Grant Cullens, chief executive officer of African Alliance Asset Management Ltd., which manages $1.2 billion in assets, said by phone from Johannesburg.

“The fine could end up being a huge number and while it may seem out of proportion to the share price, it’s that overhang risk that will be dominating sentiment.”

The NCC is seeking the penalties because MTN missed a deadline to disconnect N5.2 million subscribers with unregistered SIM cards. The ruling is based on a fine of N200,000 ($1,003) for each customer, Johannesburg-based MTN said on Monday. MTN Nigeria is in talks with the NCC to resolve the matter, the company said.

Already talks of trading by those who got wind of the Nigerian $5.2 billion sanction has started to ring loud as some shareholders disposed of their shares ahead of the MTN’s statement to the JSE.

In Nigeria, the first news about the fine emerged around 5pm Nigerian time on Sunday while Nigeria’s most influential newspaper, LEADERSHIP, was the first national news medium to carry the full story about 4am on its website Monday morning, several hours before MTN Group’s official statement on the matter.

In South Africa, Mr. Ashraf Mohamed, an executive director at Sycamore Fund, said MTN’s trading volume at around 11am on the day of the fine announcement – shortly before the company’s required SENS announcement – was very high. “Around an hour later, the SENS announcement was made. Somebody certainly went in and sold those shares with insider knowledge,” he said.

Mohamed said he will be surprised if the JSE does not investigate the trades which happened before MTN’s announcement.

Also, Giulietta Talevi, a television host with Business Day, said MTN would almost certainly have been aware of the fine, and for them to not put out a statement early in the morning was “very poor form.”

Anchor Securities portfolio manager, Deryck Janse van Rensburg, agreed, saying that transparency for a large company like MTN is vital.

He said investors and shareholders need to know what is going on, and that a company should inform the market about possible issues “sooner rather than later”.

Analysts wondered why MTN would withhold such important information from its shareholders when it knew the implication of allowing some unscrupulous investors to offload their shares to unwary buyers ahead of an official announcement.

LEADERSHIP had on Tuesday exclusively reported that the NCC had suspended all regulatory services to MTN Nigeria until its pays the N1.04 trillion ($5.2bn) fine. The newspaper also confirmed that Nigeria’s largest mobile operator is in trouble for “accumulation of over 28 separate and proven infractions.”

MTN Nigeria angered the telecom regulator by flouting a federal government directive to deactivate 5.2 million incomplete subscriber identification module (SIM) cards on its network.

Quoting an NCC document which laid bare MTN Nigeria’s ‘Sins’, the authoritative newspaper said: “In the NCC quarterly compliance enforcement report for Q2 2015, out of the six sanctions imposed on operators for various acts on non-compliance, MTN was involved and sanctioned for four separate infractions,” it stated.

“As it stands today, MTN’s persistent violations have forced the NCC to impose the unprecedented sanction of suspending all regulatory services to MTN following its accumulation of over 28 separate and proven infractions.”

NCC also said MTN’s dominance places limitations on the federal government’s power. MTN currently has 59.3 million active subscribers.

The fine of N1.040 trillion is in line with Section 19 of the SIM Registration Regulations specifying N200,000 per unregistered SIM and the penalty has been applied for the 5.2 million MTN SIM card registration records found to be non-compliant by the NCC.
SIM registration: Reps want NCC to account for N6.1bn voted For exercise

The House of Representatives has said that the Nigerian Communications Commission (NCC) must account for N6.1 billion it received from the federal government for Subscriber Identity Module (SIM) card registration.

The resolution comes after the NCC fined MTN $5.2bn (N1.4trillion) for failing to disconnect millions of its unregistered subscribers at the August deadline set by the regulatory body.

During debates on a motion seeking the investigation of telecommunication companies over failure to deactivate unregistered SIM cards, Minority Leader Leo Ogor called for an inquiry into how the NCC spent the N6.1 billion it got for SIM card registration.

From 2012 when the SIM registration started, SIM card buyers had to register the card under their name by law.

Ogor said: “Let me appeal to the committee handling this investigation to be mindful of the billions of naira budgeted for the registration of SIM cards as given to the NCC. I am aware that this House in the 7th Assembly appropriated over N6 billion for the purpose of registering SIM cards and the funds were released. The NCC should explain what it did with that money now that we are still having issues of unregistered subscribers.

“So let them go beyond the telecom providers and also look at the role of the regulator itself which claimed over N6.1billion for the purpose of generating a database of subscribers.”

Yesterday, the House launched a probe of both the NCC and all telecommunication firms over the non-compliance with the directive to deactivate unregistered SIM cards on their networks and allegation of allied abuses of good corporate governance by the service providers.

The motion’s sponsor, Oluwole Oke (PDP, Osun) reported that by December 2014, about 45 per cent of SIM cards on the mobile network were invalid due to non-registration or improper registration.

He gave a breakdown of unregistered SIM cards: MTN, 18.6 million; Airtel, 7.4 million; Glo, 2.33 million and Etisalat, 9.46 million.

In the lead debate, Oke said: “The assiduous efforts of our hard working security agents to tackle incessant and sustained cases of insurgency and kidnappings may be attributable to the non-deactivation of lines still being warehoused by the criminals.

“This condition may worsen and prevent the achievement of the deadline to tackle insurgency and other forms of insecurity in Nigeria.

“MTN has not denied that the regulator had variously served the telecommunication companies similar directives at the same time, but while the other seemed to have complied, MTN blatant refused, driven by pecuniary profit consideration at the expense of our collective security, leading to the imposition of the fine.

“If the issue of fine imposition and the alleged decision of MTN to negotiate with NCC are made the primary concern and the link to our collective security, the parliament would be abdicating its primary responsibility,” the lawmaker stated.

When the motion was put to a voice vote by the presiding Deputy Speaker Yussuff Lasun, it was unanimously approved and subsequently referred to House Committee on Telecommunication.

A report is expected within three weeks.