Since 2011, Nigeria has been pushing telecom operators to verify the identity of subscribers due to concerns that unregistered SIM cards were being used for criminal activity. Nigeria’s state security alleged that the SIM cards are already being used for unlawful acts, as such failure to fully deactivate unregistered subscribers would impede the government’s ability to trace any suspicious activities, especially in the fight against terrorism.
On October 27 2015, Nigeria’s largest telecommunication provider, MTN, was fined a record fee of $5.2 bn for failing to comply with the directives of the National Communication Commission (NCC). According the the commission, MTN failed to comply despite receiving a 12 month warning on the importance of ensuring that only SIM cards with valid SIM registration details should be active on telecommunications networks. According to the NCC the fine issued to the telecommunication company is imperative for addressing their clear disregard for the law.
The Nigerian government’s decision to impose such an excessive fine on a multinational company is not out of place, considering the imposition of a $10million and $3.9 bn fine in 2010 and 2014 respectively on Shell for the oil spillage and environmental damage in the Bodo Community.
However as Nigeria is MTN’s largest and profitable market, the fine is a massive blow to the company, as it has led to a 16% drop of the company’s share on the Johannesburg Stock Exchange. The company’s shares reportedly lost almost a quarter of its value after this fine was disclosed, before managing to recover nine percent in the past two sessions. Also, South African Vice President, Cyril Ramaphosa, says MTN must respect any laws the Nigerian Communications Commission (NCC) has given.
According to Nigeria’s new communications minister, Adebayo Shittu, Nigeria does not want MTN to quit the country because of the $5.2 billion fine imposed last month. This suggests that Nigeria may eventually temper justice with mercy by reviewing the fine slammed against Africa’s largest telecoms provider.
It was reported that South Africa MTN Group’s Executive Chairman, Phuthuma Nhleko had arrived Nigeria ahead of the previously set deadline for payment which fell on 16th November 2015. However the NCC has extended the Friday deadline to MTN to pay the fine. While it may be too early to ascertain whether the telecoms company can or will pay the fine imposed by the NCC, the legality of MTN’s transgression is clear.
The last straw
The fine is legal and in accords with the Telecommunications Act. Advocacy for Societal Rights Advancement and Development Initiative, (ASRADI) has expressed support for the NCC’s decision to impose a fine on MTN Nigeria. While it has been argued that Nigeria sanctioned the telecommunications giant due to its failure to deactivate 5.2 million unregistered SIM cards, it is likely that this offense was the last straw following other sanctions.
A source in the NCC told Ventures Africa that the fine is actually cumulative, and not only based on the issue of registration, “from running adverts without the permission of the commission to poor service provision and numerous customer complaints to the commission,” this is just one of several offences. But even though these sanctions had been communicated to MTN, the company was slow to take correctional measures. According to the source, during the immediate past administration the commission’s hands were tied; they were told not to pursue MTN fines. However the present administration is heading in the opposite direction, as the commission is now required to sit up and and make sure that the money is paid.
In a statement signed by the Executive Director of ASRADI , Mr Adeolu Oyinlola, he stated that NCC’s bold step was commendable as he doubted this kind of fine would have ever been imposed under former President Goodluck Jonathan’s administration.
The fine is supported by the law at Sections 11- 18 of the Nigerian Communications Commission (Registration of Telephone Subscribers) Regulations, 2011 (the “regulations”) which was created further to the NCC’s general powers to make regulations at Section 70 of the NCA, 2003. At Section 13 of the regulations, it is provided that a licensee (any entity licensed to operate in the telecommunications sector by the Nigerian Communications Commission (NCC)) must capture and register the biometric data and personal information of all subscribers within a certain ‘subscriber registration period’. At subsection 3 of the said Section 13, licensees are mandated to deactivate any subscriber who does not register within the subscriber registration window prescribed by NCC.
Is it worth the risk?
Since the announcement of the $5.2 billion fine, MTN has lost about a fifth of its share price in the stock market. The market capitalization of the company plummeted to R289 billion and its stock is now at the same level as it was around October 2012. However, analysts have said that the share price of MTN would not fall further as it is expected to stabilize.
According to Nnamdi Awa-Kalu, a commercial lawyer who responded to Ventures Africa from a cursory examination of the law relating to telecoms in Nigeria within the context of the fine imposed by the NCC on MTN, the telecoms company will incur further liability by way of a penalty for default of compliance with the law upon failure to pay the fine.
Sifiso’s resignation was just one of many other developments to follow through as analysts and market watchers predicted. If the situation worsens, it could result in job cuts and subsequently MTN could have difficulties procuring loans amidst the struggle to keep its share price afloat.
There’s no easy way out
MTN Group had attempted to review Nigeria’s $5.2 billion (N1.04 trillion) fine to $1.04 million (N208 million) while the company also tried to approach the Nigerian banking sector for loans to balance out the huge fine.
This was revealed by the head of research, Renaissance Capital (RenCap) Nigeria, Adesoji Solanke, in his note to clients on Wednesday. “MTN is pushing to reduce the fine by 60 to 80 percent,” Bloomberg quoted Solanke to have said.
The NCC has the power to review its decisions. However according to Mr. Awa-Kalu, there is little in the regulation and the Nigerian Communications Act to suggest that NCC can lower the applicable fine specified in its establishing legislation or in any subsidiary legislation. “The possibility of MTN being granted a chance to structure payments in installments or, indeed, a reduced fine is dependent on the regulator’s discretion and powers to vary the statutory penalty,” he said.
MTN needs Nigeria
MTN has been in the forefront of Nigeria’s telecommunications industry, expanding its presence in Nigeria with about 62.5 million subscribers. The company ought to keep it that way considering MTN Nigeria currently controls 43 percent of the country’s telecommunications market. The acquisition of its license in 2001 for about US$285 million was recognized as a very bold step for a South African investment in a rather challenging market.
Failure to pay this fine poses a risk to its position as one of the most tech savvy companies in Nigeria. Africa’s largest telecoms provider has also made significant impact in the Nigerian music industry through its music related value added services.
As a forward thinking and customer service driven company, MTN is a valuable asset to Nigeria’s telecommunications sector as a whole. However, even with the delay, the future is imminent- the company has no choice but to pay up.
