mtn_NCC1 and MTN lOGOS

MTN In The eye of the Storm Against NCC over N1.04tn Fine

South Africa’s largest mobile phone operator, MTN Group in South Africa, confirmed monday that it had commenced discussions with the Nigerian Communications Commission (NCC) over the N1.04 trillion ($5.2 billion) fine imposed by the industry regulator on its Nigerian subsidiary, MTN Nigeria Limited, for failing to deactivate unregistered SIMs and incomplete SIM card details on its network.
This is just as the company’s shares fell more than 12 per cent, the biggest one-day decline since November 1998, on the Johannesburg Stock Exchange (JSE) where MTN’s shares are listed, as the market reacted to news of the sanction. The share plunge effectively shaved off $2.76 billion of MTN’s market capitalisation.
MTN was penalised by the regulator last week for failing to disconnect 5.2 million subscribers who had unregistered SIMs and incomplete details on its network.
NCC based the fine on a N200,000 surcharge for each of the 5.2 million subscribers and gave MTN till November 16 to pay the fine.
But its parent, MTN Group, in a statement from South Africa yesterday, said MTN Nigeria was currently in discussions with the NCC to resolve the matter in recognition of the circumstances that prevailed with regard to the subscribers.

It said: “Shareholders are advised that the NCC has imposed a fine equivalent to $5.2 billion on MTN Nigeria. This fine relates to the timing of the disconnection of 5.1 million MTN Nigeria subscribers who were disconnected in August and September 2015 and is based on a fine of N200,000 for each unregistered subscriber.

“MTN Nigeria is currently in discussions with the NCC to resolve the matter in recognition of the circumstances that prevailed with regard to these subscribers. We will continue to update shareholders in this regard.”

However, speaking on the company’s concerns over the deactivation of unregistered subscribers on its network monday, an MTN executive in Nigeria faulted the N1.04 trillion fine imposed by NCC, stating that it was “inimical to business growth in Nigeria”.

The official, who preferred not to be named, clarified that the sanction was not for failure to disconnect unregistered and improperly registered SIM cards on its network, as it had since disconnected all the “genuine numbers”.

He said the fine imposed was for failure to do same within the seven-day window as directed by the NCC.
“The initial set of numbers of subscribers to be disconnected by operators prescribed by the NCC was wrong and it was impossible for any operator to comply without some validation,” he said.
He disclosed that during the company’s meeting with NCC in August, it had raised some concerns over the directive on the deactivation of subscribers with unregistered SIMs, and informed the regulator of the “particular exposure of MTN having over 60 million subscribers and the feasibility of manually inspecting each dataset to ensure conformance with NCC standards”.

“We also informed NCC of our concerns about the feasibility of one week to carry out the review exercise given the size of our network and the possible severe disruption which the seven-day ultimatum could pose to the social and economic lives of Nigerians.

“As a way out, we recommended a staggered process that entailed the deactivation of active SIMs without biometric data immediately, and deactivation of active SIMs with incomplete personal information in one month.

“We also asked for a review of the 48-hour window during which a RGS activity must occur for a SIM to remain active to four days after activation, and for all operators to be mandated to place post-registration expiry dates on all SIMs,” he explained.

The MTN official said the company’s primary concern at all times was to ensure that it minimised any severe disruption to the lives of Nigerians, as a negative public backlash could have untold effects on the agreed public enlightenment campaign.

Added to this was the overriding need for sufficient time to be given to do a thorough evaluation of records, he said.

“After the first meeting early in August, regular updates of our compliance activities were provided as a result of the meeting and the NCC public notice of 19th August 2015,” he added.

He maintained that the N1.04 trillion fine was for delayed compliance, adding that the sanction was unprecedented in the world and would “kill MTN’s business with attendant implications”.

“The N1 trillion sanction will send the wrong signals to the international investing community and could deter foreign direct investment for Nigeria that is in dire need of foreign investments to create jobs at this time.

“It is a contingent liability which literally puts a stop on our business because we are heavily dependent on sourced finance and investment to exist.

“Lest we forget the sanction could threaten 500,000 direct and indirect jobs in the telecoms and financial sector and even the wide ecosystem,” he stated.

The official also pointed out that for a company that had paid billions in taxes and levies since it commenced operations in Nigeria in 2001, he considered it worrisome that NCC could impose such a fine without taking into cognisance the far-reaching implications.

He expressed hope that the matter would be resolved amicably within the shortest possible time, adding that his company would do all that was necessary to reach a resolution with the regulator.

But in a confidential memo by NCC to the presidency showing attempts by the regulator to get telecom companies to comply with its directive on SIM card deactivation, NCC indicated that it carried out an independent investigation across networks last month and discovered that MTN only made a partial attempt to bar unregistered subscribers in selected areas over a few days in September 2015, whereas other operators fully complied and reconciled their deactivations with the invalid registrations shared by the NCC up to four weeks earlier.

“The consequence of MTN's refusal to comply with the directive is even more pronounced, as fully half of all the invalid registrations shared by the NCC belonged to MTN.

“These SIM cards with invalid registrations pose a grave security risk to the country, because their registration information cannot be used to successfully identify their owners in the event of a security breach involving any of these SIM cards.

“The recent kidnapping of the former finance minister, Chief Olu Falae, is one example of this risk. The kidnappers used MTN SIM cards and MTN was unable to provide any registration data for those SIMs,” NCC said in the memo said.

According to the memo, having reviewed the registration records of all the telecom operators and having taken into consideration their compliance records, the NCC imposed a fine of N1.04 trillion on MTN alone for noncompliance with SIM registration.

“The fine 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," the memo stated.

The registration of all active SIMs in the country dates back to 2010 when the Office of the National Security Adviser asked NCC to direct network operators in Nigeria to start collecting biometric and non-biometric personal information for each new subscriber in an effort to improve information gathering towards enhancing national security.

He said MTN was the only telco that committed the infraction by failing to comply with its directive, so the penalty had to be imposed based on “our regulations specifying N200,000 per subscriber, which brought the fine to N1.04 trillion”.

Meanwhile, MTN’s stock took a hit on the JSE yesterday, declining more than 12 per cent to 167 rand per share, effectively shaving off $2.76 billion of the company’s market capitalisation. This values the company at 308 billion rand ($23 billion), reported Bloomberg.
Commenting, Wayne McCurrie, a Pretoria-based money manager at Momentum Asset Management, which owns MTN shares, told Bloomberg by phone: “$5.2 billion is way, way higher than the profits they’re going to make from Nigeria for many years to come.”

“That fine is totally and utterly out of proportion to whatever regulation they are contravening, if any.”
MTN, which has about 233 million customers in 22 countries in the Middle East and Africa, cut its full-year forecast for subscriber numbers on October 22 after the 5.2 million Nigerian customers were disconnected following a review into how they were able to register for phone contracts.

Nigeria is the company’s biggest market, with about 62 million customers at the end of September.
“MTN is working flat-out to try and finalise this,” McCurrie said. “That’s an astonishing amount of money.”

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