Friday 10 June 2016

MTN agrees to pay Nigeria N330billion ($1.7billion) fine

MTN Group Ltd. agreed to pay a 330 billion naira ($1.7 billion) fine in cash to the Nigerian government, a third of the original penalty, removing a major uncertainty hanging over the phone carrier’s operations in its largest market.

MTN rose 13 percent higher to 140 rand at the close in Johannesburg, the biggest gain since 2008, valuing the company at 258 billion rand ($17 billion).

Africa’s biggest mobile-phone company will also start the process of listing shares of its Nigeria unit on the country’s stock exchange, Johannesburg-based MTN said in a statement on Friday. The fine will be paid over three years and will be funded by cash flow from local operations, the company said.
“This is the best compromise amount the company could have hoped for,” Martin Roberts, senior Africa analyst at IHS Country Risk, said by phone from London. “It’s a further sign of their commitment to stay in Nigeria that they’ve agreed to list on the stock exchange, which is a long-standing goal of the government.”
The agreement ends eight months of start-and-stop negotiations with Nigerian officials over how to settle the fine, which was levied for missing a deadline to disconnect 5.1 million customers unregistered in the country. Chairman Phuthuma Nhleko returned to the company he used to run to oversee the process, hiring former U.S. Attorney General Eric Holder to lead negotiations. The deal was signed in the Nigerian capital of Abuja and is supported by the telecommunications regulator and the country’s attorney general, Nhleko said on a call with reporters.

MTN’s battle with Nigerian authorities over payment of the fine had caused a weakening of the stock price by a third amid a lack of clarity about the negotiations and posturing by Nigerian politicians. The government originally issued a $5.2 billion penalty and later lowered it to $3.9 billion. MTN offered $1.5 billion in March, made up of $750 million in cash and the balance in the form of various investments.
“This is the best outcome for the company,” Nhleko said in the statement.
Nigerian lawmakers are continuing an investigation into the circumstances surrounding the fine regardless of the settlement, said Saheed Fijabi, chairman of the House of Representatives’ communications committee.
“We just want to ensure all was done in good faith,” he said by phone from Abuja.
MTN “certainly hopes” the probe won’t affect the fine agreement, Nhleko said.

MTN Nigeria’s local listing will be carried out when market conditions are appropriate and won’t result in the parent company losing control of the unit, the chairman said.

Credit: Bloomberg

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