Analysts believe the industry should expect more senior management exits at MTN following the resignation of group CEO Sifiso Dabengwa yesterday.
This as the mobile operator remains in hot water in Nigeria where it is facing a R74 billion ($5.2 billion) fine for failing to disconnect over five million customers with unregistered SIM cards.
"Certainly we anticipate that more heads will roll," says Brian Neilson, research director at BMI-TechKnowledge.
Ovum senior analyst Richard Hurst says "the dust has far from settled" on the matter and shareholders should expect to see executives from the Nigerian operation begin to exit as well.
The Public Investment Corporation (PIC) has made its feelings clear, saying Dabengwa's exit was "the noble thing to do in the current circumstances" but it believes "a lot more people need to take collective responsibility for the fine".
The PIC owns a 16.63% stake in MTN through an investment for the Government Employees Pension Fund.
"There still remain questions as to the role of the board of directors, which is charged with exercising fiduciary responsibilities for the benefit of shareholders. In particular, we question the role of the risk and compliance function within MTN," the PIC said in a statement.
"Could risk and compliance have not foreseen there were instances of noncompliance, which could lead to penalty? What actions were taken to address noncompliance and mitigate possible fallout?" the PIC questions.
Former CEO and current non-executive chairman, Phuthuma Nhleko, will now take the reins as executive chairman while the company looks for Dabengwa's successor. The PIC says it will request a meeting with Nhleko "to understand exactly how he plans to turn things around for the benefit of shareholders".
Falling on his sword
When scandals erupt it is usually the CEO who has to take the fall and Neilson says Dabengwa's exit addresses a problem of managing perceptions, "especially for the company's stakeholders such as (both private and public sector) investors, who have to see some kind of action being taken".
Hurst says as CEO, Dabengwa held the responsibility for the group's activities and "in essence the buck did stop with him".
Whether more heads will roll at MTN Nigeria remains to be seen and Neilson says the blame will depend on where the decisions that led to the fine, and how the news was handled, were taken.
"It may be that MTN Group was more involved in that issue, and therefore shoulders more of the burden of responsibility," according to Neilson.
Lack of communication
Hurst believes MTN did not handle the situation as well as it could have after it found out about the hefty fine from the Nigerian Communications Commission. So far, the company continues to tell shareholders it is engaging with Nigerian authorities on the matter but has given little indication of when a resolution may be found.
"The entire uncertainty and the ongoing downward pressure on the share price is a result of the lack of communication with the market," Hurst says.
Neilson agrees the telco has not handled things well, pointing out the company's initial delay in announcing the fine to the market on 26 October is an example of this. It is this delay that has spurred a Johannesburg Stock Exchange (JSE) investigation into the timing of the particular MTN SENS announcement. News of the fine broke in Nigeria early in the morning but MTN only issued a statement to the market in South Africa after 2pm.
The JSE says it is looking into whether there were any breaches of the listings requirements but says this "can be a lengthy process".
"As with all price-sensitive announcements, the market regulation team is looking into trades that took place before the announcement in order to determine if there is any evidence of possible insider trading," Peter Redman, senior technical advisor for market regulation at the JSE, told ITWeb when the JSE launched the investigation last month.
Now what?
The PIC says the challenges need to be dealt with immediately "to ensure MTN complies with laws and regulations wherever it operates to ensure long-term sustainability of the company".
"I think that the company needs to quickly and effectively communicate how they will deal with this situation and what progress they have made to date," adds Hurst.
Neilson agrees MTN now needs to take steps to re-assure customers in Nigeria that it is stable.
"From a PR standpoint, they will be putting out more positive statements, like the recent one about their key licences being renewed in Nigeria. They will also seek help from the SA government to pull strings to mitigate the severity of the fine, particularly because of the exposure the PIC has to MTN's shares. This may be fruitless, however,' adds Neilson.
MTN has until next Monday, 16 November, to pay the fine.
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