Today marks one year since MTN announced it was facing a N1.04 trillion (R71 billion at the time), fine from the Nigerian Communications Commission (NCC) for failing to disconnect 5.1 million unregistered SIM cards in the country.
What followed was eight months of drama, which ultimately ended in MTN negotiating to pay N330 billion (R25 billion at the time) to settle the fine, while MTN's share price and investor confidence took a beating.
The week before the announcement, MTN's stock on the Johannesburg Stock Exchange was trading at around R190 per share. At 11h00 CAT today, the stock was worth around R114, an almost 40% drop in a year.
Before the fine was announced, MTN's market capitalisation was worth around R350 billion; 12 months later this has dropped to R212.7 billion.
Africa Analysis MD Dobek Pater says the fine has certainly negatively impacted MTN's business over the short-term.
"I don't know what the shareholder confidence is now, but presumably it is not all that great, judging by the further decline of the MTN share price. In particular, I think shareholders who perhaps do not follow MTN all that closely and are not familiar with the intricacies of Nigeria may be losing faith in MTN's operations there," says Pater.
Year-to-date, the MTN share price is down around 13.6%, with the share price tick-tocking up and down in recent weeks. This as the company faces new allegations in Nigeria - this time for allegedly illegally repatriating around $14 billion (R192 billion) out of the country. MTN has denied the allegations and says it is co-operating with an investigation by Nigerian authorities.
"The MTN share price began to recover a couple of months ago before the newest allegations, and it's more recent volatility was more subject of competitive market forces than the fine itself, in my view," adds Pater.
He says one needs to keep in mind the "dire state of the Nigerian economy" and that the West African nation's government is looking for additional sources of funding - partially through the regulatory environment.
"This means that in a case such as the [recent allegations], Nigeria may take this opportunity to levy another fine on MTN, in order to gain additional funds."
Reputational damage
Pater says MTN effectively admitted it had done wrong, and on purpose, by not disconnecting unregistered SIM cards by the NCC's deadline, which he says has probably had some negative reputational impact on the operator. However, he says MTN's latest quarterly results, which reflect nominal growth in most markets, show MTN subscribers "have mostly shrugged off" the association with the fine.
MTN's quarterly Nigerian numbers, for the three months to 30 September, showed marginal recovery. After reporting year-on-year declines in revenue in Nigeria for the first and second quarters of 2016, of 6.2% and 3.3% respectively, the third quarter saw MTN limit the revenue decline to 1.2% year-on-year.
In Nigeria, constant currency data revenue increased by 6.7% and MTN saw a 2.5% quarter-on-quarter increase in its subscriber base in the country to 60.5 million.
BMI-TechKnowledge director Brian Neilson doesn't believe customers generally take much note of "industry rumblings".
"I believe most customers are far more interested in what any given service provider offers them, and their own personal experience with that company. I think this is borne out by the observation that MTN beat market expectations, and even grew its subscribers quarter-on-quarter in Nigeria.
"Although consumers in Nigeria may be slightly more aware and maybe even occasionally concerned, in which case it is most likely out of 'righteous indignation'," adds Neilson.
"Investors, on the other hand, are clearly fazed by the latest accusations, as the share price volatility reflects," he says.
A year ago, analysts said the fine would be "disastrous" for MTN as the original amount was equivalent to almost half of the group's revenue and double its profit for 2014. The debacle was rather messy, with MTN launching a court case to get the fine reduced, which it later dropped. The NCC also reduced the N1.04 trillion fine in December 2015 to N674 billion, but the following day changed its mind and brought it back up to N780 billion.
The fine did no favours for MTN's full year or interim results and the settlement amount of N330 billion will only be fully paid off in May 2019.
New blood
The fine not only knocked billions off MTN's market cap but also saw CEO Sifiso Dabengwa resign under a cloud.
MTN group executive chairman Phuthuma Nhleko took over the leadership role and helped to negotiate the settlement. He will revert back to his role as non-executive chairman when new CEO and group president Rob Shuter begins work on 13 March 2017.
Pater believes Dabengwa's exit was the right move at the time because he was seen as "the person blamed for the Nigeria fiasco; therefore, he needed to go as a compromised executive".
"Dabengwa had been in that position for a number of years and possibly had begun to run out of ideas on where next to reinvigorate the company. There was a need for new blood and this presented a good opportunity," adds Pater.
Dabengwa's exit also came at a heavy cost, with the group paying him R23.6 million for "compensation for loss of office".
"Shuter will need to co-develop and execute on an entire new strategy of the organisation moving into the digital area, adjacent markets, competing in an environment that is experiencing a significant paradigm shift from where it was even five years ago in Africa and the Middle East," adds Pater.
He says shareholders are now looking for MTN to showcase a sense of control over the company and confidence it has moved from its historical ways of doing business and has a clear map of where it wants to go to grow.
"Consumer customers in most markets are probably happy, even if perhaps complaining about high tariffs. MTN still delivers better value than many of its competitors, which is why it is number one or two in most markets. Business customers will want to see that MTN is developing competency in the 'fixed-line' environment, particularly in South Africa," concludes Pater.
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