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MTN ‘optimistic’ of reaching deal with Nigerian authorities over massive fine

MTN is optimistic an agreement can be reached in the ‘short term’ to settle a $3.9 billion fine dispute with the Nigerian Government, Africa’s biggest mobile phone operator informed shareholders on Wednesday. By Gugu Lourie

“We continue our engagement with the Nigerian authorities and are awaiting feedback. We remain optimistic on reaching a conclusion on this matter in the short term. We will continuously monitor developments with regards to the Nigerian fine and will review the adequacy of the provision at the end of the reporting period,” MTN informed investors via the the JSE.

The mobile phone giant has set aside R9.3 billion as a provision for the Nigerian regulatory fine.

In February, MTN agreed to pay $250 million (R3.87 billion) to settle dispute with the Nigerian authorities over the failure by the mobile phone giant to register subscribers. The South African-based telco said at the time it made the payments to the Federal Government of Nigeria and anticipate that it will be taken as a settlement to the ongoing dispute.

MTN was given a December 31 2015 deadline to pay the R59 billion ($3.9 billion) fine for its failure to disconnect 5.2 million subscribers who did not register their SIM cards. The payment deadline has expired.

The company reiterated on Wednesday that the appointment of a new CEO is likely to be concluded in a months’ time following the departure of Sifiso Dabengwa with immediate effect on 9 December 2015.

“The search for a new MTN Group CEO is well underway and as previously noted we hope to make an announcement on this matter prior to the end of June 2016 at the latest,” said MTN.

The company appointed Phuthuma Nhleko as an executive chairman on an interim basis – from 9 November 2015 to 9 May 2016.

Phuthuma Nhleko
Phuthuma Nhleko, MTN’s executive chairman

Furthermore, on Wednesday MTN reported that it expect MTN Nigeria’s performance to improve given the focus on reconnecting subscribers and the re-instatement of regulatory services enabling the operation to provide more competitive tariffs and promotions.

“Early indications of tariff changes are positive for both data and voice revenue. Improvements made on the data network as well as once-off costs in early 2016 associated with the registration process, will also contribute to improved performance in the second half of 2016,” the company said.

In the first four months of 2016 financial year, MTN Nigeria’s organic revenue was down 6% year-on-year mainly due to uncompetitive pricing arising from the suspension of regulatory services and regulatory restrictions that obliged operators to seek permission from customers to charge out-of-bundle rates upon the depletion of data bundles.

The company said MTN Nigeria’s Revenue was also impacted by subscriber disconnections and an increase in promotional minutes to encourage subscribers to complete their SIM registration details.

“Despite the decline in MTN Nigeria’s organic data revenue data traffic increased by 27% YoY, supported by the continued improvements made to the data network. This was further enhanced by the lifting of regulatory services at the end of March 2016 and the approval of price plans in early May. May daily data volumes are up approximately 20% month-on-month with nearly 4 million subscribers taking up the new offers, following the introduction of the new price plans. The early signs are positive on both voice traffic as well as new subscriber acquisition volumes, where month-on-month gross connections are showing positives signs with an increase of almost 13%.”

MTN said it expects the South African operation to report improved revenue growth through the rest of the year supported by 3G and LTE network roll out, improvements in network quality and competitive offerings.

Data revenue in South Africa is also expected to benefit from aggressive handset sales.  In the first four months of 2016 financial year, MTN South Africa reported a 4% rise in year-on-year revenue. The company attributed this to “a 17% increase in handset revenue and 23% growth in data revenue driven by a 59% year-on-year increase in data traffic as well as a 55% increase in digital revenue. Outgoing revenue was impacted by a 48-hour network outage in some key areas in February 2016 as well as a decrease in consumer spend over the period.”

The mobile phone operator added that following the partial removal of sanctions in Iran, we expect to see an opportunity to expand services and more appetite for growth in this market.

While it has taken longer than initially expected, “MTN continues to engage the various related parties in an effort to repatriate approximately US$1 billion equivalent from MTN Irancell (where it holds a 49% share).”

The company share price was up 2.87% to R131.78 by 10:16 am, pushing its market value to R236 billion.

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