MTN Sets Aside $600 Million Toward Fine for Settlement Talks

  • MTN provision accounts for about 15% of fine as talks continue
  • Africa's biggest phone company also plans 2016 dividend cut

MTN Group Ltd. put aside about $600 million for payment toward a record $3.9 billion regulatory fine in Nigeria, signaling Africa’s largest mobile-phone company is confident the penalty will be reduced. The shares rose the most in almost a month.

The provision, which includes a 50 billion naira ($251 million) installment announced on Feb. 24, accounts for about 15 percent of the total fine, which was imposed for missing a deadline to disconnect some subscribers. MTN may also reduce the 2016 dividend if more funds are needed to pay the fine, the company said.

“Management has applied its judgement in determining the provision,” Johannesburg-based MTN said in a statement on Thursday. The company is continuing settlement talks “in an attempt to ensure an amicable resolution in the interest of MTN Nigeria, its stakeholders and the Nigerian authorities.”

MTN was fined by the Nigerian Communications Commission last year for being slow to disconnect 5.1 million subscribers that the regulator had deemed to be unregistered in the country, which is tightening security as it battles an Islamist insurgency. Negotiations on the settlement are being led by Executive Chairman Phuthuma Nhleko, who stepped in after Chief Executive Officer Sifiso Dabengwa resigned last year. MTN plans to appoint a new CEO during the second quarter of this year, the company said.

The shares climbed 4.3 percent, the most since Feb. 13, to 141.63 rand at the close in Johannesburg. That reduced the decline since the fine was made public on Oct. 26 to 26 percent, valuing MTN at 261 billion rand ($17 billion).

Dividend Cut

“My expectations are that the Nigerian government would want MTN to pay at least a $1 billion over not longer than a year period,” Dobek Pater, managing director of research firm Africa Analysis, said by phone. “But MTN must have a feel for what is going on with the ongoing negotiations on the fine.”

MTN will pay a minimum dividend of 7 rand a share to investors in 2016, the wireless operator said in the statement. That compares with a 13.10 rand dividend for last year.

“We have adopted a cautious approach to the dividend outlook, taking into account the interests of shareholders and lenders and the importance of maintaining an investment-grade credit rating,” MTN said. “This minimum dividend remains subject to the outcome of the regulatory fine.”

Full-year earnings per share excluding one-time items fell 51 percent to 7.46 rand in 2015 as a result of the fine provision, and 25 percent excluding the one-time payment. Revenue increased 0.1 percent to 146.4 billion rand, as a rise in data revenue offset declining voice sales in Nigeria and handset sales in South Africa. The number of subscribers across more than 20 markets increased 4.1 percent to 232.5 million.

“We are hopeful that we will see improvements in operating conditions during 2016,” MTN said.

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