MTN Proposes $1.5 Billion Payment to Settle Record Nigeria Fine

  • Phone company offers to spread cash payments over five years
  • MTN shares jumped as much as 3.6 percent after the news

MTN Group Ltd. has proposed to pay 300 billion naira ($1.5 billion) to settle a record $3.9 billion fine in Nigeria for missing a deadline to disconnect unregistered subscribers that the government claims included Boko Haram Islamist insurgents.

Africa’s biggest wireless operator made the written offer, comprised of cash installments, bond purchases and network access, to the Nigerian government on Feb. 24, according to a letter to the government from the company’s lawyer, former U.S. Attorney General Eric Holder.

Nigeria’s Senate Committee on Communications met to discuss the matter on Thursday and concluded the negotiations with MTN must continue for two more weeks. A day earlier, some members of the lower House of Representatives insisted the company pays the full fine.

MTN’s shares fell 0.2 percent to 14.715 rand by 1:05 p.m. in Johannesburg, having earlier jumped 3.6 percent. They have declined more than 22 percent since the fine was made public, valuing the company at 272 billion rand ($17.9 billion).

“The initial reaction of the market was probably not a reflection of careful consideration,” Martin Roberts, senior Africa analyst at IHS Country Risk, said by phone from Lagos, Nigeria’s commercial capital. “The shares probably went up because people might have had the impression that this was an offer that would be accepted by the Nigerian government. The reaction of Nigerian parliamentarians makes it clear it’s not so cut and dried.”

MTN Rebuke

MTN was fined in October for missing a deadline to disconnect 5.1 million subscribers deemed to be improperly registered in the country by the government, which is conducting a crackdown against Islamist insurgents. Boko Haram’s campaign to impose its version of Islamic law has led to the death of more than 10,000 Nigerians since 2009.

This week, President Muhammadu Buhari, in his first public comments on the matter, rebuked MTN in front of South African counterpart Jacob Zuma during a visit to Abuja. The company had been slow to disconnect phone lines used by Boko Haram militants, contributing to casualties in the conflict, Buhari said.

“MTN Nigeria continues to engage with the Nigerian authorities in an attempt to ensure an amicable resolution to this matter,” the Johannesburg-based company said in a statement on Friday. The operator “cannot confirm or deny” the $1.5 billion figure, spokesman Chris Maroleng said by phone on Thursday.

MTN’s proposal includes the 50 billion naira that was paid last month in order to continue negotiations and a further 100 billion naira in five annual installments between the signing of an agreement and the end of 2020. The company also pledged to purchase 80 billion naira of Nigerian sovereign debt issued on international markets in 2016-2017 “as a demonstration of its commitment to and confidence in the Nigerian economy.” Thirdly, MTN would give the government access to its fiber network until 2020, an offer the company valued at 70 billion naira.

MTN Proposal

Already paid 50 billion
Installments through 2020100 billion
Government debt purchases 80 billion
Fiber access 70 billion
Total300 billion

* in naira

MTN’s management, the Nigerian telecommunications regulator and Minister of Communications Adebayo Shittu should report back to the Senate in two weeks with the outcome of discussions, according to the conclusions of the committee.

“$1.5 billion is in the right ballpark to settle the fine,” Dobek Pater, managing director of research firm Africa Analysis, said by phone. “It is on the low side of what would be reasonable. I expect a settlement of about $2 billion.”

MTN said it put aside about $600 million toward the payment at the company’s full-year earnings on March 3. Nigeria is the company’s biggest market with more than 61 million customers, about a third of the population.

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