MTN CEO Dabengwa Resigns as Largest Shareholder Challenges Boardby and
Dabengwa is replaced by Chairman Nhleko for up to six months
The shares pare early losses to trade higher in Johannesburg
MTN Group Ltd. Chief Executive Officer Sifiso Dabengwa resigned, taking responsibility for a $5.2 billion Nigerian fine that’s wiped 16 percent off the value of Africa’s biggest wireless carrier, while its largest shareholder questioned the role of the company’s board in the events.
Dabengwa will be replaced by former CEO and Chairman Phuthuma Nhleko as the company searches for a permanent successor, Johannesburg-based MTN said on Monday. Nhleko, who led MTN for almost nine years until 2011 and increased subscriber numbers 30-fold through rapid international expansion, said he will deal with Nigerian authorities personally over the penalty. Talks are at an advanced stage, according to people familiar with the matter, who asked not to be identified as discussions are private.
Nhleko, 55, said he will “pro-actively deal with the Nigerian regulator and will continue to work with them in addressing the issues.” MTN shares traded 1.1 percent higher at 159.21 rand as of 4:22 p.m. in Johannesburg.
Dabengwa, 57, resigned over the weekend after consultation with the board. His financial compensation hasn’t been decided, spokesman Chris Maroleng said by phone, describing the move as an “honorable gesture.” The company has until Nov. 16 to pay the Nigerian fine, which was imposed for missing a deadline to disconnect 5.1 million unregistered subscribers and is based on a charge of 200,000 naira ($1,008) for each such customer.
“We’ve been anticipating this, but not the timing,” Arthur Goldstuck, an analyst at World Wide Worx, said by phone. “One can only assume his role in the negotiations was not effective.”
MTN’s largest shareholder, the Public Investment Corp., called on the company’s board to take greater responsibility for the levy, according to a statement on Monday. The Pretoria-based money manager, which owns 13 percent of the company, will also be seeking a meeting with Nhleko, who will stay as CEO for as many as six months.
“A lot more people need to take collective responsibility for the fine,” PIC CEO Dan Matjila said in a statement. “Could risk and compliance have not foreseen that there were instances of non-compliance, which could lead to penalty?”
MTN shares have declined about 16 percent since the Nigeria penalty was made public two weeks ago, valuing the company at 295 billion rand ($20.6 billion)
MTN expanded into markets such as Iraq and Syria under Nhleko and now has more than 230 million customers in 22 countries. Nigeria is the company’s biggest market with more than 62 million subscribers, or almost a quarter of the total. The Nigerian Communications Commission last week approved the renewal and extension of MTN’s license for another five years until 2021 pending the payment of $94.2 million.
“Due to the most unfortunate prevailing circumstances occurring at MTN Nigeria, I, in the interest of the company and its shareholders, have tendered my resignation with immediate effect,” Dabengwa said in the statement. He didn’t answer calls to his mobile-phone seeking further comment.
“Sifiso leaving is a loss to the industry,” Shameel Joosob, CEO of MTN competitor Vodacom Group Ltd., said by phone. “I see this issue as a bump in the road. They will probably negotiate a settlement on the fine.”