MTN Mimics Apple as Rain-Maker Returns to Resolve Crisis

  • African phone company turns to ex-leader Nhleko as CEO resigns
  • The 55-year-old brought huge success, tries to fight off fine

As MTN Group Ltd. battles to reduce a record $5.2 billion fine in Nigeria, Africa’s biggest mobile-phone company is following in the footsteps of Apple Inc and Dell Inc. and turning to the person who brought it the most success: A former boss.

Phuthuma Nhleko, the Ohio State-educated engineering graduate who transformed MTN from a small South African wireless carrier into a telecommunications giant with customers in 22 countries, is back at the helm of the Johannesburg-based company after Chief Executive Officer Sifiso Dabengwa, 57, resigned at the weekend. The question is, can he recreate the old magic?

Phuthuma Nhleko

Photographer: Hannelore Foerster/Bloomberg

“The company brand has taken quite a beating, so changing the man at the top would definitely help,” Manji Cheto, a London-based Nigeria expert with Teneo Intelligence, said in a phone interview on Monday. “There is room to negotiate but I don’t think the fine is going to go away. It could well be in the billions” of dollars, she said.

Nhleko, 55, agreed to switch from non-executive to executive chairman for a maximum of six months after Dabengwa took responsibility for the fine and resigned. The businessman, who was MTN’s CEO for almost nine years until 2011, will personally handle negotiations with the Nigerian Communications Commission and try to reduce the fine, which was imposed for missing a deadline to disconnect subscribers with unregistered SIM cards. He told South Africa’s Radio 702 on Monday that he planned to resolve the matter within two weeks.

Dell, Apple

The move echoes that of Michael Dell, who stepped down as CEO of the company he founded in 2004 but returned to lead the business three years later after shrinking sales and an accounting scandal. Steve Jobs resigned from Apple in 1985 and returned in 1997 to reinvent the company as the inventor of iPods and iPhones.

MTN has until Nov. 16 to pay the penalty, calculated as 200,000 naira ($1,005) for each of the 5.1 million unregistered subscribers MTN failed to disconnect in time. The stock is down about 19 percent since the fine was made public two weeks ago, valuing the company at 286 billion rand ($20.1 billion).

Under Nhleko the company increased subscriber numbers 30 fold and added new territories including Iran and Syria. The shares gained more than 1,000 percent during his tenure. The stock fell 3 percent to 155.24 rand as of 10:46 a.m. in Johannesburg on Tuesday.

“The fact that Nhleko has such familiarity with the business is clearly positive, but there are concerns that given his high-level involvement in the business he might not be the right person to affect cultural change,” Mike Davies, the director of Kigoda Consulting in Cape Town, said in a phone interview. Even so, Nhleko’s experience at MTN and his relationships in Nigeria will help the company deal with the crisis, he said.

The Public Investment Corp, MTN’s biggest shareholder with a 13 percent stake, said Monday that Dabengwa shouldn’t be the only person to take responsibility for the fine. The board of directors and risk and compliance departments should have prevented the company from falling foul of regulators, the money manager’s Chief Executive Officer Dan Matjila said in a statement.

‘Hugely Respected’

Nhleko is “hugely respected in the market,” Davies said. “He’s got experience of doing business in Nigeria so he’d be well-placed to deal with the Nigerian regulatory situation. He should have some relationships there. That’s important at this time. But he has a lot of other business interests and it’s unclear how much time he’ll be able to devote to MTN.”

Nhleko is on the board of BP Plc and Anglo American Plc and he is the chairman of Pembani Group Ltd., an investment company that recently bought most of the business interests of South African Deputy President Cyril Ramaphosa.

Those responsibilities and a self-imposed commitment to limit his hands-on involvement at MTN to six months means that the company will be looking for a replacement, according to Arthur Goldstuck, an analyst at consultancy firm World Wide Worx.

“It won’t be an obvious poaching of a CEO from a major telco,” Goldstuck said by phone. “Chances are they will go outside of telecoms. The important issue is the extent to which MTN needs to regain the confidence of investors.“

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE