MTN Chairman Tells Shareholders Nigeria Fine Won’t Be Repeatedby and
Nhleko faces criticism from investor over risk management
Settlement of $3.9 billion fine being discussed in Nigeria
MTN Group Ltd. Chairman Phuthuma Nhleko insisted to shareholders that he can improve the mobile-phone company’s risk management and avoid a potential repeat of missteps that have led to a $3.9 billion fine in Nigeria and knocked a third off the share price.
“We are going to beef up regulatory compliances,” Nhleko told investors at the company’s annual meeting in Johannesburg, its first since the record penalty was delivered in October. “With the Nigerian fine, MTN could have done things differently.”
Nhleko faced criticism over MTN’s risk management from Sbu Luthuli, chief executive officer of The Eskom Pension and Provident Fund. He also questioned whether Nhleko should be running the company after the resignation of Sifiso Dabengwa in November, given he is effectively both chairman and chief executive officer.
“We need assurances that you have systems in place to prevent this from happening in other markets,” Luthuli said. “You had to have risk management systems in place and you cannot just gloss over it.”
MTN was originally fined $5.2 billion by the Nigerian telecommunications regulator for missing a deadline to disconnect 5.1 million unregistered subscribers in the country, which is battling an Islamist insurgency. The company eventually cut off 11.5 million as the fine was reduced to $3.9 billion. Similar government orders followed in Uganda and Cameroon.
The shares gained 1.4 percent to 129.50 rand at the close in Johannesburg, valuing the company at 239 billion rand ($15 billion). MTN is Africa’s biggest wireless operator by sales and subscribers, but conceded the title of largest by market capitalization to crosstown rival Vodacom Group Ltd. earlier this year.
Far from retreating from Nigeria, MTN is planning a substantial spending program in Africa’s most populous country in 2017, and will roll out 3G sites there later this year, Nhleko said. That’s despite a 6 percent sales decline in the country in the four months through April, according to a statement ahead of the annual meeting.
MTN is continuing to engage with Nigeria about the record fine, which is the subject of an internal discussion by authorities in the country, Nhleko said. The company hired former U.S. Attorney General Eric Holder to help it negotiate a settlement. Talks with MTN are currently suspended while Nigeria’s House of Representatives completes an investigation into the nature of the penalty, the Ministry of Communications said May 23.
Nhleko also told shareholders why Dabengwa was given a 23.7 million-rand payout after he quit to take responsibility for the fine, explaining that MTN had to meet contractual commitments and ensure he didn’t immediately go to work for a competitor. The compensation was described as “excessive” by the Public Investment Corp., Africa’s biggest money manager, when it was made public last month. MTN’s remuneration policy was voted through by 68 percent of investors at the annual meeting.
MTN said it hopes to appoint a new CEO by the end of June to replace Nhleko, who only planned to occupy the role for six months.
The company said organic revenue gained 1 percent in the first four months of 2016. The number of subscribers increased 1 percent to 230 million across its 22 markets in Africa and the Middle East, compared with an 8 percent gain in the same period last year.