Nigeria’s fine of $5.2 billion (N1.04 trillion naira) to
MTN, Africa’s largest telecommunications company, is billions more than any
company has been fined anywhere in the world and may well scare off investors,
international analysts say. MTN was fined for having 5.2 million active but unregistered
SIM cards.
“It is totally out of proportion,” said industry expert John Strand of Denmark-based Strand Consult. “I have never seen any operator receiving a fine of more $100 million and I’ve been in this business for 20 years.”
Until now, the United States tended to levy the highest
fines. AT&T is suing the Federal Communications Commission over a $100
million fine — the largest ever imposed by that body.
“There is no comparable fine, anywhere in the world,” Roger Entner, of Recon Analytics based in Dedham, Massachusetts, said of the Nigerian sanction. “This is far beyond anything that anybody has ever been levied — by magnitudes.”
Unregistered SIM cards are a matter of national security in
Nigeria and may have caused deaths. Boko Haram Islamic extremists use cell
phones to activate bombs and coordinate other attacks, say law enforcers.
Phuthuma Nhleko, new chief executive of MTN
Mobile phones are also used in rampant armed robberies and
kidnappings. Unregistered MTN SIM cards were used to make calls demanding
ransom in the September kidnapping of a former Nigerian finance minister —
weeks after a deadline for providers to deactivate unregistered cards.
MTN ignored other Nigerian rules and had committed a total
of 28 infractions, Nigerian Communications Commission spokesman Tony Ojobo told
The Associated Press.
MTN officers “have always been flouting regulations,” he declared.
The company was the only cell phone provider that failed to
meet a mid-August deadline to deactivate unregistered cards, said Ojobo. The commission’s enforcers wound up deactivating the
millions of cards. The fine is based on sanctions of 200,000 naira ($1,000) for
each unregistered card, an amount agreed in consultation with service providers
in 2011.
Since the fine was announced, the South African-based MTN
Group has lost more than 10 percent of its value. The group CEO resigned last
week.
The world’s largest, global resource for index-based
concepts, data and research, Standard & Poor’s downgraded MTN and Nigeria
and put both on a negative credit watch. The credit rating service cited
“heightened regulatory and country risk in Nigeria” and fears that MTN’s
liquidity could “weaken significantly,” depending on the ultimate size of the
fine and the timing of its payment.
MTN is the biggest player in Nigeria, where it had about 62
million subscribers before the deactivations and, according to Strand Consult,
total revenue of about $10 billion in 2014. MTN said it made $2.6 billion in
profits in Nigeria last year, making the fine equivalent to two years’ profits
and three times the $1.8 billion the company says it has invested here.
“Fines like this destroy companies,” analyst Entner warned.
MTN extended its Nigeria operating license this month until
2021, for $94.2 million. It had little choice, the analysts said, noting the
Nigerian operation provides more than a third of the group’s revenues, though
it operates in 21 other countries in Africa, the Middle East, Afghanistan and
Cyprus.
MTN bought its Nigeria license for $285 million in 2001.
“Then, everyone expected it to be a product for the few among the many, but today it is the product for everybody. Nigerians have been able to get affordable telecommunications,” Strand said. That’s because Nigeria has Africa’s largest population, estimated at 170 million, and building a telecommunications network costs roughly the same for 1 million or 10 million subscribers, he said. Mobile telephone networks, in a country without working landlines, have immeasurably boosted business and trade.
Entner said the fine will hurt MTN’s service to Nigerians.
“I think the company can survive it (but) it will probably have to really cut down on expanding, improving the network and make a whole bunch of other cuts.”
The fine equals nearly a quarter of the 2014 national budget
of Nigeria, Africa’s biggest oil producer which has been hammered by the global
plunge in petroleum prices and depreciated naira currency.
A review of Nigeria’s penalties for tax avoidance and
cybercrime, and global precedent, led Strand to suggest a fine of $500 million
is more fitting.
Strand warned the fine could hurt foreign investment: “The
question is: What is the purpose in giving a company a fine of this amount? Is
it just a revenue generator for the government? I think it’s a big message to
send to other investors in Nigeria: Stay out of this country.”
Source:
AP
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