Monday, November 2, 2015

NCC MTN fine will impact the Nigerian Economy

Nigeria’s telecommunications regulator-NCC recently fined MTN $5.2 billion, wiping almost 20 percent off its market value over the space of four days. The incident has brought to light the high level of risk when doing business in Nigeria. Many observers wonder how NCC arrived at the staggering fine which is the total National budget for most African countries. Some media commentaries also speculate that it may be a calculated attempt to halt the Nation’s largest GSM operators operation in Nigeria. 

MTN Nigeria is currently the largest employer of Labour in the communications sector and is also the single source of income for hundreds of telecom service start-ups across Nigeria. It has millions of dollars in infrastructure and has also invested largely in the booming Nigerian entertainment industry. Such a fine will definitely have a trickledown effect on thousands of Nigerians.
MTN Nigeria MD, Mike Ikpoki
While Johannesburg-based MTN is in talks with Nigerian authorities over the penalty, imposed for failing to disconnect customers with unregistered SIM cards and having incomplete data, failure to negotiate a lower sanction means the company will be paying away more than double the group’s estimated net income for 2015. It also exceeds sales of almost 54 billion rand ($3.9 billion) that the operator made in Nigeria in 2014, about 37 percent of total revenue.

After buying one of four Nigerian mobile-phone licenses for $285 million, MTN went from handling its first call in the West African country in 2001 to being the market leader with more than 62.5 million customers. Over the same period, its share price on the Johannesburg Stock Exchange soared more than sixfold as the company expanded from its home base into more than 20 countries in the Middle East, Asia, Africa and in Cyprus.

A full payment would exceed the revenue the Nigerian government made from oil in the second-quarter, and be more than double the state’s non-crude proceeds, according to central bank data.
Trading in MTN’s shares was halted more than three hours after rebounding from a decline of as much as 9.7 percent.  The dispute with MTN also comes as the economy struggles to cope with sliding oil prices, currency restrictions and no finance minister, with growth at its slowest pace this decade. The dispute couldn’t come at a worse time for MTN, with the company’s 15-year license up for renewal.

Source: Bloomberg

No comments: