By Olanrewaju Oyedeji
Leading African telecommunications services provider, MTN is fighting battles everywhere. ‘The saying ‘when it rains it pours’ might be an appropriate one for MTN at this moment. In territory after territory where the firm is plying its trade, it is being buffeted by market forces, regulatory pressures, antics of competitors, and the latest one, fines!
After a bruising battle with regulators in faraway Iran, it is now the turn of fellow African hosts to put the heat on the company, which in just about two decades, has grown to be one of the most successful and recognisable brands that has originated from the continent
In Africa’s largest market, Nigeria, the company is currently embroiled in a $3.9 billion saga with the Nigerian government. And heading east to Central Africa, the Cameroonian corruption board has also charged them (alongside France’s Orange) with defaulting on the payment of around $166 million in taxes
According to details obtained by The Difference, the local units of Orange and MTN allegedly owe Cameroon nearly 100 billion CFA francs ($166 million) in taxes, including on games, the Central African nation’s corruption board said last week.
According to the news accounts, an inquiry into the sector, carried out by the Cameroonian National Anti-Corruption Commission, CONAC, found that taxes totaling 176 billion CFA francs had gone unpaid from various companies, which also included two other multinationals, Camtel and Viettel.
However the majority of the sums involved is reportedly owed by the local units of France’s Orange and South African mobile telecom firm MTN, it said.
“Orange has not received any formal notification of the conclusions of a report or a fine of any sort. We are not aware of this affair,” an Orange spokesman said.
MTN also said it had not been informed of any fines against its Cameroon business, but said it was looking into the matter.
According to CONAC, MTN in particular owes nearly 52 billion CFA francs in taxes and royalties, while Orange is being required to pay around 48 billion CFA francs.
It said both companies had also benefited from tax breaks worth over 28 billion CFA francs for Orange and 24 billion CFA francs for MTN that the corruption watchdog also deems to be illegal.
With the telecommunications leader insisting that it is innocent of the charges being levelled against it, is there a sense in which the firm is being picked upon because it can afford to pay? Or is it that the firm has piled up some of its current success through means that are less than decent, including tax evasion and profiting from ‘working the systems’ as is being hinted in the CONAC charge?
Whichever way it is, it is clearly not an easy period for MTN which is also in the middle of contesting the $3.9 billion fine imposed on it in Nigeria for failing to disconnect users with unregistered SIM cards, which can be used for criminal activity, and what is clearly a growing concern in Nigeria given the threat posed by the militant Islamist group, Boko Haram and other system disrupters operating in the West African nation at the moment. To its credit, MTN has already successfully lobbied to get that fine reduced from the initial $5.2 billion in December, 2015.
Back in its home base of South Africa, its stock has suffered an unprecedented nose-dive in recent years. This is happening at a time that the firm’s growth prospects in its home market seem to have hit a plateau and with competition at the local front becoming more intense.
Within this scenario, the company had been forced to look outside for succour, and for many years, the role of being the cash cow for the group has been played by MTN Nigeria which year after year posts the most impressive figures from all of the territories in which the company is operating, and accounts for not less than 30 percent of global group revenues.
Equally, it is also to be recalled that a few years back, the company looked to expand further afield onto the global stage, pushing for acquisitions in far-away India. But that move did not exactly pan out all too well and so the abrasive South African brand ambassador was forced to tuck its tail in between its legs and head back to its cocoon in familiar African territory.
And now trouble has hit and seems to be persisting in Nigeria of all places with a hefty fine that just would not go away, despite all the best lobby efforts of the behemoth.
Just before the end of 2015, the Nigerian Communications Commission slammed the fine of N1.04 Trillion Naira on the nation’s foremost Communications Company MTN over what the Commission termed disobedience in disconnecting unregistered SIMs. The fine came to operators and watchers of the industry as a huge shock. Initially the telecommunications giant apologized and tried to explain what happened but the Commission refused to budge.
In quick succession, the then MTN CEO, Sifiso Dabengwa resigned and the retired former Chair of the Board, Phutuma Nhleko was forced to come out of retirement to clean up the mess. The resignation of the CEO was followed by the resignation of the CEO of MTN Nigeria, Mike Ikpoki and the Head of Regulatory Affairs, Wale Goodluck. They were all axed for their roles in the non- deactivation of about 5.2 million lines which is in direct contravention of an NCC rule that the improperly and unregistered SIMs be deactivated. The offence attracted a fine of N200, 000 per line and the cumulatively huge fine was based on the number of the lines that MTN had refused or neglected to deactivate.
While imposing the fine the Commission noted that meetings were held with all the telecommunication companies and all paid heed to its directive except MTN. Apparently the South African company disobeyed based on instruction from head office hence it was easy for the President of the Company to take the blame by resigning but that didn’t absolve the Nigerian Management from culpability in the fiasco hence the resignation of Mr Ikpoki and his Head of Regulatory Affairs. The resignation of Ikpoki was seen by many as being a demand by the NCC given that Ikpoki, a lawyer was a former operative of the Commission before joining MTN about a decade ago as a level 2 staff. He grew quickly and emerged the first Nigerian to head the Ghana operation where he was said to have turned the company’s fortune around and was therefore the natural choice to take over the Nigerian operation when there were challenges from government and competitors who were loudly complaining that MTN was dominating the market and driving them out of business.
Many believe that the consequent introduction of the number portability scheme was to clip the wings of MTN. The general belief was that many Nigerians owned an MTN line and were unwilling to drop the lines as friends, family and business partners know them with the number and adopting another network would create a problem of building a new address book and list. With number portability, one can port to another network but retain his former number. However, the Number Portability scheme was a failure in Nigeria as the designers of the programme didn’t take into account the persona of the Nigerian. Nigerians prefer to acquire several networks rather than bother with porting. Some telephone manufacturers who perhaps better understood the psyche of the Nigerian did not help matters when they produced phones with several SIM slots. One can carry one phone with three SIMs of contending networks. There are phones with 8 SIM slots and with this the idea of porting to another network was unnecessary.
The NCC said MTN was given until the end of December, 2015 to pay up the fine adding that the fine appeared punitive because a strong message had to be sent to MTN to obey constituted authority adding that no Nigerian company in South Africa would dare the government of South Africa. The Commission also stated that the telecommunications companies were told of the security implication of leaving improperly or unregistered SIMs on their networks. While the other networks paid up the fines, MTN refused to comply even after NCC threatened to charge N100 per day for the non-payment as a way to make the companies to comply but rather than comply MTN has continued to demur at complying since September when the fine was imposed.
When Phutuma came to Nigeria the foot put up by the telecommunications giant was to plead for clemency and ask the NCC to show mercy by reducing the fine. Phutuma is reputed to have several important Nigerians as personal friends. His influence worked a bit as the fine which was estimated to be 20% of the 2015 National budget was reduced but MTN was given until the 31st of December to pay up the agreed and apparently negotiated amount.
However, the whole brouhaha became more dramatic when rather than pay up as was being awaited, MTN indicated she was going to challenge the fine in the courts saying that the fine was illegal, unjustified and punitive. This new stance of the company took many by surprise. Federal legislators had said that MTN must pay the fine which many Nigerians also supported adding that the company has been ripping off Nigerians even in the face of its not very impressive service delivery records. Many Nigerians also said that but for the entry of Globacom, which is the only major network that is owned by a Nigerian, MTN would not have adopted the per second billing system adding that even now they charge the highest call fees but do not deliver even top notch service to compare with the high bills.
One thing however is clear; the company has managed to keep its management intact and avoided board room squables that was the bane of other networks especially Airtel which has suffered in its growth process owing largely to board room issues and legal challenges. MTN has over 60 million subscribers which is bigger than the population of several countries of the world. Nigeria is a huge market and produces not less than 30 per cent of the revenue of all MTN business. The Nigerian operation is also so important that if anything happens to the Nigerian operation the company will be in trouble. If MTN Nigeria sneezes, the entire group catches cold.
Many therefore believe that being the layer of the golden eggs, MTN Nigeria should be treated specially but that is not the case. Sources in the Golden Plaza Falomo headquarters of the company told The Difference Newspaper that rather than treat MTN Nigeria as the goose that lays the golden egg the operational foot soldiers are given hard- to-reach targets in order to deny the workers their deserved bonuses. The South African owners of the company carry on as if MTN has done Nigeria a huge favour by operating in the country and should be treated with deference. When South Africa calls, Nigerian executives shiver.
For example, even before the fine, the company had sent Mrs Jyoti Desai who oversees operations from Dubai, the Group headquarters, to Nigeria to find out why the Nigerian operation was not turning in more and more cash into the coffers of the group. When she came divisions such as Information Systems, Marketing, Customer Relations and Finance were handed over to her in that their executives reported directly to her leaving the Nigerian CEO to literally read newspapers, as only the Human Resources and Corporate Communications reported to him. Jyoti’s overlordsip is still in place even as a new South African has replaced Mr Ikpoki as CEO. Sources suggest that she will remain until all the issues around the fine have been resolved.
And whilst Nigerians waited with bated breath for the commencement of the epic legal battle between MTN and NCC, the lawyers to the telecommunications giant came up with an unexpected application seeking for an out-of-court settlement. With this, it appears that reason has prevailed within the management of the company as nothing would have really been gained from such a legal challenge as it would have very dangerously pitched the company against the government and people of Nigeria. On its part, the NCC has continued to restate that court cases or not, the full weight of the law establishing the commission would be used to ensure that MTN toed the line, but with the out of court of settlement sought by the company there would be no epic challenge. Scene Two would be how the whole issue would be resolved. This is even as MTN fights to ensure that all numbers on her network are registered.
Managing the Visafone acquisition
And as part of its efforts to consolidate its business platforms, MTN has embraced a policy of expanding its brand stock through making investments and acquisitions of a diverse nature. It has bought a stake in the e-commerce vendor, Jumia, and pushed very strongly its value added collaborations with the music industry. And now there is the purchase of Visafone.
The Chairman of Zenith Bank, Mr Jim Ovia is by any definition an astute businessman. Being a banker to several companies he saw that the telecommunication companies were literarily minting money so he decided to play in their field hence Visafone was born to compete in the Code Division Multiple Access (CDMA) area and this notwithstanding that the existing CDMA companies were struggling in the market. Visafone was born at the time companies like Multilinks and other CDMA telecommunication companies were going extinct. Somehow Nigerians preferred GSM to CDMA. What preserved Visafone was probably because they were attached to Zenith Bank somewhat and people dealt with the company as if it was Zenith which had a good reputation in the banking sector. What more CDMA can be operated from a mobile phone just like GSM. It also appeared that Visafone did something right with data services such that many Nigerians preferred to use their data on blackberry phones.
By 2015 Visafone was the only CDMA telephone company standing. MTN being a major business partner of Zenith Bank was the first company that received an offer to buy off Visafone. It was an open secret that MTN’s data services was at best crappy so her management believed that acquiring Visafone would be a step in the direction especially given its data coverage. The two companies set up teams to take a deeper look into the viability of a take-over of Visafone by MTN and after series of meetings an agreement was reached between the two companies and wham Visafone became a subsidiary of MTN. one issue the negotiating teams may have grossed over may have been the over bloated staff strength of Visafone of about five thousand in strength when MTN was managed profitably with just over three thousand permanent workers although Consultants and contract staff filled the other gap.
It was obvious that in MTN buying over of Visafone, something had to give and when things start going rough with corporate concerns the first element that suffers is human capital. MTN demonstrated this when staff in several divisions of the company were laid off. In some instances whole units were outsourced and in some cases MTN created shell companies like when she appeared to have sold off her towers to another company when what actually happened was that MTN created another company to manage the towers and serve even other telecommunication companies. The management of the new company came from MTN whilst MTN staffers formed the nucleus of the new enterprise. The former Finance Executive Mr Andrew Bing, a South African who sits on the board of the company became the new Managing Director of the Tower Company.
It was clear to any discerning observer that from the onset, MTN would not absorb all of Visafone given her bloated staff strength hence it was not surprising that the first casualty would be the staff and hence MTN announced that it would dismiss two thousand staff of Visafone in the first instance. The company’s decision was roundly condemned by Nigerians who believe that throwing several young Nigerians into the unemployment market. The condemnation was so vehement that MTN quickly withdrew the announcement sacking the Visafone staff. MTN had to do this in order not to worsen her situation with the Nigerian subscribers who were annoyed with the company over the sim registration imbroglio. Now the question on every lip is when will the waiting game end? As for the staff of Visafone, they should see themselves as endangered species. Apparently the decision to sack them after the acquisition was known to their management who chose not to inform them but then if MTN can outsource whole units and also sack some staff how will she find it difficult to do away with Visafone staff. Some of the very technical staff especially those who managed the data services of the company will survive the putsch.
Back to the issue of the fine, the MTN Group revealed last week that the Federal High Court, Lagos had adjourned the hearing of the case between MTN Nigeria and the Nigerian Communications Commission (NCC) until 18 March, 2016.
According to a statement issued by MTN, it was revealed that the judge had adjourned the matter in order to enable the parties to try and settle the matter. However, if the parties are unable to reach a settlement, both MTN and the NCC will then proceed with the hearing on the above mentioned date.
Back in October 2015, the NCC had fined the mobile giant for failing to deactivate 5.1 million pre-registered subscriber identification module (SIM) lines discovered on its network.
In mid-January 2016 Nigerian President, Muhammadu Buhari, had urged telecommunications companies operating within Nigeria to adhere strictly to rules and guidelines set out by the Nigerian Communications Commission, especially when it came to new SIM Card registrations within the country.
Buhari said there is a need for the telecommunication companies to place the security needs of the country above their desires for huge profits.
“The registration of all mobile phone users without exception will help the security agencies to pre-empt terrorist attacks, as a result all the telecommunication companies operating in Nigeria must adhere to the rules and guidelines of the Nigerian Communications Commission in this regard,” he said.
He added that the war against terrorism can only be won with collective effort and a commitment by all stakeholders to work in unison to halt the scourge.
It remains to be seen how far both parties would go in their discussions but as things stand now, the word out there is that MTN may very well be advised to ensure that it does everything it can to not lose its Nigerian cash cow.
Polity watchers note that the fact that talks are ongoing however raise the chance of an end to the standoff.