Nigeria MTN licence renewed but penalty still an issue

MTN offered some good news out of Nigeria on Tuesday, saying the authorities had renewed its licence for another five years.

After a torrid week, its stock rose 5% to close at R155.54 after the announcement.

It is however still caught up in a crisis over a $5.2bn fine from the Nigerian Communications Commission (NCC) for unregistered SIM cards on its network and on Tuesday it was unclear whether the payment of the fine was linked to the renewal.

Its original licence was issued in 2001 and is due to expire in February next year.

The five-year licence period is much shorter and could put further pressure on MTN in its single largest market.

Asked why the licence was only renewed for five years NCC head of public affairs Tony Ojobo said the period was the same for all operators. He did not provide further details on what the decision was based.

MTN said it would have to pay a spectrum fee of $94.2m by the end of December and the licence was "conditional upon MTN fulfilling all its regulatory obligations". It did not explain what those obligations were.

This has raised speculation the $5.2bn fine also forms part of those obligations. But Mr Ojobo would not comment on the obligations it needed to fulfil.

MTN Group spokesman Chris Maroleng said the two matters were unrelated. He said the fact that the licence was renewed meant that MTN met all the necessary requirements.

In a statement issued after the markets closed, the company dismissed speculation that it had reached an agreement with the regulator. It did not comment on whether it had asked for a reduction of the fine but said it was still in discussions with the NCC.

Reuters had reported that MTN had written to the authorities asking for "leniency" and requesting a review of the fine.

MTN said it was "always mindful that our growth has not only been due to the success of our commercial propositions. We therefore remain committed to maintaining solid partnerships with regulators, governments, communities and our markets, including in Nigeria, to build a sustainable industry that contributes to the growth of local economies."

On Monday the Public Investment Corporation, MTN’s largest shareholder, questioned its lack of transparency regarding the shock fine.

Farai Mapfinya, head of equities at JM Busha, said the wording around regulatory obligations that needed to be fulfilled "leaves the door open to different interpretations".

Sibonginkosi Nyanga, a telecoms analyst at Momentum SP Reid, said the timing of the licence renewal "is a bit worrisome" given the regulatory obligations referred to by MTN. "We think paying the fine might be part of the regulatory obligations," he said.

If imposed, the fine would leave MTN with little money to spend on its Nigerian network as it would wipe out more than two years of annual profits.

Paying the fine this month and the licence fee before the end of December could be a liquidity headache as the company’s cash is spread over more than 20 countries, he said.

Dobek Pater, the MD of Africa Analysis, said reaching an agreement on the payment prior to the licence renewal could be one of the prerequisites for the licence to become "active".

But he said the renewal at least provided partial relief that the NCC was not withholding the licence given the investment that MTN had made in the country and its contribution to the economy.

Reuters