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Is MTN a victim of regulatory overkill?

By Henry Boyo

Media reports, from both local and foreign sources, have lately suggested that MTN, arguably, Africa’s largest mobile telephone network, may be confronting possibly, the greatest threat since its inception and its bountiful global success, particularly, in their Nigerian operations where they have over 62million registered subscribers.


However, the mobile conglomerate’s well laid apple cart, presently appears threatened, by a $5.2bn fine imposed by Nigeria’s National Communications Commission(NCC) for its failure to deactivate over 5million of its registered subscribers, whose biodata were not captured as mandated by the regulatory body.

The NCC has set the deadline for MTN to pay off the fine for November 16, 2015. The news of the sanction quickly shaved over 25 percent off the multi-national corporation’s market value of over $25bn on the Johannesburg Stock Exchange; furthermore, trading on MTN stocks, was also temporarily suspended at the JSE to protect it from a free fall.

Regrettably, when the dust settles, investors may have lost billions of dollars, with unpleasant individual and corporate consequences, because of this clearly back breaking fine.

In the light of the above circumstances, it is not surprising therefore, that NCC’s sanction of MTN was condemned, particularly in the foreign media. It is alleged that the fine is disproportionate to the offence, and worse still, it is speculated that its payment may ultimately wipe out over 2years of MTN’s annual profit;

in a worst case scenario, there are fears that the company may go down, with potentially similar, socially destabilizing consequences for erstwhile shareholders and employees, including tens of thousands of Nigerians who make a living from its operations; conversely, however, hardliners may suggest that in such a vibrant market, any inheritor of the MTN business will quickly absorb the casualties of the erstwhile market leader’s demise.

There is, however, the danger that foreign investors, particularly, would hesitate to bring their money to our country, for fear that they could equally become victims of similar draconian regulations. Consequently, some critics may argue, that Nigeria’s economy and employment potential would be the ultimate losers if foreign investors stayed away.

Interestingly, although, there are some favourable comments by some journalists and analysts in the media, there is so far, clearly no significant overt overwhelming public sympathy, for the MTN cause; cynics may suggest that millions of disgruntled subscribers probably support the fine as payback time for the shabby services they have had to, helplessly, endure for so long from mobile phone operators in Nigeria.

Nonetheless, the question that however inevitably pops up, is why such negative attention is focused on MTN, as nothing so far suggests that the other major telecom operators also blatantly disregarded the NCC’s directive, to deactivate subscribers without Biometric verification since August 2015. Conversely, could it be that the other mobile networks took the issue more seriously and therefore recorded ‘minimal’ default on their subscriber base?

Furthermore, there was no reported call by any of the operators for the need for additional time extension on the Biometric exercise, so, the question is, why did MTN fail, big time, to respect the Sector Regulator’s policy directive? Clearly, the failure to deactivate over 5million lines without related biodata may not easily be explained away as the result of the proverbial printer’s devil; the question is, did the MTN itself bring the notice of its failure to the attention of the NCC when it eventually discovered its default or did the NCC independently confront the company with incontrovertible evidence of their ‘crime’?

Furthermore, even if MTN claims that its poor compliance was not deliberate, was there, nonetheless, a commercial or revenue advantage that accrued from the omission of over 5million active subscribers from its biometric verification, i.e. was there an intention to defraud government of revenue on the part of MTN?

Finally, what pro-active steps have been taken, so far by the telephone company to resolve the issue to mutual satisfaction. Ironically, other phone companies who may have already paid the mandatory N200,000 fine per person for not deactivating subscribers without biodata verification, may feel cheated if MTN’s penalty is subsequently, inequitably reduced on completion of the reported ongoing negotiations between the parties.

Incidentally, MTN has, not yet, proclaimed its innocence on the alleged violation of NCC’s directive in any public statement; neither has it claimed ignorance of the security implications for police investigations of its failure to deactivate related subscribers; so the question is, why did MTN disregard the Regulator’s very clear guidelines so brazenly?

The NCC presumably set the penalty for infraction so high, so as to encourage full compliance with its directive rather than as a covert strategy designed to fleece mobile operators. Besides, the penalty has not been decried, as retroactive by any one; so, in view of the prevailing social culture of impunity, did MTN expect they could get away with breaking the law, knowing full well the severe implications of a default of such magnitude on their credibility and their operations.

A $5bn fine is obviously no chicken change, but it is certainly not unusual, as billions more are paid for serious regulatory infractions in older, more successful economies where sentiment is no defense against the letters of the law. There is often the undeniable popular suspicion of the great promise of economic development and job creation that transcontinental investors bring to Africa; some reports have, however, suggested that significantly more funds flow out of Africa each year through myriad financial instruments than the actual inflow of real foreign direct investment and various aid interventions.

Nonetheless, despite their pervasive presence, their enviable corporate success, and the numerous social interventions and billions of Naira paid as taxes over the years, MTN is probably still not integrated in popular consciousness as a Nigerian company; it is possible that a public listing in the Nigerian stock Exchange may enhance its local image; certainly, the voices of Shareholder Associations would have been more resonant in the defence of the company if they had a stake to protect in such circumstances.

Foreign investors are definitely welcome in Nigeria but they must respect our laws and respect our institutions; in the same manner, Nigerian companies operating abroad will also be expected to abide with the rule of law in their host countries.

Clearly, if the NCC refuses to reduce the burden of MTN’s $5.2bn penalty, foreign direct investors will be served a strong signal that the Nigerian Administration has zero tolerance for any breach of our laws; conversely, a waiver of any kind to MTN may encourage other corporations to further disregard the provisions of our laws and violate our national interest with impunity.




Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.