You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

MTN to pay just R777m to end Nigeria dispute

MTN will pay a tiny fraction of the R118 billion which the Nigerian Central Bank initially sought.

Christmas has come early for MTN Group. The telecommunications operator’s shares are likely to soar when markets reopen on Thursday in Johannesburg after it announced late on Monday that it has settled a multibillion-dollar dispute in Nigeria.

It will pay just US$53.2 million (about R777 million) in a settlement with Nigeria’s central bank, a tiny fraction of the $8.1 billion (R118 billion) the Bank had sought from the group’s subsidiary in the West African country.

MTN Group shares plunged 22% on 30 August when it emerged that the Nigerian central bank had ordered four banks to refund the $8.1 billion it claimed was illegally expatriated by the telecoms provider between 2007 and 2015. Its shares, which trade on the JSE, have failed to recover significant ground since then on investor fears.

A second allegation by Nigerian authorities that MTN owes $2 billion in back taxes remains the subject of dispute, however. That matter is due to be heard by a Nigerian court in February next year.

The settlement amount with the central bank — less than 0.7% of the sum originally demanded — is likely to be seen as a significant victory for group CEO Rob Shuter, who took the reins at MTN last year from Phuthuma Nhleko. Shuter joined MTN from Vodafone Group.

In a statement late on Monday, MTN said a series of meetings were held in Lagos with central bank officials in November.

“At these meetings, MTN Nigeria provided additional material documentation which satisfactorily clarified its remittances,” it said. Upon review of this documentation, the central bank “concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders”.

‘Irregular’

“However, the central bank maintains that the proceeds from the preference shares in MTN Nigeria’s private placement remittances of 2008 of circa $1 billion were irregular, having been based on CCIs (certificates of capital importation) that only had an approval-in-principle, but not final regulatory approval of the central bank.

“The central bank instructed MTN Nigeria to implement a notional reversal of the 2008 private placement of shares in MTN Nigeria at a net cost of circa 19.2 billion naira — equivalent to $52.6 million. This is on the basis that certain CCIs utilised in the private placement were not properly issued.”

MTN Nigeria and the central bank have agreed that they will resolve the matter on the basis that the operator will pay the notional reversal amount without admission of liability, the group said.

“In terms of the resolution agreement, the central bank will regularise all the CCIs issued on the investment by shareholders of MTN Nigeria of circa $402.6-million without regard to any historical disputes relating to those CCIs, thereby bringing to a final resolution all incidental disputes arising from this matter.”

It said MTN Nigeria relied on “certain commercial banks to ensure all approvals had been obtained prior to the CCIs being issued and to ensure the CCIs were properly utilised in the private placement”.

“MTN Nigeria will be engaging with the banks in relation to the issues dealt with in the resolution agreement,” the group said. Presumably, this means MTN is going to try to recover at least some of the $53.2 million from the banks involved.

The original $8.1 billion demanded by the central bank followed just three years after the Nigerian Communications Commission imposed a $5.2 billion fine on MTN for failing to disconnect unregistered Sim cards. That fine was later reduced to about $1 billion.

MTN Group said it remains involved in legal action with Nigeria’s attorney-general over the $2 billion in back taxes the AG claims are owed. The case came up for “initial mention” before the federal high court in Lagos on November 8 2018 and has been adjourned to 7 February 2019.

“MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment … is due,” the group said, adding that no provisions or contingent liabilities have been raised in the accounts of MTN Nigeria for the claim.

Nigeria is MTN’s biggest and most profitable market. It has more than 64 million customers in the country and it enjoys high profit margins. Earnings before interest, tax, depreciation and amortisation in the third quarter represented 43% of revenue.  

This article was published with the permission of TechCentral. The original publication can be viewed here. 

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

AUTHOR PROFILE

COMMENTS   5

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Don’t worry, soon Nigeria will concoct up a new fine. You can’t trust those bastards. This whole thing is a farce to extort money out of companies.

Surdo Fabulam Narras – MTN will never learn – this is just episode 3 of the enthralling fleecing of MTN shareholders by the nigerian government.

Next time you dip your toes in there will be another fine.

Have you not learned your lesson? 3 times now and MTN share price gets bashed, people take strain and those damn gangsters laugh at you.

Walk away!!!

The share price is still down at less than half it’s peak fairly reflecting the uncertainty of future earnings. Mtn s markets are essentially gangster countries with very poor governance . Iran ,Nigeria, south africa are all mismanaged tier 3 players. The high risk strategy of mtn s oily previous management has failed. Colossal destruction of shareholder value.

Load All 5 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: