MTN Cuts Investors Payout by Almost 50 percent, blames NCC
Africa’s biggest mobile phone operator MTN Group Ltd cut investor payouts by almost 50 percent as it reported its first-ever half-yearly loss on Friday August 5th, 2016. MTN said in Johannesburg that the loss is majorly due to several hits from hefty regulatory fine meted on them by Nigerian Communication Commission (NCC).
MTN, according to the report, had agreed in June to pay a 330 billion naira ($1.05 billion) fine in a settlement with Nigeria, the company’s largest market. The penalty was levied in October after MTN missed a deadline to cut off unregistered subscribers, and the subsequent loss of customers further hurt operations in the country.
MTN said the fine, a third of the proposed initial penalty, wiped 10.5 billion rand ($768 million) — 474 cents per share — from headline earnings, South Africa’s main measure of profit, in the first six months of the year.
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“What you have here is a company that was gung-ho about Africa, where the operating environment has become difficult but they have shot themselves in both feet by losing control of the key markets and not paying attention to regulators,” said one MTN shareholder, who declined to be named.
MTN also said the results were affected by unfavorable currency swings, under performance in its home market and in Nigeria where it had to cut off another 4.5 million SIM cards to comply with local registration requirements.
The South Africa-based company had in any case been struggling to accelerate subscriber and profit growth as years of price wars and regulatory pressure hit margins and weakening economies squeezed consumer income.
The MTN fine follows a kidnapping on Sept. 21 of Olu Falae, former Nigerian finance minister. Regulators say kidnappers used MTN phone lines to negotiate a ransom.
Nigeria has also been trying to halt the use of unregistered cards over concerns they are being used for criminal activities, expecially by Islamist militant group Boko Haram.
Meanwhile, it has hired Vodafone European head Rob Shuter to lead its development, aiming to persuade its millions of clients to use their handsets for everything from shopping, paying bills to storing money.
Shuter, who will take over as chief executive by next July, replaces Sifiso Dabengwa who resigned last November after Nigeria imposed the penalty — which will be paid by the Nigerian business in the local currency.