N780 Billion Fine: MTN Pays Initial N50bn, Withdraws Court Case

MTN Nigeria yesterday succumbed to the Nigerian authorities and agreed to make an initial payment of N50 billion ($250 million) as well as withdraw the court case it instituted against the Nigerian Communications Commission (NCC) and the Federal Government as part of agreement to resolve out of court, the N780 billion fine imposed on it for not deactivating 5.1 million unregistered lines.
Yesterday’s update on the fine imposed on MTN Nigeria and renewal of cautionary announcement to MTN shareholders follows a statement a fortnight ago by the Minister of Communications, Barrister Adebayo Shittu, that MTN must make substantial payment  to the government as precondition for a peaceful out of court settlement with the federal government.
The minister who spoke to technology journalists in Lagos said as a “show of good faith”, MTN needs to show that it is committed to a peaceful settlement by making substantial payment or else the matter will revert back to the court.
MTN Nigeria CEO, Ferdi Moolman speaking on the issue said “This is a most encouraging development. It demonstrates a willingness and sincerity by both parties to work together towards a positive outcome”.
Chris Maroleng, spokesman of MTN Group said “Pursuant to the ongoing engagement with the Nigerian authorities, MTN Nigeria has today (yesterday) made an agreed without prejudice good faith payment of N50 billion ($250 million) to the Federal Government of Nigeria on the basis that this will be applied towards a settlement, where one is eventually, hopefully arrived at.
“In an effort to achieve an amicable settlement, MTN has agreed to withdraw the matter from the Federal High Court in Lagos. Phuthuma Nhleko in his capacity as Executive Chairman of MTN Group and a director of MTN Nigeria is continuing to lead the team engaging the Nigerian Authorities with a view to settling the matter” he said.
 Maroleng said shareholders were advised on 22 January 2016 that the above-mentioned matter came up for hearing before the Federal High Court in Lagos, Nigeria when the judge adjourned the matter to 18 March 2016 in order to enable the parties to try and settle the matter. He therefore, advised shareholders to continue to exercise caution when dealing in MTN’s securities until a further announcement is made.
MTN Nigeria CEO, Ferdi Moolman speaking on the issue said “This is a most encouraging development. It demonstrates a willingness and sincerity by both parties to work together towards a positive outcome. We are hopeful at this stage.
“Along with the authorities, it is clear that we are collectively committed to working towards a solution that is of mutual benefit to all parties.  Our industry in Nigeria is an incredibly important example of the remarkable progress in  ICT  particularly as a much needed  catalyst for socio economic growth and development  at this time” Moolman said.
NCC had in October 2015 penalised MTN for flouting Sections19 and 20 of the SIM Registration Regulations 2011which prescribed imposition of penalties of N200, 000 per improperly registered SIM card amounting to N1.04 trillion for 5.1 million pre-registered simcards.
The telecom regulator fined MTN for not complying with its directives and that of the security agencies on deactivation of unregistered simcards while other operators like Globacom, Etisalat and Airtel complied forthrightly because of the security implications. MTN only made a partial attempt to bar unregistered subscribers in selected areas over a few days in September 2015.
On Thursday October 22nd, 2015, NCC reviewed the registration records of all the telecom operators and took into consideration their compliance records and imposed a fine of N1.04 trillion on MTN alone for noncompliance on SIM registration.
Following a letter of apology and promise not to breach the guidelines again, on December 4, 2015, the federal government through the NCC granted MTN 25 per cent discount on the fine thus reducing it to N780 billion. However, MTN was not satisfied and sued the Nigerian authorities to court.
At the Federal High Court, Ikoyi, Lagos last month, MTN sought an for an out-of-court settlement. The move by MTN came as a surprise to many. The judge granted both parties till march 18, 2016 to settle the matter or the case will revert to the court.
Barr. Shittu recalling the genesis of the fine said “MTN was in violation of laid-down rules, but the previous government didn’t do anything about it”, he said tracing the background of alleged 28 previous infractions committed by MTN.
 “When MTN came, we understood their pleas. However, we added that if you cannot meet up with the fine, you have to add your account details to show that upon paying, your company will collapse. I told them to attach their statement of bank accounts and write a second letter addressed to Mr. President saying that if you pay the fine, your company will collapse.
“They are yet to respond on that. The next thing was for me to get a call that they are going to court. And now, they are coming back for out of court settlement. See we don’t want MTN to die, because 99 per cent of MTN Nigeria’s staff is Nigerians. But when you default in the law, you have to bear the consequences; we want them to obey the law” said the minister. 
Last week, MTN issued a profit warning to its shareholders that it would take a hit in its profit as basic headline earnings per share fell at least 20 percent in 2015 in part due to weak performance in Nigeria, its biggest market.
MTN said the negative earnings performance has been impacted by a number of factors with the operational underperformance in Nigeria, resulting from the subscriber disconnections and the withholding of regulatory services, being a key contributor to this.
It however said the profit warning did not include a N780 billion ($3.9bn) fine imposed by NCC in October 2015 for failing to cut off unregistered SIM card users because it was still in talks with authorities about the final size of the penalty. Nigeria is MTN’s biggest market with 63 million customers and contributes 37 per cent of its group’s revenues.
Mr. Phuthuma Nhleko, executive chairman of MTN Group will present the company’s results for the year ended December 31, 2015 on March 3, 2016. Last month, MTN hired ex US Attorney-General Eric Holder to negotiate the fine on its behalf with the Nigerian authorities.

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