The Group CEO of Africa’s largest mobile telecoms company, MTN, Sifiso Dabengwa has lost his job, and will leave office with immediate effect, news reports out of South Africa say citing a statement from the company which says he has resigned.
But this is coming on the heels of several negative developments facing the company.
In early October 2015 a five-country investigative reporting project by journalists working under the auspices of Finance Uncovered found that the MTN had transferred large sums of money worth several hundred millions dollars out of Uganda, Cote d’ivoire, South Africa and Ghana into tax havens.
“Although these transfers are badged as payments for management and technical services, in reality much of them end up in a shell company in the tiny Indian Ocean island of Mauritius, where MTN employs no staff.
These fees are counted as a cost of doing business and deducted from taxable profits in the countries where MTN operates outside of South Africa, but questions have been asked about whether these payments are justified,” the report said.
But MTN said it did no wrong in those instances as found by the investigative reporters.
In the last week of October, Nigeria’s regulator, the Nigerian Communications Commission (NCC) then imposed a fine of N1.04 trillion on MTN Nigeria in relation to the timing of the disconnection of 5.1 million subscribers in August and September. The amount is the equivalent of $5.2 billion.
The company was fined N200,000 ($1,005) for each unregistered subscriber.
Following the fine, MTN’s shares fell the most in 17 years. MTN’s stock declined more than 12 per cent, the biggest one-day decline since November 1998, to 167 rand.
The fall was considered the lowest closing price since June 2013 and values the Johannesburg-based company at 308 billion rand ($23 billion). MTN was the biggest decliner in percentage terms on the benchmark FTSE/JSE Africa All Share Index, while also weighing more on the gauge than any other security on that day.
MTN indicates today, that it is continuing the engagement with the Nigerian authorities on the NCC fine and shareholders will be advised as soon as there are any material developments on the matter.
MTN executives have been holding negotiations with the Nigerian authorities on the fine.
As a result of the fine in Nigeria, the ratings agency, Moody’s on October 29, 2015 downgraded MTN’s Baa2 ratings from stable to negative.
According to Moody’s the action follows the announcement on October 26, 2015 that the NCC has imposed a fine of N1.04 trillion, about $5.2 billion on MTN Nigeria relating to the timing of the disconnections of just over 5.0 million improperly registered subscribers.
Former MTN Group CEO and current nonexecutive chairman, Phuthuma Nhleko, the statement said will take over as executive chairman on an interim basis until a replacement to Dabengwa has been found.
MTN has about 233 million customers in 22 countries in the Middle East and Africa. There are 62 million customers in Nigeria as at the end of September.
By Emmanuel K. Dogbevi