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MTN: A soft landing after NCC’s stiff fine

By Adeyemi Adepetun
03 July 2016   |   3:50 am
Last year, Nigerian Communications Commission (NCC), the country’s telecommunications regulator had slammed a whopping N1.04 trillion ($5.2 billion) fine on...
Telecom

Telecom

ADEYEMI ADEPETUN, in this report, chronicled the fine imposed on MTN by the country’s telecommunications regulator and the impact on the industry.

Last year, Nigerian Communications Commission (NCC), the country’s telecommunications regulator had slammed a whopping N1.04 trillion ($5.2 billion) fine on MTN, for failing to disconnect customers with unregistered and incomplete subscriber identification modules (SIM) cards within the stipulated time handed to mobile network operators (MNOs) in the country. The telecommunications firm had failed to disconnect, as it were, defective SIMs from its network, at a time the country was reeling under serious security challenge arising from the activities of the rampaging terrorist sect, Boko Haram and kidnappers, among others.

The fine, which was the largest in the history of telecoms infringements globally, redefined the relationship between telecommunications operators and regulators, especially in Nigeria.

Former Chief Executive Officer of MTN Nigeria, Michael Ikpoki

Former Chief Executive Officer of MTN Nigeria, Michael Ikpoki

Genesis of the fine
NCC had disclosed that though it was not only MTN that was found culpable, “but MTN remains the biggest culprit. The telecommunications firm was found with a database that consisted of unidentified users, including kidnappers, insurgents, miscreants, armed robbers and other criminals to carry out their nefarious activities in the country. NCC’s decision was taken based on security advice from the Directorate of State Service (DSS).”

NCC could have pardoned the offence, but it decided to punish the telecoms giant for an alleged arrogance. An NCC source told The Guardian that at the August 4, 2015 meeting held at the commission’s office, where all the operators were invited and which had the commission’s top officials in attendance, as well as members of the DSS and officials from the office of the National Security Adviser, “MTN sent low-ranking officers to attend such a meeting. That singular act further undermined the importance of such a meeting, which was at the instance of the office of the National Security Adviser and Director of State Service. This had become worrisome to the government in an attempt to curtail the activities of the insurgents.

“Also, when NCC Enforcement and Monitoring team went to MTN’s office for more checks, their officials declined to open their switches for inspection.”

According to the source, all these acts infuriated the NCC team, which in their report, indicted the telecommunications firm as not willing to cooperate in the deactivation of improperly and pre-registered SIM cards within the stipulated time. “So there was no option but to slam them with the fine, said the source.”

The Guardian further gathered that despite all entreaties and warnings covering a period of over 12 months, (from September 2014), on the importance of ensuring that only SIM cards with valid SIM registration details are active on telecommunications networks, MTN failed to comply with the directive to deactivate improperly registered subscribers.

Information also had it that in September 2015, following repeated warnings and compliance enforcement, MTN only made a partial attempt to bar unregistered subscribers in selected areas over a few days in the month, while other operators had fully complied and reconciled their deactivations with the invalid registrations shared by the NCC up to four weeks earlier.

Another industry source, who preferred anonymity, said MTN’s persistent violations forced the NCC to impose the unprecedented sanction of suspending all regulatory services to MTN, following its accumulation of over 28 separate and proven infractions.

Industry reactions
As the matter degenerated, chairman, Association of Licensed telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, expressed fears that such a sanction could destroy the business.

Said he: “I don’t know how NCC arrived at the huge amount as a fine. But I think government should urgently intervene, because it could affect further investments in the sector. It is disincentive to investors and would have negative impact on the sector as a whole.”

Lanre Ajayi, who recently completed his terms as the President of the Association of Telecoms Companies of Nigeria (ATCON), also condemned the ‘outrageous’ sanction, saying it is unacceptable in a telecommunications industry, which is still gasping for foreign investment to achieve pervasive telecoms services.

“In my view, I believe strongly that there is nothing wrong in a regulator imposing a sanction on erring operator to ensure sanity in the market, but when such a regulatory tool is being abused, it calls for alarm,” he said.

Blockade of subscribers SIMS
Earlier in August 2015, the quartet of MTN, Airtel, Glo and Etisalat, deactivated all lines with unregistered or improperly registered mobile subscriber data on their networks. Altogether, about 10.7 million lines were disconnected. This later led to mammoth crowds of subscribers converging at the various operators services centres across the country, trying to reconnect their lines.

At a press conference in Lagos, Idehen Efosa, Head, enforcement and monitory department of NCC, explained that in September 2014, NCC discovered from the SIM data the operators sent to the commission for hamonisation that some of them were defective and had to be returned to the operators for proper checks.

He said about 18.6 million SIM data were sent back to MTN Nigeria, 7.49 million to Airtel, 2.23 million to Globacom and 10.46 million to Etisalat.

Idehen, however, said the monitoring exercise undertaken by the NCC showed that operators were only partially committed to the exercise.

According to him, out of the about 18.6 million SIM registration data found to be defective on MTN network, only about 1.6 million had been barred. He explained that what MTN actually did was to put the affected subscribers on “Receive Calls Only,” which means the subscribers couldn’t put a call through to another network.

Indeed, on November 9, 2015, Sifiso Dabengwa, the Group Chief Executive Officer of MTN, resigned from the company.

“Due to the most unfortunate prevailing circumstances occurring at MTN Nigeria, I, in the interest of the company and its shareholders, have tendered my resignation with immediate effect,” Dabengwa was quoted as saying in a statement.

As expected, pressure was also mounted on Michael Ikpoki, the Nigerian CEO, to toe the path of honour taken by Dabengwa.

Consequently, on December 9, 2015, Michael Ikpoki and Akinwale Goodluck, MTN’s Corporate Service Executive both resigned their appointments at MTN.

They were replaced by Ferdi Moolman and Amina Oyagbola, as the new CEO and Corporate Service Executive.

The impact of the fine was, however, not only felt by the resignation of the top executives, but its profit, shares and customers’ growth were also affected, as they crashed.

From what it perceived as growing weak exchange rate system in its two major markets, Nigeria and South Africa, MTN expects its group earnings to be under serious pressure for the rest of the year.

Last month, the firm said the weak economic growth in its key markets and tough competition could also negatively impact performance.

Court case and withdrawal
After several accusations, counter accusations and denials of any wrong doing, MTN sued NCC and engaged the services of Chief Wole Olanipekun (SAN), who led six other senior advocates of Nigeria (SANs) to prosecute the case.

MTN, which was yet to pay the fine by December 31, 2015, however, withdrew the case in February 2016, to enable it reach a peaceful agreement with NCC.

According to MTN, the decision to withdraw the case followed renewed efforts at creating a conducive atmosphere for further negotiations.

MTN withdrew the case on Federal Government’s advice, which gave such action as a condition for renewed negotiations. MTN had also to pay N50bn to the government’s coffers immediately it withdrew the case, as a gesture of good faith and commitment to the continued efforts towards an amicable resolution.

Buhari And Zuma’s Meeting
After much dialogue, which failed to yield positive result, on March 8, President Muhammadu Buhari told his South African counterpart, President Jacob Zuma, who was then on a state visit to Nigeria: “You know how the unregistered GSM SIM cards are being used by terrorists and between 2009 and today, at least 10, 000 Nigerians were killed by the Boko Haram sect. This has been fueled by the inaction of MTN to deactivate unregistered SIM cards.”

The reduction
Consequent on the meeting between Presidents Buhari and Zuma, NCC eventually reduced the fine by 25 per cent, which brought it to N780bn, while negotiations on the matter continued.

During the dialogue, the MTN team was headed by former US Attorney General and Head of Covington and Burling LLP, Washington DC, Eric H. Holder Jr, while the government team was led by the Attorney General of the Federation and Minister of Justice, Abubakar Malami (SAN).

But further reprieve came the way of MTN penultimate week, when NCC announced a reduction of the fine from N780bn to N330bn, to be paid within a space of three years.

According to a statement from NCC, the N330bn would include the initial payment of N50bn earlier made by MTN to the government.

The regulator said the balance of N250 billion would be made in six tranches within a period of three years. By the terms of agreement, MTN will pay N30bn into NCC’s Treasury Single Account (TSA) with the Central Bank of Nigeria (CBN), 30 days from the date of the agreement dated June 10, 2016. Other dates of payments are: March 31, 2017, (N30bn); March 31, 2018, (N55bn); December 31, 2018, (N55bn); March 31, 2019, (N55bn), while the balance of N55bn will be paid in May 31, 2019.

Executive Vice Chairman of NCC, Prof. Umar Danbatta, said the decision was taken based on professionalism and global best practices and in line with the NCC core value “to be fair, firm and forthright.”

The EVC explained that the commission has always carried industry and stakeholders along in taking transparent regulatory actions, adding that at no point would the regulator do anything to jeopardise the business health of the entire sector.

“We were careful not to take decisions that are likely to cripple the business interest of the operators we regulate. Besides, the downturn of global economy is biting hard on everybody and every sector. So, we must, therefore, be sensitive and flexible in our decisions,” he added.

Apparently satisfied with the final outcome of the negotiations, the Managing Director and Chief Executive officer of MTN, apologised on behalf of his company for the violation.

Said he: “MTN Nigeria once again offers its most sincere apologies for the series of unfortunate events that led to the imposition of the fine. It was of critical importance to reach a solution that would be of universal benefit to all stakeholders, given the importance of the ICT industry in Nigeria and its tremendous impact on socio-economic growth. Along with the authorities, we believe that has been achieved.”

House of Representatives kicks
Just as the industry thought the issue had been put to rest, after both parties (NCC and MTN) had amicably resolved the matter, members of the House of Representatives kicked against the reduction, querying the rationale behind the new development. It said the action was illegal.

The House Committee on Telecommunications, led by Saheed Akinade-Fijabi, had summoned Danbatta, Shittu and Malami.

According to Akinade-Fijabi, NCC, the ministry of justice and the ministry of communications undermined the integrity and independence of the National Assembly by slashing the fine, while investigations were still on.

“We will certainly continue with our investigations. We are disappointed that this agreement was reached without our consultation. We need to make sure everyone complied with the law, which doesn’t say anything about reduction. What are the issues that have changed in the assessment between the time of imposing the fine and now? What is the legal basis for this reduction,” Akinade-Fijabi queried.