Shuter… The telecoms veteran comes to MTN

The frantic search for a new helmsman to reposition MTN came to fruition on Monday, with the announcement of Rob Shuter, as the new Group Chief Executive Officer (GCEO) of Africa’s largest telecommunications firm.

Shuter, a South African, is a Vodafone European Cluster Head. He replaces the former GCEO, Sifiso Dabengwa, who resigned in November 2015, over his ‘shabby’ handling of activities that led to the $5.2 billion fine slammed on the Nigerian arm of MTN for contravening regulatory orders.

Shuter, who is expected to resume duties not later than July 1, 2017, is an accountant with experience in managing risks.

The new MTN boss, obviously has a herculean task in repositioning a company a company overhauling its corporate governance standards and in search of new revenue streams, even as tough competition hits profit margins in its key markets, especially in Nigeria. He will oversee the telecommunications firm’s operations in 21 countries across Middle East and Africa and about 230 million subscribers.

In welcoming Shuter, the telecommunications firm on Monday, said is “confident that Rob will bring experience and new insights to the CEO role having had many years in the telecoms sector both in Africa and Europe.”

Shuter has been CEO of Vodafone Netherlands since April 2012 and in October 2015 his role was expanded to include the other European countries excluding the four large European markets. He had held senior management roles at Vodacom, Standard Bank and Nedbank prior to joining Vodafone.

MTN said it’s confident Shuter will bring “experience and new insights to the CEO role having had many years in the telecoms sector, both in Africa and Europe, as well as in banking where his expertise will help as MTN continues to develop its new business strategy.”

According to the telecommunications firm, Phuthuma Nhleko, who has steered MTN since Nov. 2015, will return to his role as non-executive chairman. Nhleko took over after Dabengwa was forced to step down in the middle of the turbulence caused by the Nigerian fine.

Meanwhile, many will see the new GCEO as the person to give MTN Group the new path the company should thread to achieve its aim. Some two months back, MTN has promised to release 4G lite network in Nigeria by July, we are already in June, Nigerians have not seen any signed of that. This promised was made immediately after the revival of the old Nitel into Ntel that have seen some cities enjoying the 4G networks in Nigeria. The network only covers Abuja, the country capital city, Lagos; the commercial city of the country and PortHarcout, where the nation oil riggers and oil business men and workers dwell.

According to Bloomberg, investors have always been comfortable working with Shuter, and his experience from Europe with Vodafone has added a new dimension to his management skills, an analyst at Arqaam Capital, Ian Brink stated.

“The European telecommunications market is a more mature market and in many instances the African market is also starting to move in that direction,” Brink said.

Shuter’s announcement and firm’s Moody’s rating
On Shuter’s announcement as MTN CEO, ratings agency, Moody’s affirmed on Monday, MTN Group’s Baa3 global issuer rating, the Aa3.za national scale issuer rating and Baa3 rating on the senior unsecured notes issued by MTN Mauritius Investments.

Obligations rated Baa3 are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics while obligations rated Aa3 are judged to be of high quality and are subject to very low credit risk.

According to Moody’s, the affirmation is based on the view that the fine and payment terms, recently imposed by the Nigerian authorities and agreed to by MTN Nigeria, are within the funding capabilities of MTN Nigeria and will not require funding support from the Group.

Moody’s indicates that the affirmation of the Baa3/Aa3.za issuer ratings follows the announcement on June 10, 2016 that MTN Nigeria has agreed to pay a total cash consideration of N330 billion (equivalent to $1.671 billion) over three years to the Federal Government of Nigeria in relation to the failure to disconnect over five million improperly registered subscribers within the stipulated time frame in 2015.

“This is materially lower than the original fine of NGN1.04 trillion ($5.2 billion) imposed on October 26, 2015 and the subsequent reduction in December 2015 to NGN780 billion ($3.9 billion). MTN Nigeria has already paid NGN50 billion on February 24, 2016 leaving the balance of NGN280 billion to be paid over three years,” Moody’s noted.

The agency said it views the resolution of the fine and payment terms as manageable given MTN Nigeria has sufficient cash balances to meet the yearly obligations over the next three years.

“It also reflects the view that this paves the way for MTN Nigeria to resume its focus on growing its business in Nigeria,” Moody’s said.

Moody’s, however, maintained the outlook at negative, indicating that it is driven by MTN’s weakened liquidity profile resulting from the inability to repatriate dividends from MTN Nigeria over the past six months and utilisation of its available facilities to fund the capital outflows.

However, in a letter titled “Re: Settlement between NCC and MTN over fine,” dated June 15, 2016, and addressed separately to actors in the deal, the Chairman of Senate Committee on Communications, Senator Gilbert Nnaji expressed dismay over the “settlement agreement of N330 billion that was reached with MTN out of a whopping N1.04 trillion” and as such summoned all the parties involved to appear before the panel to explain their extent of culpability or otherwise.

The panel further noted “as a committee and representatives of the Nigerian people, we are saddened about this development at a time when the Nigerian economy needs all the available capital infusion to bolster it.”

The committee said, “It is our strong opinion that Nigeria has been shortchanged in this whole process on account of the ridiculous settlement payment plan; coupled with the disparity in the exchange rate regime when the fine was imposed ab initio compared with the current prevailing exchange rate when it was agreed to cut the fine to N330 billion.”

Genesis of $5.2 billion fine
Between October 24 and 25, 2015, when the news broke out that the Nigerian Communications Commission (NCC), the country’s telecommunications regulator has slammed a whooping N1.04 trillion ($5.2 billion) fine on the largest telecommunications firm in the country, MTN, many people never believed it. Even the newsroom queried the authenticity of the source of such story, largely because of the quantum of money involved.

Indeed, the news came out to be authentic! NCC did slam MTN with the fine because the South African firm failed 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 on its network, at a time the country was reeling under serious security challenge because of the activities of the rampaging terrorist group, Boko Haram.

The fine, which is the largest in the history of telecoms infringements globally, redefined the relationships between telecommunications operators and the regulator, especially in Nigeria.

NCC disclosed that it was not only MTN that was found culpable, “but MTN remains the biggest culprit. The telecommunications firm was found having a database allegedly been use by kidnappers, insurgents; miscreants, armed robbers and other criminals to commit crimes in the country. NCC’s decision was taken based on security advice from the State Security Service (SSS).”

Besides, an NCC source had 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; members of the SSS and officials from the office of the National Security Adviser, “Can you imagine that MTN sent low rank officers to attend such a meeting. That singular act further undermined the importance of such a meeting.

“That meeting was at the instance of the office of the National Security Adviser and Director of State Service. This has 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 decline 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 of 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.”

Impact of fine on MTN’s operations
According to industry watchers, such a magnitude of fine will definitely throw up some casualties. Indeed, on November 9, 2015, the GCEO, Dabengwa, 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, several pressures mounted on the Nigerian CEO, Michael Ikpoki. On December 9, Ikpoki and Goodluck, MTN’s Corporate Service Executive resigned their appointment at MTN. They were replaced by Ferdi Moolman as the CEO and Amina Oyagbola became the new Corporate Service Executive.

The impact of the fine was not only felt by the resignation of the top executives, its profit, customers’ growth also fell.

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 had said the weak economic growth in its key markets and tough competition could also negatively impact performance.

The telecommunications firm disclosed that it grew its total subscriber base by one per cent to 230.3 million over the year to end-April despite a seven per cent drop in Nigerian customers.