MTN and burden of incessant fines

FOR MTN, Africa’s largest telecommunications firm, the last three weeks will remain the most turbulent time in its history.

Established in 1994 in Johannesburg, South Africa, MTN has come under fire in Nigeria, a major arm of the telecommunications firm.

Apart from having its shares plummeted severely on the Johannesburg Stock Exchange (JSE), which as at last week, declined to about 25 per cent since the fine was made public weeks back, valuing the company at 289 billion rand ($20.4 billion), the issue last week also claimed its first casualty, in the person of the Chief Executive Officer, Sifiso Dabengwa, who tendered his resignation letter last Monday for failing to mediate effectively with the Nigerian authority, according to sources.

Nigeria accounts for 37 per cent of revenues for MTN, which operates in more than 20 countries in Africa and the Middle East. According to analysts, with Nigeria been the major ‘cash cow’ for the Group, it is onus on the management to abide by the rules and regulations governing the activities in the country, especially one, which MTN is a signatory to.

Indeed, after several warnings from the Nigerian Communications Commission (NCC) to telecommunications operators in the country including MTN Nigeria, Globacom, Airtel and Etisalat that they should disconnect defective Subscribers Identification Modules (SIM) cards, while others complied, NCC claimed that it still found about 5.1 million subscribers on the MTN network having pre-registered SIMs cards and incomplete registration details.

This led to the commission imposing a N1.04 trillion ($5.2 billion) fine on the telecommunications firm for the defective SIMs at the cost of N200, 000 each.

Before this $5.2 billion fine, MTN, like other operators were in August slammed with N120.4 million fine.

The telecommunications firm was asked to pay N102.2 million as fine, followed by Globacom, which was fined N7.4 million. Etisalat paid N7 million and Airtel got of N3.8 million for SIM cards contraventions.

Reprieve however, came the way of MTN on Monday, following the extension granted it by the NCC without prejudice to the fine after the deadline period (November 16) lapsed because of the on-going negotiations between Nigeria and the South African delegation from MTN.

The sanction indeed and expectedly generated all manner of reactions, from the legitimate to the ludicrous with the NCC accused of being too harsh and being anti-business
What regulations say about SIM registration
The NCC said it did explore the Nigerian Communications Commission (Registration of Telephone Subscribers) Regulation, 2011 before it struck. It stressed that MTN also must have seen and owned a copy of it.

On November 7, 2011, the 12-page regulation was published in the Federal Government of Nigeria Official Gazette No 101 Vol.

Indeed this four-year old regulation, which was actually signed by the former Executive Vice Chairman of NCC, Dr. Eugene Juwah, provided the framework for the registration of subscribers of mobile phone users in Nigeria.

Pages 11 and 12 of the NCC Registration of Telephone Subscribers Regulations, the regulation sets out penalties for default in sections 19 and 20.

Section 12 (1, 2, 3) informed that upon the commencement of these regulations, licensees shall only provide new subscribers with subscription mediums enabled for limited access to their network services and such limited access shall last for the duration of the activation window.

Justifying the sanction, Section 20 (1) of the Regulation states that: “any licensee who activates or fails to deactivate a subscription medium in violation of any provision of these Regulations is liable to a penalty of N200, 000 for each unregistered but activated subscription medium.”

Given how regulations are made in regulated sectors, it is inconceivable that MTN Nigeria was not aware of the regulation, the penalty for default, and the implication of default for its business.

Frankly speaking, operators in regulated environments have enormous legal and other resources to shape the outcome of regulations and analyse the risk to their operations.

According to a telecommunications expert, Kehinde Aluko, why then is the NCC being chided for taking the initiative to curb unacceptable corporate behaviour whereas MTN is getting sympathy for failing to abide by the rulebooks?
Divergent views continues to trail sanction

Aluko said some people have actually claimed the fine to be unfair because it makes up 1/4 of MTN’s total asset and may as a result push them out of business.

But my question is: “Should the fairness of the fine meted out be based on MTN’s profit margins and its ability to pay or the magnitude of the problem being addressed – which in this case is: ending terrorism and other criminal acts. I believe the latter should be the litmus test for fairness. “

According to him, if you are familiar with corporate behaviour in Africa as compared to the rest of the world, you will know that corporations have constantly exploited weak regulatory bodies to get away with a lot that they wouldn’t dare attempt in the Global West.

Speaking to The Guardian, a former President, Institute of Software Practitioners of Nigeria (ISPON), Chris Uwaje said if that is the Law of the land, then compliance is demanded.

“Alternatively, they can go to court to test the interpretation of the law. There is always the risk potential in any business: a good example is the fine of over $8 billion to British Petroleum on the Oil Spill Saga and recently on Volkswagen of Germany for the technological (software) manipulation of the technical performance of VW Cars in the US market.