Business / Business News

Siki Mgabadeli
4 minute read
27 Oct 2015
12:04 pm

Dobek Pater discusses MTN’s monster R71b fine

Siki Mgabadeli

Following the fine, MTN's share price took a pounding, ending down 12.5% at R167/share.

SIKI MGABADELI: You’ve heard that MTN’s share price took a pounding today, ending down 12.5% at R167/share after they confirmed they’ve been fined $5.2bn – that’s around R71bn by the Nigerian regulator for failing to disconnect subscribers with unregistered and incomplete SIM cards at their unit in Nigeria. Africa’s largest mobile operator said in a statement that the Nigerian Communications Commission imposed the fine on MTN Nigeria – and it relates to the timing of the disconnection of 5.1 million subscribers in August and September.

Let’s chat to Dobek Pater, who is telecoms analyst at Africa Analysis and who joins us now. Dobek, thanks so much for your time today. In fact, last week MTN reported a slowdown in their quarterly subscriber growth, citing stiff competition and tougher regulation in Nigeria. So is this the toughness that they were talking about?

DOBEK PATER: In terms of the fine?

SIKI MGABADELI: Yes.

DOBEK PATER: Yeah, it could be. But the competitive market landscape is quite vicious in Nigeria. It’s almost a dog-eat-dog type of environment, and expectation is the mobile space is also now moving into the fixed-line environment.

Yet the market is slowly reaching maturity. So that’s one of the factors. Now you have to fight harder for your subscriber, for your customer. But, apart from that, yes, the NCC comes up [with these] curative measures against the operators. Normally in the past it has been around quality of service and operators trying to take on too many subscribers too quickly through various promotions, which then ultimately could often [impact service] because the national capacity wasn’t necessarily able to cope with the influx of new customers. … trying to regulate…either through moratoria on the uptake of new customers through promotions for a period of time, or sometimes outright for a month, or prohibition to issue new SIM cards. And sometimes that went hand-in-hand with something of a fine for inadequate quality of services. This is the first time I think that I have seen a fine of this nature for not disconnecting SIM cards that have not been registered based on regulations, and that it’s actually so high. This is a significant fine.

SIKI MGABADELI: It’s massive. But what is this regulation? Why did they need to disconnect subscribers? Is it similar to the RICA thing that we do here?

DOBEK PATER: Correct. It’s the same thing that we have in South Africa in terms of RICA – and it’s all over the world. After South Africa implemented its RICA, most African markets implemented registration of SIM cards and so has Nigeria. There was a window of time when users/subscribers needed to register their existing SIM cards. And now obviously when you get a new SIM card you are …to register before the SIM card is activated and you can use it. It normally takes about three or four hours in Nigeria for that activation to take place.

But obviously MTN either had previous SIM cards pre the registration requirement that have not been registered to date, or maybe some of its distributors issued SIM cards without registering them. That’s a possibility as far as the process is concerned.

And obviously in order to make that registration effective you need to disconnect and deactivate unregistered SIM cards otherwise it defeats the purpose of having that type of regulation in place to begin with.

SIKI MGABADELI: And how much teeth does the Nigerian Communications Commission have if you compare it to Icasa, for example.

DOBEK PATER: Like Icasa, it tends to rule in a fairly stringent way. For example they may even call an operator … something to the effect of well, if you don’t comply we are going to review your licence conditions or your licence in general. Some of the regulations that they have passed in the past have not necessarily been based on the due process one would have expected in a developed market, so effectively they estimate, take a view on the market, and pass regulations that they feel are going to lead to greater competition and small-market equality among different players. That tends to expedite the process. And once they’ve taken the decision to implement some regulation they try to do it as quickly as possible to conclude the process. And, number two, they are not shy of imposing curative measures in order to then enforce that regulation.

SIKI MGABADELI: All right, we’ll leave it there. Thanks to Dobek Pater. Maudi, Nigeria contributes around a third of MTN’s sales.

MAUDI LENTSOANE: Ja, I think about 60 million subscribers the last figure that I checked. It’s quite a big contributor and I think this fine, if it is passed, would be a big blow for MTN in general. Already you are dealing with heavy pressure coming from there, lower oil prices impacting negatively on the Nigerian economy and as result that’s weakened as well. So it’s already a double blow to MTN. One can only hope that it’s resolved amicably.

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