Beleaguered telecommunications giant, MTN is to challenge the $3.9 billion fine imposed on it by the Nigerian Communications Commission (NCC) in court after resolving that the penalty that has wiped 28 percent off the company’s value wasn’t within the powers of the country’s telecommunications regulator to impose.
MTN shares gained 6.3 percent to 138.20 rand at the close in Johannesburg, the highest since Dec. 3. That values the company at 255 billion rand ($16.8 billion).
Africa’s biggest phone company will also continue to engage with the Nigerian authorities to try and ensure an amicable resolution, the Johannesburg-based wireless operator said in a statement on Thursday. Pending the court hearing, neither party should take further action until the matter is resolved, the company said.
In a statement released yesterday, MTN said “acting on legal advice”, it “resolved that the manner of the imposition of the fine and the quantum thereof is not in accordance with the NCC’s powers under the Nigerian Communications Act and therefore there are valid grounds upon which to challenge the fine. Accordingly MTN has followed due process and has instructed its lawyers to proceed with an action in the Federal High Court in Lagos seeking the appropriate reliefs.”
The beleaguered telecommunications giant may have been pushed into pursuing a legal option for the resolution of the hefty $3.9bn fined imposed against it after the regulator, NCC, foreclosed any chance of a negotiation and with the company’s auditors PWC, threatening to recognise the entire fine as a debt in its books at the end of the financial year on December 31.
If the fine is recognised as a debt, MTN’s medium term loans will become imperilled analysts told our reporter last night, with the likelihood of the loans being recalled, throwing the company into insolvency.
“MTN has done everything it can do to make the regulators see that it cannot pay the fine”, one analyst said. “It will appear that for many, it is difficult to conceptualise what a trillion is. MTN’s books are out there in the public and truth is the company cannot pay this fine and no bank gives you a loan to pay a fine in the circumstance that MTN is in.”
BusinessDay learnt that MTN will be asking the court to determine if after examining its books, whether MTN is capable of paying the fine or not and secondly whether the fine is proportional to the offence committed and perhaps thirdly, if there was no other way in which this matter could have been handled by the regulator.
According Leighton Fenton, a telcoms analysts in London, “It is no fun taking a regulator to court because they will come at you with bricks and stones and so one must see MTN’s recourse to the law courts as a last resort.”
He added, “One must hope that despite this legal battle taking off, that both parties can still resolve this matter in a manner that is industry enhancing rather than killing MTN with all the company’s faults.”
MTN filed an originating process backed up by affidavit at the Federal High Court, Ikoyi in Lagos yesterday.
The company is being represented by a battery of lawyers including six Senior Advocates of Nigeria (SAN) led by Wole Olanipekun, a former president of the Nigerian Bar Association (NBA). Some of the other SANs on the team are Gbolahan Elias, Fabian Ajogu, a professor of law and A B Mahmood.
MTN is one of the few foreign companies that took the bold step to invest in the Nigerian telecoms market in 2001 in spite of negative claims and projections made by international analysts, one of which included that the Nigerian judicial system is too slow and winding to grant meaningful relief to aggrieved parties. This is an aspect that will be tested with MTN’s decision to challenge the regulator in court.
The Nigerian Communications Regulator imposed the penalty on MTN for failing to meet a deadline to disconnect 5.1 million unregistered subscribers as security agencies seek to fight crime in a country with poor identity records.
Chairman Phuthuma Nhleko is leading negotiations with the NCC after Chief Executive Officer Sifiso Dabengwa resigned. The initial fine of $5.2 billion was reduced by 25 percent to $3.9 billion earlier this month, with a payment deadline set for Dec. 31.
NCC spokesman Tony Ojobo declined to comment on MTN’s plan to challenge the fine.
Jumoke Akiyode, with agency report
