The renewed fight against terrorism in Nigeria was behind a $5.2-billion fine slapped on MTN by the communications commission in Africa’s largest economy.
Or was it?
The bottom falling out of the global oil market has also been suggested as a reason for the penalty, which is more than the telecoms giant’s annual Nigerian revenue.
The fine is for failing to comply with legislation requiring MTN to disconnect unregistered subscribers. Well-placed industry insiders said the Nigerian government found, in tracking Boko Haram’s activities, that unregistered numbers, such as those that MTN failed to disconnect by the deadline, were identified as a security risk.
Nigeria has suffered an insurgency by the militant Islamist group since 2009, which has grown over the years, and has claimed responsibility for a rising number of increasingly severity attacks. A new government came into power in Nigeria earlier this year and has successfully driven the group back into the Sambisa Forest area on the northeastern border of the country.
In an attempt to thwart communication in planning criminal activity, the Nigerian government introduced – and has enforced – legislation to have all SIM cards registered to verifiable users.
It is understood MTN was in talks with the Nigerian Communications Commission (NCC) about noncompliance when confidential commission documents were leaked to the Nigerian press on Sunday. On Monday, the commission officially levied the fine on MTN.
In a brief Sens announcement on Monday, MTN informed the market about the fine and stated that it relates to the timing of the disconnection of 5.1-million MTN Nigerian subscribers in August and September this year. The amount is based on a fine of 200 000 naira (R13 600) for each unregistered subscriber. The news caused MTN to lose 14% of its market value in the subsequent 48 hours.
With more than 62-million subscribers, MTN is the largest mobile operator in Nigeria, which, in turn, is also MTN’s largest market. Although some observers believe the company will have to pay only a fraction of that mammoth fine, the $5.2-billion (R71.4-billion) is significantly more than the R54-billion in revenues MTN earned in Nigeria in 2014.
Some industry insiders have speculated about Nigeria’s reasons for the fine, given that when the new government came into power, it faced significant challeges.
Nigeria derives more than 70% of its revenues from the sale of crude oil and, with the global oversupply and low prices, is feeling the pinch.
But telecommunications is also an important industry in the Nigerian economy and contributes a significant amount to revenues and gross domestic product, according to George Kalebaila, the senior research manager of telecoms and media at the International Data Corporation.
Nigeria is the largest cellphone market on the continent.
“In a crisis economy, all revenues are scrutinised, but the NCC is a pretty sophisticated regulator and has been around the block a few times. MTN has to pull its weight,” said Alison Gillwald, the director of Research ICT Africa. “I don’t think it is as direct as ‘we are going to gauge them on this because the bottom fallen out of the oil market’, but it could relate to a general squeezing of revenues.”
Last week, the Central Bank of Nigeria fined the First Bank of Nigeria and the United Bank for Africa 4.8-billion naira (R326-million) for failing to comply with a federal government’s directive on the remittance of government revenue.
Gillwald said there were bigger issues at play. “Post 9/11, there has been a series of security and surveillance legislation that have been picked up with gusto by various governments in Africa. One was registration of SIM cards.”
Like the Rica requirements in South Africa, Nigeria is trying to prevent criminal activity by keeping a database that links every number to a verifiable person. But Nigeria’s system takes it one step further with a biometric component.
“It is a massive exercise that costs millions and is, in my opinion, futile,” said Gillwald. “In South Africa, it resulted in one million poor people being disconnected because they couldn’t provide the necessary information,” she said, adding that those who were planning a crime would simply steal a SIM card.
“It seems like an enormous cost and effort at a time when you are trying to connect people.”
But, she said, MTN’s noncompliance in Nigeria “does suggest some kind of cutting corners, if not fraudulent registration of people”.
Kalebaila said: “Earlier this year, the NCC issued further instructions to re-register customers they found were improperly registered. MTN was in a position to deal with it, so I’m not sure why MTN did not comply with NCC requirements. They had until September this year to comply.”
Nigeria is vast, with a large rural population and its own operational difficulties related to identification systems and residential registration. This resulted in Nigeria introducing the biometric component to the SIM card registration process, he said.
“The fine needs to be seen in the context of the Nigerian government’s renewed vigour to take on terrorism,” said Kalebaila. “For MTN to not be compliant would be spitting in the face of the government.”
The legislation, once in place, had to be enforced to be taken seriously. “It is the kind of mechanism you need, but on the other hand there is a proportionality issue,” said Gillwald.
The size of the fine appears intended to send a strong message. But if it were enforced it would have a serious effect on MTN’s profitability, she said.
“There is a bit of history of MTN in Nigeria. They got very big very quickly. The regulator thought they were very arrogant and has even by decree tried to bring prices down,” said Gillwald, adding that, in 2013, the regulator fined MTN and other service providers for quality of service.
“But MTN have brought communications to that country and opened it up to rural hinterland. But their prices have been very high,” she said.
“You can’t be running a company like that, being one of the biggest in Africa, and not have a working relationship with the regulator. It appears to have been a long-running thing to put MTN in its place and seemingly the NCC has now done so. But it should never get to this point.”
Kalebaila said: “Mobile contributes quite a big chunk of GDP, so don’t think they can put that at risk. But they are trying to send a message into the market. I think ultimately they will come to an arrangement. MTN is major player and has made massive investments in the country.”
The Mail & Guardian was unable to reach the NCC and MTN said it was unable to comment.