Why NCC Fined MTN $5.2 billion: The True Story
MTN Nigeria would probably have got away with a much smaller fine for its reluctance to deactivate improperly registered SIM cards were it not for a high-profile kidnapping in Nigeria.
The kidnapping happened on September 21 in Akure, a sleepy town 300km northeast of Lagos, Nigeria’s commercial hub and home to MTN’s Nigerian operations.
The target? Olu Falae, a former Nigerian finance minister and runner-up candidate in the 1999 presidential elections. Falae, who turned 77 that day, was abducted from his farm on the outskirts of Akure, capital of Nigeria’s Ondo State. Eyewitness accounts from farm workers alleged that nomadic herdsmen carried out the abduction.
The herdsmen, Fulanis from northern Nigeria, are found across large swathes of the savannah belt between the country’s arid north and the densely forested south.
In recent years, dwindling grazing territories have pushed them southwards – and triggered violent clashes with locals, who complain the Fulanis’ cattle are destroying farmlands.
Newspapers reported that the kidnappers were asking for a ransom of 100 million naira (R6.8 million) and that negotiations were ongoing. Three days later, Falae was freed in Owo, 50km from Akure, amid confusion as to whether a ransom had been paid or not.
The police denied knowledge of a payment; Falae insisted his family paid a ransom.
It was one of the most prominent kidnappings in Nigeria’s history, given explosive resonance by its cultural and religious dimensions – a Christian Yoruba statesman from southwestern Nigeria abducted and harassed by alleged Muslim Fulani herdsmen from the north, in a country where people define themselves along these regional and religious fault lines.
The kidnapping is now believed to be at the heart of the ongoing regulatory clampdowns on a company that is one of Nigeria’s biggest tax payers. The Nigerian Communications Commission said the phone lines the kidnappers used to conduct ransom negotiations belonged to MTN.
“[Falae’s] kidnappers used MTN SIM cards and MTN was unable to provide any registration data for those SIMs,” the commission said in a report.
Commission sources say the decision on the $5.2 billion (R72 billion) sanction’s severity stopped being a purely regulatory issue and became a matter of national security.
“The government insisted they must be sanctioned to make the right statement,” said one official familiar with the matter. “In South Africa you can’t break their laws and get away with it. So why come to Nigeria and flout the laws?”
Even before the Falae kidnapping, the office of the national security adviser (Onsa), and the department of state security weighed into the SIM card registration issue, citing concerns that the absence of registration data on them was being exploited by criminals – from kidnappers and fraudsters to Boko Haram.
On August 4, the commission hosted a meeting that brought together all the mobile phone companies, as well as Onsa and department of state security representatives. A subsequent commission statement gave the phone companies a seven-day ultimatum “for deactivation of all invalid/improperly registered SIM cards; these include all SIM cards without, or improperly captured, facial pictures and/or finger prints”.
A week after the deadline, the commission’s head of compliance and monitoring said at a press conference that, while other networks were taking steps to deactivate defaulting lines, MTN, which accounted for 18 million of the 38 million improperly registered cards, showed “no compliance”.
At another meeting at the president’s office in September, chaired by his chief of staff and including military intelligence and telecoms executives, MTN was again warned about the security implications of improperly registered cards and government’s resolve to penalise offenders.
Many Nigerians believe the “telcos” have got away with it by calling the regulator’s bluff, and paying slap-on-the-wrist fines instead of immediately complying. It is being speculated that MTN chose not to disconnect the lines because of revenue that would have been forgone had the more than 5 million lines been disconnected.
All four of Nigeria’s major phone companies have been fined more than once for their failure to deactivate unregistered lines. The most recent came at the end of August, after a commission enforcement team came out of a compliance check dissatisfied. The commission slammed 120 million naira in fines on the four biggest operators.
MTN, with twice as many subscribers as Globacom, Nigeria’s second-largest operator, took the biggest hit, with a fine of 102 million naira. Globacom, Etisalat and Airtel were fined 7.4 million naira, 7 million naira and 3.8 million naira, respectively.
The penalties were based on a sum of 200 000 naira per defaulting SIM card.
While the previous fines were based on numbers emerging from random, limited-sample monitoring exercises, this time the commission decided to penalise MTN for the total number of improperly registered cards – hence the unprecedented size of the fine.
“In terms of ratio per subscriber, the amount is very big compared with fines recently imposed on telcos,” says Thecla Mbongue, a senior analyst at research and consulting firm Ovum, which focuses on IT, telecoms and media markets.
MTN is by far Nigeria’s largest mobile phone network, with 62 million of the 148 million mobile phone subscribers – double that of its nearest competitor, and more than double MTN’s 29 million subscriber base in South Africa.
Nigeria also accounts for a third of MTN’s global revenue.
The MTN Group holds a 78.83% stake in MTN Nigeria through a wholly owned Mauritius-based holding company known as MTN International (Mauritius). The rest is divided up among a group of private investors, including Nigerian businesspeople, and South African investment firm Shanduka Group.
Since the company announced this week it was being fined, its share price has fallen by 19%, wiping out more than $2 billion in market capitalisation.
Ratings agency Standard & Poor’s has since downgraded its credit rating.
MTN executives were scheduled to attend a meeting at the Nigerian presidential villa in Abuja on Thursday, involving senior state and security services officials, and the commission.
It is also believed the South African government has waded into the matter, and talks between presidents Jacob Zuma and Muhammadu Buhari are likely to take place.