South Africa’s MTN has set aside R9.29bn (US$595m) to pay its pending US$3.9bn fine to the Nigerian government, suggesting it is confident the penalty will be further reduced. The amount includes a US$250m “good faith payment” made earlier this month in anticipation of a settlement.
South Africa’s MTN (JSE:MTN) has set aside R9.29bn (US$595m) to pay its pending US$3.9bn fine to the Nigerian government, suggesting it is confident the penalty will be further reduced.
The Nigerian Communications Commission (NCC) imposed a US$5.2bn fine on MTN Nigeria in October 2015 for being slow to switch off unregistered SIM card holders, prompting a complete management overhaul at both group and country level.
Former CEO Phuthuma Nhleko, parachuted in as executive chairman in November, subsequently negotiated the fine down to US$3.9bn. In early February, MTN reportedly hired former US attorney general Eric Holder (pictured), a lawyer at Covington & Burling, to help reduce it further.
Last week, MTN Nigeria made a “good faith payment” of US$250m to the government on the basis that it would be put toward a settlement, when one is arrived at. The telco said it had agreed to withdraw its lawsuit challenging the fine “in an effort to achieve an amicable settlement”.
In a statement yesterday on its FY 2015 results, MTN said it had recorded a R9.29bn (US$595m) provision for the fine at the end of the reporting period. This includes the US$250m good faith payment.
“Management has applied its judgement in determining the provision in accordance with International Financial Reporting Standards (IFRS),” the company said. “MTN Nigeria continues engaging with the Nigerian authorities in an attempt to ensure an amicable resolution in the interest of MTN Nigeria, its stakeholders and the Nigerian authorities.”
MTN said it may reduce its 2016 dividend if it needs more funds to pay the fine.
In January, a federal judge gave MTN until 18 March to negotiate an out-of-court settlement.
Officials at the NCC have said their intention is not to “kill” MTN, which reported revenue for 2015 of R146.4bn (US$9.4bn) and EBITDA of R59.9bn (US$3.8bn).
MTN said the fine has negatively impacted its EBITDA by 13.6%.
