MTN and the Nigerian government

Between 1999 and 2001, during his many ‘shuttle diplomacy’ trips, Obasanjo severally pleaded with telecom companies like Verizon in the United States and Vodafone in the United Kingdom to come and invest in Nigeria. He clearly preferred them to the other African companies like MTN and Econet. In anticipation of their coming, only four licenses were created for auction with five year exclusivity period within which no licenses will be auctioned to enable the investors recoup their investments. The expected bid winners were also given tax relief for five years.
However, when the bids were announced and invitations sent to these companies, they all declined to participate. They cited reports of various studies by telecom research agencies, the global financial institutions like the World Bank and the International Monetary Fund (IMF), and consulting bodies, which forecasted a very slow growth for the Nigerian telecom sector. Some of the reports alleged that the average Nigerian could not afford to own a mobile phone as the per capita income of the citizens was below the internationally recognized average and the daily income was below the $100 mark. It was forecasted that it would take up to twelve months for any operator to get 100,000 subscribers; 3 years to connect 300,000 lines and 5 years to reach 500, 000 subscription rate. This conservative report put off many operators that would have entered the mobile licence auction. Obasanjo felt humiliated and let down, of course.
However, MTN – a South African Black Empowerment company – was not discouraged. Unlike fellow South African Vodacom – a subsidiary of the UK Vodafone – which vowed never to touch the Nigerian market even with a 10-metre pole, it choose to listen to Nigerians on the ground and sent some of their staff to observe the ‘Nigerian informal economy’, whose value they confirmed to be equal or even more than the so-called formal economy. At the end, they decided the risk was worth taking and paid $285 million for one of the license – a fee derided by many western and local analysts as excessive and unwarranted.

The rest of the story is now well known. By 2002, MTN already had over 2 million subscribers in Nigeria, posted a net profit of $364 million, had the highest ARPU (Average Revenue Per User) of $51/month in Africa and second only to Japan in the entire world. In 2003, the MTN group, buoyed by its Nigerian investment, had become the most profitable telecom operating company in the world in an era where the likes of Vodafone and Orange in the UK were posting net losses. By this time, all the companies that had repudiated Nigeria were all queuing and begging to enter the Nigerian market. One of the earliest frontline bidders in 2001 (United Networks consortium led by Hakeem Bello Osagie) that had earlier declined to pay $285 million on the grounds that it made no business sense in the Nigerian environment was to later acquire the Unified Access License after the five year exclusivity period in January 2007 under a different consortia of Emerging Markets Telecommunication Services (EMTS) at a price of US$400 million.

But MTN’s success didn’t come cheap. Of all the companies that secured the licence to roll out telecommunication services, it was the most determined and adventurous. While others were content to just make minimal investment in infrastructure and wait to rake in profit, MTN mobilised huge FDI into its Nigerian operation, building massive telecom infrastructure across the country. It also had the fortune of being managed by quite visionary and enterprising individuals that formulate and implement unassailable strategies for provision of quality service and for profit maximization in Nigeria.

Of course, because of its aggressive and huge investment in the Nigerian market, MTN Nigeria has grown to become the jewel of the MTN Group. MTN Nigeria is also contributing massively to the Nigerian economy. Since it came to Nigeria, it has directly or indirectly employed more than half a million Nigerians and has paid not less than N1.6 trillion in taxes to the Nigerian government. It has also contributed billions of Naira to various projects in the country through the MTN foundation.

However, MTN’s success in Nigeria has become its greatest undoing. In a case of attempting to snuff life out of the goose that lays the golden eggs, regulators, various government agencies and the Nigerian government itself have been competing with themselves to demonise the company and destroy its brand equity in Nigeria. True, no company is permitted to flout the country’s rules in the course of doing business in the country and the government and the necessary industry regulators must ensure strict compliance of extant rules and apply sanctions where necessary. However, the government must not consistently vilify a company doing legitimate business in Nigeria in such a manner as to scare off potential investors, especially at this time when the Nigeria is desperate for investors and is doing everything to attract them.

Gone are the days that governments call the bluff of investors and command the controlling heights of the economy. Times have changed and governments are appreciating the indispensible role of private capital and investments in nation building. What is more, governments no longer have the kind of resources needed for investments in major sectors of the economy. But the Nigerian government is increasingly alienating owners of private capital and doing everything in its powers to kill successful businesses in Nigeria.

Christopher Akor