MTN fine ‘error’ and regulatory rascality

On December 2, 2015, MTN Nigeria announced the receipt of a letter from the Nigerian Communications Commission (NCC) informing it that “after considering the company’s request, it has taken the decision to reduce the fine on the MTN Nigerian business from the original N1,040,000,000,000 (one trillion, forty billion naira) to N674 billion” which has to be paid by 31 December, 2015. This represented a 35 percent reduction of the fine hitherto imposed on the telecom firm for failure to promptly disconnect unregistered and improperly registered SIM cards as directed by the NCC.

However, in a bizarre twist, the next day the MTN Group CEO, Phutuma Nhleko, in a statement sent to shareholders and made available to journalists, stated that the company received another letter saying the NCC informed it that there was an error on the first letter and that the fine was reduced by 25 percent and not by 35 percent as erroneously communicated to the company the day before. According to the statement, “The second letter, which was stated to supersede the first letter, informed the company that the fine had been actually reduced by 25 percent to N780 billion and not by 35 percent to N674 billion, as was stated in the first letter… Neither the first letter nor the second letter sets out any details on how the reduction was determined.”

To confirm the assertion of the MTN Group CEO, Tony Ojobo, NCC’s director of public affairs, in a clarification in Lagos on December 4, admitted that there was an error in the initial letter sent to the telecommunications firm. “The initial letter sent to MTN was in error and we have quickly communicated the actual rate of 25 percent to MTN, as approved by the presidency,” Ojobo said.

This is an embarrassment to the country. It beggars belief that such an elementary error could elude the motley of officials at the presidency and the NCC who drafted, vetted and signed the said letter. Pray, if the crowd of officials at the NCC and the presidency could not be relied upon to communicate a simple decision accurately in a letter, how could they be relied upon to effectively regulate the telecoms industry or coordinate the complex process of inter-governmental relations in the country?

Besides the error, the reduction of the fine in the first instance shows the little thinking and lack of broader consideration that went into the imposition of the fine. Historically, the largest such fine ever slammed on a telecoms company was $100 million levied AT & T in the United States – which is even still under litigation. So, how could Nigeria then wake up and impose a fine of $5.2 billion (bigger than MTN’s total assets of $3.54 billion, total debt of $3.5 billion and total borrowing capacity of $1.7 billion in Nigeria)? Was the plan to punish MTN Nigeria’s apparent intransigence, destroy the company or take it over completely? Or was the motive, as so many foreign analysts and commentators believe, a desperate attempt by the government to shore up depleting oil revenues (since the fine, if collected will represent nearly a quarter of the government’s $22.6 billion annual budget for 2015)? Whatever the motive or plan, it is becoming apparent that the initial fine (or even the reduced one) was unrealistic and uncollectable.

The actions of the NCC and the government have only heightened Nigeria’s risk profile and will only further portray the country as an unreliable and unusually risky investment and business destination. Little wonder FDIs have dried up and owners of foreign capital are repatriating their funds.

With each passing day, the NCC action appears to be an overreaction that is not well thought-out. Of late, we have observed the tendency of regulatory agencies in Nigeria to run amok imposing hefty and unreasonable fines indiscriminately on businesses operating in Nigeria. Such actions got to a head with the CBN publicly asking Stanbic IBTC to disregard the supposed N1 billion fine slapped on it by the Financial Reporting Council of Nigeria (FRCN) and the suspension of its chairman, CEO and other directors.

To be sure, we frown at companies flouting extant rules and regulations in the course of their businesses in Nigeria and advocate that such companies be sanctioned appropriately. But the regulatory agencies cannot go about unsettling the business environment in Nigeria just because they want to be seen to be in sync with the president’s ‘body language’.

We urge the government to call the regulatory agencies to order before they totally damage the business credentials of the country. Meanwhile, we also urge the government to critically examine the fine slapped on MTN and let rationality prevail instead of issuing unrealistic ‘letters and deadlines’ that will not work.