MTN fine is a state-sanctioned mugging - TechCentral

MTN fine is a state-sanctioned mugging

Duncan-McLeod-180-profileIt’s time to call the situation South African telecommunications group MTN is facing in Nigeria what it really is: a state-sanctioned mugging.

The Nigerian government, through its communications commission, is pointing a gun at MTN’s head, demanding that it hand over an absurd amount of money. To make it even worse, it is insisting that it do so immediately or face further, unspecified sanctions. Pay up, or else!

It is certainly true that MTN erred in not cutting off 5,1m unregistered Sim cards in Nigeria in time for an August deadline set down by the Nigerian Communications Commission (NCC). And it is only fair that it be sanctioned for this. The fine also calls into question governance at MTN and whether the board’s risk committee was doing its job. But the punishment proposed by NCC, even after the fine was cut this week by a quarter, in no way fits the crime.

With a lack of communication from the NCC about why it has imposed the maximum fine permissible, it’s difficult to see this as anything more than a revenue-raising exercise by a government that is under severe pressure as oil revenues slump. Ultimately, of course, it could end up hurting Nigeria much more in the long term than it does MTN. Foreign investors don’t look favourably on such risk and will think twice about investing in the West African nation.

The decision this week by the NCC to reduce the fine by 35%, only to communicate to MTN less than 24 hours later that, in fact, it had meant to cut it by only 25%, reinforces the view that the fine amount is arbitrary and the authorities’ approach capricious.

Remember, the fine, even with a 25% reduction factored in, is almost 40 times larger than the next-biggest fine imposed anywhere in the world on a telecoms operator (US$100m on America’s AT&T).

Remember, too, that there’s little evidence that Sim card registration laws — of the kind MTN found itself in trouble over in Nigeria — have had much of an impact in achieving their intended outcome of helping law enforcement agencies in fighting crime and terrorism.

MTN pointed out in a statement on the JSE’s stock exchange news service on Friday that the NCC has not provided any details about how the reduction in the size of the fine was determined. This is not the sort of behaviour one would expect of a competent and effective regulator. And the decision to change the size of the reduction in the fine from 35% to 25%, apparently quite arbitrarily (it’s reportedly handily blamed a “typo”), speaks either of incompetence by the NCC or political meddling of the worst order.

Although MTN has little choice but to cooperate with the authorities in Nigeria in an effort to get the size of the fine reduced — indeed, for now it’s dancing carefully around them, doing it’s best not to offend — the time may be approaching where it either has to call the NCC’s bluff, or to start fighting back legally. That time is not quite yet, though.

MTN’s best hope of securing a meaningful reduction in the fine could happen in the coming day or so, during a high-stakes meeting that is set to take place on the sidelines of the Forum on China-Africa Cooperation (Focac), currently underway in South Africa.

MTN-640

President Jacob Zuma is set to meet with his Nigerian counterpart, Muhammadu Buhari, at Focac, with the discussions reportedly set to focus the MTN issue.

While it’s important that the government approaches the discussions with all the necessary diplomacy and tact, it’s also important that the message is clearly conveyed to the Nigerians that the size of the fine imposed on MTN is gratuitous and unacceptable.

It needs to be made clear that the fine will have a direct impact on the taxes MTN pays the South African government, to the extent that it could have an impact on service delivery to ordinary South Africans.

Nigeria is playing a game of brinkmanship with South Africa. It is in the process of trying to mug one of its most successful companies, one which has pumped billions of dollars into Nigeria’s economy over the past 15 years and provided tens of millions in that country with access to telecoms services for the first time. It seems plausible — likely, even — that it is doing this in an effort to plug a yawning hole in its finances.

The best outcome to this mess will be if Nigeria agrees to a massive reduction in the fine — even 5% of the original fine, or $260m, would still make it the biggest in history — and that this incident and its resolution then leads over time to warmer relations between Abuja and Pretoria. South Africa and Nigeria can achieve much more as partners in Africa than as rivals.

But if the diplomacy fails, and Nigeria continues to play hardball with MTN — insisting that the unreasonable fine be paid — South Africa would be quite justified in taking a tougher line. Pretoria must not allow itself to be bullied and it most certainly must not allow one of its most successful companies to be subjected to a brazen mugging.

  • Duncan McLeod is editor of TechCentral. Find him on Twitter

42 Comments

  1. Agreed. I can’t think of a case in any industry anywhere in the world where there has been such a huge fine.

    The LIBOR Scandal took a long time to assess and even then the largest fine was $342M paid by UBS.
    In that case the banks had been responsible for causing financial damage to banking customers.

    Here no direct damage was done.

    Sure a punitive fine is appropriate… Nothing this large though

  2. Vusumuzi Sibiya on

    >>But the punishment proposed by NCC, even after the fine was cut this week by a quarter, in no way fits the crime.

    The fine in the regulations is USD1000 per unregistered SIM which has always been out there and all operators were indeed aware of. The penalty as such, is fitting because there’s absolutely no reason for MTN to have not disconnected the unregistered subscribers given the extent of the fine that they would be facing if they were to be found with 5.1million unregistered SIMs on their network.

    The situation of having fines which companies just pay whilst laughing contemptuously in the face of law enforcement is precisely what lead MTN to flagrantly disregard the law and not disconnect the unregistered SIMs. The NCC ought to be congratulated for applying the law and I still maintain that there is no reason whatsoever, why MTN should not be liable for paying the full fine that was imposed when the detail of it being USD1000 per unregistered SIM was out there and well known to all operators.

    This is an article that more than anything looks to be suggesting that the NCC and indeed the state; is somehow to be accused of wrongdoing when in actual fact, it is MTN who are the culprits that had 5.1million unregistered SIMs on their network; and had they disconnected the unregistered SIMs as per deadline, this set of circumstances would’ve most definitely been prevented.

    Poor Biased Article!! Nigeria is a sovereign state and can solely at its own discretion determine what fine fits a crime within its borders.

  3. The article is most clear in acknowledging that MTN did wrong and some sort of a fine is indeed justified.
    Saying otherwise is inaccurate,.

    The article is discussing the fine’s quantum… that is all.
    Restating the crime doesn’t change this. The nature of the offence is acknowledged by all.

    It doesn’t make the fine’s quantum just.
    Just like the world comments on a death penalty dished out for what we consider a less than major crime…. we can comment on this.

    Out of interest can you name an international precedent of such a fine (in any industry)? Direct damages (like when one spins oil and has to clean it up) are separate. We are talking about fines.

    On the subject of being biased, I have read quite a few of your comments on this subject. Some comments have been insulting to individuals.

    Are you sure it isn’t you being biased?

  4. Vusumuzi Sibiya on

    >>>>Nigeria is a sovereign state and can solely at its own discretion determine what fine fits a crime within its borders.

    Which part of this statement above was beyond your limited comprehension…???

    The article is most certainly poor and biased as is your failure to read with understanding the statement which followed;

    >>>>Poor Biased Article!!

  5. Of course they are sovereign.
    No-one is saying they can’t get away with it because of this.

    Does it make it just ito international precedent?

    Does that mean we shouldn’t comment on matters outside SA that affect us?

    “Limited comprehension”? -Behave like that again you can play with yourself. Insults don’t deserve answers. I didn’t insult you…

  6. Vusumuzi Sibiya on

    >>Of course they are sovereign.

    And so please point out exactly where the fault is in then; in solely determining that imposing a fine of USD1000 is just for the crime of having an unregistered SIM on a network within the borders of Nigeria…???

  7. All Duncan and myself are saying is the fine is excessive when one considers business offences anywhere in the world

    Who’s fault was it that the SIMS weren’t cut off? MTN – No argument
    Do MTN deserve a fine? Yes. MTN would probably even agree.
    Who sets the quantum? The NCC but companies have redress to the appeal process and the courts (as is the case here).

    It doesn’t follow that the process yields a ‘just’ answer.
    And what is a ‘just’ answer has subjectivity attached.
    I should point out that you were against any discount at the outset.

    Now we have the quantum one can comment on whether it is just. The NCC won’t listen to me but they may listen to others. So what I say is just free comment that affects no-one. No idea why it would inflame anyone.

    Regulators from all industries in many countries often fine companies for offences.
    I have never heard of any fine of this magnitude even when their have been offences that are seemingly worse than this.
    I have also never heard of payment deadlines such as these.

    Maybe this is a new international precedent? I doubt it though

  8. Vusumuzi Sibiya on

    >>All Duncan and myself are saying is the fine is excessive when one consider business offences anywhere in the world

    What if it was just 5,100 unregistered SIMs; which would still be a potential of 5,100 probable criminals… MTN would have paid whilst contemptuously laughing in the face of the NCC.

    The fine is NOT excessive but the flagrant disregard of the law to the tune of having 5.1million unregistered SIMs is what is excessive undermining of the regulations that would impose a fine of USD1000 multiplied by the number of unregistered SIMs.

    Both you and Duncan are indeed biased and are questioning the authority of the NCC and the state based on what…???

    …some “so-called”

    >>Does it make it just ito international precedent?

    Go and question Israel, China, etc. and many other sovereignty on their atrocious practices… no-one held a gun to MTN and forced them to go and do business in Nigeria.

  9. Fundraising Nigerian style. This is, after all, the country that gave us the 419 scam. Just saying.

  10. Vusumuzi Sibiya on

    The fraudulent criminal activities that relate to section 419 can be combated if such companies as MTN also comply with regulations and the law;

    …and are not complicit in willfully retaining unregistered SIMs on their network; against the regulations which the NCC is certainly having a mandate to enforce as per prescribed fine for the offence.

  11. Anthony Odey (Theymooe) on

    I wont go as far as calling it a ‘state sanctioned mugging’ but the fine is excessive and unprecedented. I understand that the NCC has the authority to levy fines when companies flout their rules but $5.2b? What is the purpose of the fine? Is it to discourage companies from flouting regulations or crippling the company? They did not defraud the government or customers. They failed to switch off unregistered SIM but to ask for more 2 years worth of revenue is excessive. They should try and work it down. 10% is more appropriate. $500m is a lot of money.

  12. Greg Mahlknecht on

    >The LIBOR Scandal took a long time to assess and even then the largest fine was $342M paid by UBS

    Which means it’ll probably happen again and again like it always does in the financial sector. The consequences of wrongdoing there aren’t enough to deter the behavior.

    >Sure a punitive fine is appropriate… Nothing this large though

    If there was an unspecified fine for non-disconnection, and Nigeria surprised MTN with this, I’d agree with you 100%. But MTN knew about the possible consequences yet failed to disconnect despite missing numerous deadlines. Their bean counters took a gamble and lost. They didn’t have to pay this – they basically CHOSE to pay it.

    I hold stocks in MTN and lost money off this. I still think it was the right thing to do for the industry as a whole. Telecomms companies run roughshod over governments all over the world, it’s the citizens that suffer. Look at the example Duncan used – AT&T fined $100M for shaping/throttling, they had a $6.2B profit last year. No surprise that 1.6% hit on their profit hasn’t had any effect on the industry – throttling/shaping is just getting worse in USA.

  13. I find it hard to believe that MTN….a multinational corporate deliberately disregarded the NCC about the 5.1 million disconnections. Think about it….reconciling 5 million sims is not a straightforward task..who decided that all 5 million+ were illegal numbers? Is it possible that a large majority were indeed legitimate private or business customers? MTN obviously had to investigate and audit the affected number’s as it also has a right to protect its business and legitimate customers. So I believe it was busy engaging with the NCC on the process of the disconnections when it was slapped with the fine because it had missed the deadline. The fine is absurd….it is a mugging of course….MTN might not recover from this. No foreign investors in their right mind will consider investing in such a hostile corrupt environment.

  14. CovertNigerian on

    I must respectfully disagree with you. I have read your exchange with Vusumuzi, so I think I have a fair grasp of your position. While I do agree that the fine is on the high side, I find it difficult to sympathize with MTN and definitely disagree with the author’s insulting description of the fine as ‘state sanctioned mugging’ and must agree with Vusumuzi that the article is not objectively written.

    For instance:

    It is not fair to suggest that the NCC chose to impose the maximum fine since as far as I’m aware, the regulations to which ALL the networks were subjected and made aware of as far back as 2011 provides for a $1000 fine, not one of up to $1000.

    I am tired of suggestions that the fine is arbitrary in some way when a direct line can be drawn between the agreed rate and the extent of MTN’s default. It is simple math. If any other formula had been applied, I would agree willingly to the charge of arbitrariness and join in the criticism. The only other exception I can imagine is if there was some unavoidable reason for MTN could not meet the deadline.

    This author, and others like him, does not even attempt to explain why of the 4 major networks in the country (only one of which is Nigerian), and the dozens of smaller operators subject to the same rules only MTN seems not to have complied with the rules to disconnect. Has anyone bothered to ask why? I have not even seen an official excuse or explanation from the company itself. If there’s any evidence that MTN has been singled out, I will join in the condemnation of Nigerian authorities too. In fact, the Nigerian public in general would probably protest as well.

    The writer refers to the billions of dollars (some of which was raised domestically within Nigeria) that MTN has invested in the Nigerian economy as though they entered the market as a favour to Nigerians and have not made billions in return. No reasonable person can deny that MTN has been mostly positive for the Nigerian economy, but let’s not pretend that their investment decision was solely based on a desire to improve communications in Nigeria.

    Then there’s the ridiculous comparison to AT&T’s $100m fine in the US, but no mention of what they were fined for. An apples to oranges comparison of a fine for throttling subscribers’ data speeds (AT&T’s alleged offence) and one that is linked to threatening national security is nonsensical at best.

    As far as your comment that no direct damage was done, I assume that you have not read that the straw that broke the camel’s back after several ignored infractions by MTN was the kidnap of a former Nigerian minister whose ransom was demanded through an unregistered MTN line. Furthermore, Boko Haram (for a while at least), coordinated attacks using mobile phones and are part of the reason for this SIM registration exercise in the first place. Even the potential that this may have continued because MTN chose not to disconnect unregistered lines is direct damage enough in my view.

    That said, I think that there’s a lesson to be learned here for Nigeria. Having absolute fines without a provision that they could be “up to” whatever maximum is unwise. I definitely don’t want to see MTN destroyed over this and I hope that the NCC steps back from this figure. However, if they don’t ,as is their perogative, I’d like to see on what basis Duncan McLeod wants the SA govt to take a ‘tougher line’ because I don’t see one.

  15. Whatever, please don’t let zuma get involved!! Or maybe he’s already got involved, therefore the 10% raise once again.

  16. Sniper Mahapa on

    Maybe the question should be: can you name a similar transgression? A similar disdainful disregard for the law? Once you do, I’ll find a similar fine.

  17. Sniper Mahapa on

    Dave, firstly, do you understand how the regulatory sphere works?

    Back in 2012, the regulations came into effect. Of course, they were consulted on way before that date. ALL telcos knew what the quantum of the fine per sim was set at. I’ve even done a calculation of a potential fine for another transgression and used it to contextualize the urgency of ensuring compliance…in 3 separate markets. And I can tell you, MTN was well aware of the potential fine.

    And just to correct one thing, the regulations have long set the quantum of the fine, it wasn’t set NOW once MTN’s liability was established.

    And lastly, what transgression is worse that this? What transgression is worse that a threat to national security?

  18. Sniper Mahapa on

    There’s also no mention of the excessive profits MTN made from those unregistered sims….

  19. Sniper Mahapa on

    I’ve presided over such an audit at a different company. They know every single such SIM card and its extent of non-compliance.

  20. Xavier Charles on

    If SIM registration was really effective in fighting crime and terrorism, they’d be doing it in Europe. But you can buy a SIM card from a vending machine when you land at Heathrow.

  21. Vusumuzi Sibiya on

    Anthony the consequence of not being able to effectively address and combat the appalling state of criminal activity that are being perpetrated using the networks is one which is far more serious and these regulations are in-place to combat that.

    MTN by willfully flouting the regulations in being complicit in the criminal activities and it is up to the NCC and the state to demonstrate how serious they are about cleaning-up the dreadful situation which Nigeria finds itself in; and that begins by enforcing the regulations which are in-place without fear or favor.

  22. Vusumuzi Sibiya on

    >>Think about it….reconciling 5 million sims is not a straightforward task..who decided that all 5 million+ were illegal numbers?

    They were unregistered SIMs as outlined in the regulations provided and MTN was subsequently indeed able to disconnect the SIMs following the fine; proving that disconnecting SIMs is really not that difficult for a company that adheres to good governance and one which has accountants that are more than capable of doing the reconciliation.

  23. Vusumuzi Sibiya on

    If capital punishment was effective then South Africa, like China, would be doing it as well…

    What exactly is it that you are failing to understand about being sovereign…???

    Do you land at Heathrow and begin to flout the laws in the UK?

  24. CovertNigerian on

    What is the basis for your belief? Why is it that no other network in Nigeria seems to have had the difficulties or considerations you suggest MTN must have had? Or did they not act to protect their legitimate business as well? I too have wondered why and how this could have happened at MTN, but in the absence of an official explanation I will not join you in speculating.

    I am amused by talk of hostility and accusations of corruption when a Nigerian regulator is actually enforcing the rules for a change. I am willing to agree that the rules have had an unforeseen effect but I doubt that anyone could have foreseen the extent of MTN’s default.

  25. No direct damage? MTN SIM are used by Boko Haram terrorists and kidnappers. MTN could not provide information to security agencies regarding those lines. If that is not direct damage, I wonder ….

  26. When a criminal comes to justice, the law is to be applied. The sentence is not adjusted to fit the criminal, even if it is MTN, even if it is Nigeria applying the fine.

    The fine is known to all telcom operators since 2011, or so. Greed.
    Corporate greed, and greed has its risks. MTN to de-activate
    5.1 million unregistered lines and lose all that revenue? Of course
    national security was secondary to them. MTN could not provide data on
    owners of lines used by Boko Haram, kidnappers and fruasters to damage lives. And you
    still think the fine is too high? How much is the value of those lost lives, lost economics, etc.

    “State sanctioned mugging” indeed!!!

  27. Richard Wickens on

    I agree with you wholeheartedly, I also think the South African government shouldn’t “step in” and bail out MTN. I fail to see why my hard earned tax money should be used to bail out MTN when they clearly and willfully ignored the directive to disconnect the 5.1 million subscribers, in the hopes that it would be just another deadline going whizzing by and they could reap more profits in the interrim.

  28. I find it hard to agree with anything in this article. MTN screwed up. They deserve this fine. They had enough time to come to the table and to comply.

  29. MTN like all other corporate continue to give governments a middle finger. Even companies here in SA continue to flout AA, environmental laws and get away with it. They knew in advance what the fine will be and they knew the deadline. Now they must pay up and obey the laws.

  30. Magomarele Gomi Thobejane on

    A well written and articulated article by someone with sense of sanity and broad wisdom than the rest. Some people just spew insult and hatred towards MTN before they can even wait to receive the full complement of facts. I hope someone in Nigerian NCC has some shred of wisdom still left.

  31. Vusumuzi Sibiya on

    Brown-nosing does indeed reveal a whole lot of truth about the character of an individual now doesn’t it…???

    This article at best when assessed; is deliberately meant to be biased and I say this because I read many of the articles on TC.

    If you had any small inkling about content then you would’ve noted that there were two articles posted on the topic on TC at relatively the same time;

    …this one; “MTN fine is a state-sanctioned mugging” and one that had a headline in contrast to this “Reduction of MTN fine a ‘positive’ move”

    If this one was a paid for article, by MTN; then it would certainly be considered a good article by the entity paying;

    …but my educated guess, is that this was more likely a split test by TC and one that proved that this type of article would indeed get more attention than the other, given that the other had zero comments when I last checked.

    Now that you’ve gone and revealed the kind of individual that you are, I bet you’re feeling very smart… word of advice; brown-nosing any ass is going to ultimately land you in a compromised position.

  32. Magomarele Gomi Thobejane on

    You sound bitter and scornful, like someone with uncontrollable hatred and distain for those who do not agree with your myopic sense of rational. I say you better broaden your perspective on various issues…political, commerce, social, religious etc. You’ll discover the world is far diverse a place from the one you defined and cordoned off for yourself. I wish you good luck though.

  33. Vusumuzi Sibiya on

    On another comment made by yourself, you suggest that the NCC in enforcing the regulations represents a display of the hatred that Nigerians have for South Africans;

    …if that is not bitter and scornful xenophobic behavior “like someone with uncontrollable hatred and distain for those who do not agree with your myopic sense of rational” then please point out what is.

    I am a content creator and all that I do with such people like yourself; that I engage on this forum, is mirror exactly what their comments reflect about them and the fact they are offended and insulted is something that they would need to do some introspection on.

    There’s no reason for any comment that is made to have the affect of insult nor “sound bitter or scornful” for that matter, unless it is indeed hitting a nerve.

    There’s this difference which sets me and those that I engage apart;

    I absolutely enjoy what I’m doing but they on the other hand; always persist in proving that what I’m mirroring in the comments I make, is indeed a true reflection about their character. Just like you’ve also just proven with your very response.

    There is only one smart fellow, named Greg, who figured it all out, although in fury during an exchange, with the suggestion that I was always tossing back what he had said…

    …he subsequently went on to display just how smart he is, by doing some research and finding out exactly who he was dealing with.

    Now just because you are a fool that gets suckered into brown-nosing when there’s a deliberately biased split test article and you also fall prey to the intentionally crafted remarks of such content creators like myself;

    …do you think that I am somehow responsible for the feelings of hate that you harbor…??? LMAO!!

  34. tongue in cheek on

    yeah and MTN is a telcom sanctioned mugging of it’s clients, as is all service providers

  35. Very very poor article with a title that could easily pass for a xenophobic rant.
    The title is the kind of silly argument being passed around by uneducated folks on both sides of the Nigeria/South Africa discourse that makes for very unpleasant view. I am shocked that a seemingly informed fellow like Duncan could stoop so low.

    In summary I will like to make a few salient points in bullet form;

    1. The fine was never arbitrarily imposed. Any one advancing that argument is either ignorant or willfully misleading an ignorant public. About 3 years ago when this SIM registration issue began, NCC met with operators and agreed on modalities together with prospective punitive measures. All parties signed and shook hands over it.

    2. It was daft and amateurish of the regulator to prescribe a fine per SIM that sounded not only ridiculous but was ridiculous as soon as you imagine anyone defaulting in large measure.

    3. Were the operators (including MTN) unaware of the prescribed fine they signed in that agreement or was it either a case of assuming that the regulator will be slack as it had been in the past or an arrogant assurance that they will not default?

    4. It is a known fact to insiders in the local industry that MTN more than any other operator has treated the regulator with levity and almost disregard. As we speak, i know of two specific regulatory approvals that MTN is consciously and willfully flouting even passed agreed deadlines in view of commercial interests, irrespective of the ongoing SIM saga.

    In the light of the above, Duncan’s conclusions are silly, slightly xenophobic in nature and utterly unbecoming of a seemingly rational critic and industry observer.
    Terms like ‘state-sanctioned mugging’ depict a scenario of obtaining by coercion, state-sponsored and abated theft. While NCC may be an inept regulator, in this case MTN has no one to blame for its past behaviour and continued contempt for the country’s regulator.

  36. Very untrue.
    This process has been on for over 3 years. How long does it take to verify?
    How come others were able to do same and got theirs sorted?

  37. The country that gave you the 419 scam that gullible, greedy fellows like yourself continually fall for?

  38. Nigeria is playing a game of brinkmanship with South Africa. It is in the process of trying to mug one of its most successful companies, one which has pumped billions of dollars into Nigeria’s economy over the past 15 years and provided tens of millions in that country with access to telecoms services for the first time. It seems plausible — likely, even — that it is doing this in an effort to plug a yawning hole in its finances.

    With comments like this, I am well convinced that xenophobia is not an exclusive preserve of the unlettered in townships and settlements. How does a supposedly educated industry critic spout such? Do you really recognize that this fine is calculated based on a pre-agreed fine? A fine which i find ridiculous but one which MTN and other operators signed on to?
    What has MTN providing Nigerians telecom services for the first time got to do with this argument? It is like saying ANC should do as they wish until Jesus returns simply because they led the liberation struggle. Does it make sense?
    You seem to have lost your sense of rationality simply because you have been looking for an intellectual angle to get on the Nigeria/South Africa xenophobic train. An ugly train for both sides.

  39. Arthur Richard Francis on

    MTN should oppose the fine and challenge the schmucks in the Supreme Court. MTN avoided punitive measures against 5.1 million users by “not willy-nilly disconnecting” them and depriving them of needed communications facilities. The Nigerian government has gone “overboard”. I say it’s a new Nigerian Scam called “PAY FINE”.

  40. I have never fallen for it. But I have won the Lotto in 60 countries. I wait patiently for the payout.