By Stuart Lowman
Africa’s biggest mobile phone company will challenge the fine it received for failing to disconnect users in a Nigerian court. MTN says the country’s watchdog, the Nigerian Communications Commission, had no legal grounds on which to order the penalty.
The initial penalty was $5.2 billion, but this was reduced by 25 percent to $3.9bn. MTN was then given until the end of the year to pay the fine, until its most recent action of heading to court.
When one unpacks the value of fine, the initial total worked out to $1,000 per illegal user that MTN failed to disconnect, compared against the average revenue per user of $5. That’s a fine 200 times bigger than the average income derived.
The table below, which was first published in Business Day Nigeria, takes the fine comparison one step further. It compares MTN’s fine against the group’s total revenue as a percentage, and then compares it against other major fines imposed on multinationals across different geographies.
The comparison’s are mind boggling. One of the biggest corporate scandals this year was the Volkswagen diesel emissions scandal, yet the fine imposed as a percentage of the company’s revenue was 6.7%. The largest marine oil spill in history in the Gulf of Mexico saw BP fined $18 billion, which as a percentage of revenue was 7.8%.
Of all the examples shown on the table, MTN’s fine as a percentage of revenue is the outlier. The fine as a percentage of MTN Nigeria’s revenue is almost 95% and when compared against the total group it’s 28%.
The numbers don’t question why MTN was fined, or whether or not the company should pay the fine. It just highlights the thumb suck nature of the total value of the fine.
When a company is fined, the fine has to have an impact so as to prevent the issue from happening again but it cannot bring a company to its knees. Government must play watchdog but it also needs to enable economic growth and job creation. The value of this fine does neither.
