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There must be more going on behind closed doors, given MTN chairman Phuthuma Nhleko’s optimism that the $3.9 billion fine issued in Nigeria will be resolved soon. Nhleko strode in like a knight on a horse when former CEO Sifiso Dabengwa stepped down over the controversy. And has made the fine his top priority. But from the outside looking in it’s a hard one to digest. There’s been lots of too-ing an fro-ing with the latest seeing MTN propose a $1.5 billion payment, plus incentives. The Nigerian government has yet to respond. Another key decision investors will keep a close eye on is Nhleko’s succession when he steps down from the role of CEO. A source in the below Bloomberg piece below claims there are three on the shortlist, two of them internal. MTN stock has been decimated following the announcement of the fine, sitting at 50 percent of the 12 month high. And with operations in hot bed territories like Nigeria and Iran, and anaemic growth in South Africa, Nhleko’s successor won’t have an easy ride.– Stuart Lowman
By Loni Prinsloo and Sophie Mongalvy
(Bloomberg) — MTN Group Ltd. Executive Chairman Phuthuma Nhleko, who returned to lead the African wireless company’s negotiations over a record $3.9 billion fine in Nigeria, is moving forward with plans to step down next month, according to a person familiar with the matter, a sign he’s confident a resolution will be reached by then.
Nhleko won’t step away from his operational role until he comes to an agreement with the Nigerian attorney general, said the person, who asked not to be identified because the plans are private. In November, the chairman agreed to run MTN for six months in order to “proactively deal” with Nigerian authorities after Chief Executive Officer Sifiso Dabengwa resigned, Nhleko said at the time.
The plan for an on-time departure suggests an end is in sight for a murky, months-long crisis that’s gutted the share value of Johannesburg-based MTN by one-third. Getting it solved has been the top priority of Nhleko, who ran MTN as CEO for almost nine years until 2011. The company proposed a $1.5 billion package last month that included 150 billion naira ($754 million) in cash plus incentives. The Nigerian government hasn’t formally responded, though some lawmakers have called for even bigger fines.
The government hasn’t taken a position on the MTN offer and is still fielding responses from stakeholders, Abubakar Malami, Nigeria’s minister of justice and attorney general, said at a parliament hearing on Tuesday.
“No negotiation has taken place yet,” Malami said. “We asked that MTN should put their position on paper, which they did, and we circulated to stakeholders.”
MTN spokesman Chris Maroleng declined to comment.
There’s a shortlist of three candidates to become the new CEO, according to the person familiar with the matter. Two are from within MTN and one is external, the person said.
MTN was hit by the penalty in October for missing a government deadline to disconnect 5.1 million subscribers who were declared unregistered following a crackdown on security in the country. The fine was later reduced by 25 percent from an original $5.2 billion. While the lower amount equates to almost three times MTN’s 2015 net income, a spokesman for the West African country’s House of Representatives said last month the original levy should be doubled to $10 billion.
In its annual results issued March 3, MTN said it was engaged with Nigerian authorities as it seeks an amicable resolution, and that traders in its securities should exercise caution until the matter is resolved. The company paid 50 billion naira to a government “recovery account” in February toward an eventual settlement, a payment that has been criticized by some lawmakers. The board plans to appoint a new group CEO in the second quarter.
“The payment was an idea sanctioned by the court for looking at the possibility of negotiating a settlement,” Malami said Tuesday.
Nigeria restored regulatory services to MTN in mid-March.
MTN shares have declined 32 percent since the penalty was made public on Oct. 26, valuing the company at 239 billion rand ($16.2 billion). They rose 0.5 percent in Johannesburg on Tuesday, reversing earlier declines to close at 129.46 rand after Bloomberg reported on Nhleko’s plans.
Nigeria has been fighting an Islamist insurgency led by the Boko Haram group, who have killed at least 20,000 people in their campaign to bring Sharia law to Africa’s largest economy. MTN is Nigeria’s largest mobile-phone company with more than 61 million subscribers, about a third of the population.