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MTN, which with a R365bn market cap is comfortably South Africa’s leading telecoms company, tomorrow releases interim
results for the half year to end June. Investors are already aware from the group’s trading update that earnings will rise between 20% and 25%. So the profit number and even the dividend payment won’t be news. But CEO Sifiso Dabengwa need not worry about any empty seats. This is the group’s most eagerly anticipated results presentation ever.
Reason lies with the confusion surrounding the sudden departure of former CFO Nazir Patel. Three weeks ago, a terse SENS announcement told us Patel, for the past four years head of finance and an executive director on the MTN board , “resigned with immediate effect”. MTN is a notoriously poor media communicator, so it wasn’t unexpected to read the drivel which followed about him leaving because he did not want to prejudice an investigation. You have to wonder why companies even bother to publish such nonsense. Nobody believes it. least of all the lawyers who drafted that non-statement.
That is all MTN has said thus far on the issue. Which is very strange considering Patel was effectively the second most senior executive behind Dabenwga. In MTN’s 2012 annual report, Patel’s picture appears alongside Dabengwa’s on the first page devoted to the Executive Committee. He was given four pages to use for his CFO’s report to shareholders.
Patel was a member of MTN’s Group Tender Committee and attended all four scheduled board meetings and all of the 2012’s five special board meetings. Confirming his status as Number Two to Debengwa, he and the CEO were the only executive directors to attended the board’s Risk Compliance and its Remuneration Committee as “invitees”.
Irnest Kaplan, our go-to guy on the TMT sector, told me he’s missed the last two MTN results presentations but won’t miss this one. Kaplan, who came through to the CNBC Africa studio for our Power Lunch show today (the video of the full interview below) reckons the Patel issue is likely to dominate the event.
He says the CFO’s departure left unanswered questions: “I knew him reasonably well. I’ve interacted with him quite a few times….always thought he was a fantastic guy, on top of all the numbers. He got back to you, was very capable and he’s been there a long time. Prior to him becoming CFO he was serving in the financial department as the head financial manager under Rob Nisbett. It really is shocking to hear of his immediate departure.
“To me it doesn’t sound good because if somebody is prepared to put his entire career on the line and leave a company with arguably a lot of potential share options that haven’t vested yet, you’d have to think something is serious there.” The MTN annual report shows that had Patel still been employed by the group at the end of 2015, as part of the executive performance scheme he would have received a total of 163 200 shares, currently worth R32m.
Patel earned a guaranteed salary of R420 000 a month (only Dabengwa, at R700 000 earned more) and together with bonuses and other benefits, was paid a total of R13.8m in 2012.
Kaplan added: “What we do know – or what we suspect from people I have spoken to in the industry – the resignation of Nazir Patel had nothing to do with that (alleged corruption of Government officials in Iran). But for me it’s not good because it puts the company’s reputation at stake. I think they are going to have to deal with that.”
“They should have come out with a little bit more explanation. But also the fact that they’ve hired the CEO of the Nigerian operation (Brett Goschen) to be the CFO of the group in Nazir’s place tells me that this is serious. They’ve taken the CEO of their single most profitable entity and put him as CFO of the group. Which tells me that there are big changes that have happened because of whatever forced Nazir to think he should resign.”
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