Big businesses normally do what they can to ward off scandals. But when the inevitable happens and the bubble bursts so that the pass begins to pour, the consequences can be extremely adverse and may sometimes lead to irrecoverable collapse.
But this happens in sane climes where appropriate laws are made and enforced without let or favour. In timid regulatory environments where official compromise is the norm rather than exception, big businesses are known to ride roughshod in pursuit of mindless capitalism. In this case, corporatism triumphs as corporate might coax and sometimes coerce regulatory rights into capitulation in a reign of exploitation visited on consumers, citizens and country. This is the story of MTN in Nigeria; a twisted script inspired by the gory examples of oil multinationals in the country. But the story of big oil is for another day. Today is judgement day for the telecoms giant that likes to pride itself as the largest mobile network in Africa.
Instructively, judgement for MTN has taken shoot from the home base -South Africa- where its shares took a dive down south for consecutive trading days this week. Reports from the Johannesburg Stock Exchange (JSE) said MTN shares dropped by 4.2 per cent as at Tuesday, a clear indication of investor paranoia over a landmark event involving the company’s Nigeria subsidiary. The company’s operation in Nigeria presents the firm its biggest subscribers’ market and contributes up to a third of the conglomerate’s annual revenues. Little wonder then that a sneeze affecting MTN Nigeria is causing flu at the headquarters in South Africa. As at time of writing this, reports put the cumulative drop in MTN shares at 16 per cent, a significant development for a top grade company trading on the Jo’burg Exchange. Investors in South Africa were spontaneous in their reaction to reports of sanctions meted on MTN Nigeria even while the picture was yet to become clear as the company was yet to make a full disclosure on the matter. But the consequences for the South African telecoms giant could be much more grim and grave by the time the full import of the alleged infraction in Nigeria comes to light. What is worse is that it could even trigger a spin-off effect with very negative outcomes for the company across the continent and even beyond.
In a bold and surprising move which jolted many industry watchers, the Nigerian Communications Commission (NCC) slammed a $5.2 billion (N1.04 trillion) fine on MTN Nigeria for infractions of regulations relating to the registration of SIM for subscribers. In what is considered by the regulator as a rebuff of the rules, the company reportedly failed to deactivate some 5.2 million subscribers on its network that have continued to operate with completely unregistered and incomplete SIM registration details within a stipulated deadline. Details of the fine show that MTN Nigeria is being charged approximately $1000 (N200,000.00) for each defaulting SIM and the firm has up till November 16, 2015 to pay up. Although the company is yet to officially react to the sanction, media reports quoted an unnamed official as saying that “MTN is talking to NCC with the view to revoking or reducing this fine.”
The move by the NCC is a giant reawakening from a regulator many had written off as accomplice to the big corporate concerns it is created to whip into line when consumers are being short-changed. But this regulator had often carried on like a dog that can only bark but cannot bite especially when the rights of consumers are trampled upon with reckless abandon by the likes of MTN. On the issue of SIM registration for instance, the NCC has continued to bend over backwards to shift deadlines and shirk its responsibilities to sanction defaulting firms. In spite of the regulation on SIM registration, it is still common (at least until news of the MTN fine broke) to find pre-activated SIMS being sold and activated on the streets of Lagos, Abuja and other major cities and towns of the country without the required due process of detailed registration before activation. Apart from the SIM registration regulation which is now in the spotlight, the NCC has been heavily criticised for being weak in protecting subscribers against unhealthy practices by telecoms companies. These include the nagging issue of dropped calls, arbitrary billing, invasion of subscribers’ privacy for commercial purposes, and coerced inclusion in promotions by the networks, among a host of other practices detrimental to consumers’ interests in the country.
All these disturbing manifestation of inefficiencies by the telecom networks in which MTN Nigeria features prominently are nothing compared to a recent mind-boggling exposure by Premium Times online newspaper which detailed a web of money laundering and tax evasion schemes against the South African company. According to the report accessed on the publication’s website (www.premiumtimesng.com) on Monday, MTN Group devised a phony scheme of shipping huge amounts of capital to off-shore (tax haven) destinations in Dubai, Mauritius and the Virgin islands. These funds were reportedly transferred as operating costs to foreign MTN subsidiaries even though the conglomerate maintained little or zero presence in those places. According to the report, “until 2010 MTN Nigeria had an agreement with MTN Dubai to pay 1.75 per cent of revenues to the company for management and royalties for the use of the MTN trademark.” But the report also noted that the relevant national authority that usually approves of such transaction and payment did not give approval after 2010 and the company had continued to wire the funds abroad. For emphasis, let me give excerpts of the Premium Times report said to be the outcome of an 11-months investigation which traversed several countries in Africa and beyond: “It was discovered that in 2013 for example, MTN set aside N11.398 billion from MTN Nigeria to pay MTN Dubai. In a rare disclosure in 2013, MTN admitted it made unauthorized payments of N37.6 billion to MTN Dubai between 2010 and 2013. The transfers were then ‘on-paid’ to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box. The disclosure amounted to a confession given that MTN made the dodgy transfers without seeking approval from the National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversight such transfers.” This scandalous report on MTN is no doubt a grievous rape of Nigeria’s scarce resources; a subversion of the rules of engagement; and a heavy slight of the country’s sovereignty. This type of thing would never be tolerated in the parent country of the company.
While the nation awaits reactions from both the government and the firm, suffice to say that this is the kind of scandal that can bring the roof down on any company and much more importantly, convulse economies of certain jurisdictions. Sharp and unethical practices manifested in ‘smart accounting’ ‘cooking the books’ and blatant malfeasances like tax offences and default in corporate governance rules are known to have caused the collapse of corporations like Enron, Lehman Brothers, AIG and similar others in the Western world. In fact, the collapse of those firms contributed in no small measure to the economic contraction witnessed around the first decade of the millennia.
Perhaps, all of these MTN shenanigans could have been mitigated if the company is listed on the Nigeria Stock Exchange (NSE). Recall that the national assembly in the last few years has tried to come up with legislations that would compel multinationals to be listed in the Exchange. There are signs that the 8th assembly will revisit the matter. For example, Speaker of the House of Representatives, Hon. Yakubu Dogara was quoted to have frowned at the continued non-listing of top firms.
Addressing a delegation of the Nigeria-United Kingdom Capital Market Project in Abuja in July, Dogara said the aborted legislation to make it mandatory for multinationals to enlist in the Nigerian stock market would be revisited. According to him, this is necessary “because these companies account for a huge percentage of revenues in oil, communication and energy.”
It was gratifying to note that Dogara was talking to the right set of stakeholders as the group was led by Mr. Aigboje Imoukhede, President of the NSE. That interface between the leadership of the federal legislature and key stakeholders in the stock market provides a veritable framework upon which a sustained and systemic collaboration can be built in order to realize the shared goal of deepening the market and retaining substantial capital inflow into the country.
This is how economies grow and Nigeria should toe this path as quickly as possible. But MTN and other companies of its ilk should tread the sidewalks of rectitude and responsible corporate citizenship. And then significantly, the company must confront the herculean challenge of redeeming a buffeted brand equity that is currently headed south.
Oke Epia is a columnist at ThisDay. He can be reached by email HERE and tweets from @resourceme.
The opinions expressed in this article are solely those of the author.
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