Benin breaking law, says MTN

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 30 Aug 2007

MTN is accusing Benin of breaking its domestic laws, international law and the conditions of the licence under which the 14-year-old mobile provider operates in that country.

MTN group CEO Phuthuma Nhleko says the country's decision to switch off its network there in June, leaving half a million subscribers stranded, presented the multinational with one of its worst headaches in its history.

"We are in discussions with government," adds Nhleko. "We have said to them they are acting outside the provisions of the licence, they are acting outside local law and they are acting outside international law.

"We do believe, irrespective of what we may think, to turn off two-thirds of the subscribers in the country ... is certainly not acting in the best interest of the country. We sincerely hope we will arrive at some speedy resolution," Nhleko said after presenting the group's financial results yesterday.

Benin's Telecommunications Regulation Authority suspended MTN and Atlantique Telecom's Moov service on 9 July, saying both companies had changed their names without its permission.

The regulator also said MTN and Atlantique needed new licences, with much higher licence fees required. MTN was asked to pay $620 million (R4.34 billion), a 620% increase from the $10 million under the original structure.

MTN and Atlantique - owned by Dubai-based Emirates Telecommunications - have so far refused to pay, although two other mobile operators in Benin have. Analysts have said the move amounts to extortion.

High and dry

Nhleko concedes MTN's subscribers have effectively been left high and dry by the government's action. "Subscribers are effectively switched off, unless they go get a SIM card from another network, which some of them have. We are constantly in touch with our subscribers and seeking to assure them things will come right fairly soon.

"It is in everybody's interest to resolve this thing speedily, so I'm still hopeful we will do that. It is important that our licence conditions be honoured.

"We are engaging government and I'm hopeful and optimistic sanity will prevail for the benefit of a million subscribers; because remember, it is not only our network that is off, it is Atlantique as well."

Damage control

Nhleko says the switch-off has not materially affected MTN's bottom line, as the impact has been "digestible". However, damage has been done.

"The damage unfortunately will be more to the government than to us, as they have put us in this position. But having said that, yes, it is completely unpleasant and unfortunate. We are hoping sanity will prevail fairly soon."

The MTN executive adds the regulator's action is not only "extremely unfortunate" for the ICT sector, "but also for Benin as an investment destination".

Walk away?

Nhleko says MTN could walk away from Benin. However, "we don't believe that is how we should do business. We won't walk away voluntarily, but to the extent to which it becomes untenable and we are left with no choice, [then], yes, we could find ourselves doing that.

"We must approach business on the basis of principle and that's what we also expect from the government regulator. So it is not about the impact of Benin, it is about the principle of parties honouring licence conditions."

Analysts say the importance of the Benin stand-off lies in the signal it is sending to other regulators, which may be tempted to follow suit. Nhleko says he does not see any other country following Benin's example.

"In the vast majority of countries we operate in, there is a constructive relationship with the regulator. We operate in 21 counties; it would be a miracle if we did not have a single problem anywhere. This one is rather extreme, I fully concede that, but what we are saying, is sometimes there will be problems, although we've never had a problem of this nature. We've never had that."

Meanwhile, Frost & Sullivan consultant Spiwe Chireka says MTN's most significant competitive advantage remains its willingness to aggressively tackle markets shunned by other operators.

"The company's position as a risk-taker continues to show rewards," he notes.