The cost of MTN's non-compliance in Nigeria is racking up, as the telecoms giant reveals the massive golden parachutes given to executives who left in the midst of the ongoing mega-fine scandal.
MTN's 2015 integrated report shows former CEO Sifiso Dabengwa was given R23.6 million for "compensation for loss of office" after he resigned as group CEO in November 2015. Dabengwa's exit came just two weeks after MTN revealed it was facing a $5.2 billion (R75 billion) fine in Nigeria for failing to disconnect 5.1 million subscribers in the country, by a regulatory deadline.
This was later reduced by 25% but MTN still faces a $3.9 billion (R56 billion) fine from the Nigerian Communications Commission, which is yet to be resolved six months later. How much of the fine will ultimately be paid is still unknown, but the costs associated with the non-compliance issue are racking up for the telco.
In total, Dabengwa walked away from MTN almost R40.6 million richer when including his over R8 million salary, share gains, post-employment and other benefits as well as his exit package.
Besides Dabengwa's expensive exit, MTN Nigeria CEO Michael Ikpoki was also given almost R17.3 million after his resignation in early December. Ikpoki made almost R26.9 million in total for the year when including his salary, post-employment benefits and exit package.
There is no indication as to how much Nigerian head of regulatory and corporate affairs, Akinwale Goodluck, received for his exit - he resigned at the same time as Ikpoki.
So far, in terms of the actual fine, MTN has only paid Nigerian authorities $250 million (R3.6 billion) as part of a "good faith payment" towards settling the hefty fine in the West African nation. The company also included a provision of almost R9.3 billion for the fine in its 2015 full-year results.
Because of Dabengwa's exit in early November, former-CEO Phuthuma Nhleko had to step in as group executive chairman to steer the ship. This job earned him R5 million for less than two months in the role. He also took home another R3.5 million in 2015 for his non-executive director role.
Nhleko's six-month contract is due to expire on 9 May as the company searches for a new group leader. Nhleko told journalists at MTN's annual results presentation in early March that the company hoped to fill the CEO role by the end of June.
Overall, in 2015, MTN paid its more than 21 000 employees a total of R8.6 billion. Around 15 000 of these employees are permanent, while the rest are contractors. The number of people in the business declined 5% from 2014. The company also revealed that only 37% of MTN's staff are women.
The total amount paid to non-executive directors was around R21.5 million, compared to around R14.7 million in 2014. In 2015, MTN paid almost R3.7 billion in regulatory fees across its 22 operations; R19.1 billion was paid for licences and R13.5 billion in taxes.
Fine aftershock
MTN admits in the integrated report that the Nigerian fine has "eroded investor confidence in MTN Nigeria and the group as a whole, and negatively impacted the reputation of MTN across our stakeholder groups".
Between 26 October and 31 December 2015, the group's market capitalisation declined by 20% to end the year at R245 billion. The share price has declined by almost 25% since the fine was announced, six months ago today. In early trade this morning, MTN stock was worth R143.26 a share and the market capitalisation was at over R263 billion.
The total of the MTN fine in Nigeria is still up for negotiation and the telco says it continues to engage with the Nigerian authorities to "ensure an amicable resolution in the best interests of the company, its stakeholders and the Nigerian authorities".
Last month, Bloomberg reported MTN had offered to pay $1.5 billion (R23.1 billion) to settle the fine ? in an offer consisting of cash instalments, bond purchases and network access. The specifics of the offer were reportedly detailed in a letter to the Nigerian government from one of MTN's lawyers, and former US attorney general Eric Holder.
At the end of March, Reuters reported Nigeria's parliament had launched a probe into whether the NCC had the legal authority to reduce the fine from its original $5.2 billion amount. To date, MTN remains silent on any resolution to the saga.
Dropping subscribers
MTN Nigeria experienced "a most challenging year" and performance in the territory was severely impacted by heightened regulatory pressure, in particular the suspension of services by the regulator, as well as the subscriber registration requirements which led to the disconnection of 6.7 million subscribers in the year.
While MTN Nigeria reported a 2.3% increase in subscribers to 61.3 million in 2015, the company's market share in the West African nation declined to 44.7% from 49% in 2014.
"This was largely the result of the withdrawal of regulatory services (which restricted any introduction of new tariff plans and promotions) as well as the disconnection of subscribers whose registration documents were considered to be incomplete," the company's integrated report says.
Weak economic conditions, a sharp fall in global oil prices and limited availability of US dollars also contributed to a lower than expected showing in Nigeria. The average naira/dollar rate also declined 20% in the year.
Last week, MTN revealed it had disconnected another 4.5 million subscribers in Nigeria, in February, in another culling related to an ongoing registration compliance process in the country. This has left MTN's latest subscriber numbers in Nigeria at 57 million.
Hopes for Iran
MTN says it is working on repatriating funds from its Iranian operation following the easing of financial sanctions in January. At 2015 year-end, MTN held R15.9 billion worth of cash in Iran.
Iran reached a landmark nuclear deal with six world powers in July last year, which opened the way for a phased lifting of nuclear-related economic and financial sanctions from January 2016.
"It increased the potential for MTN Group to repatriate dividends and outstanding loan funding from our operation in Iran, with due consideration to capital and forex requirements," the group says.
The deal should assist the Iranian economy broadly, which will also aid MTN's business in the territory, where it had 46.1 million subscribers and 46.7% market share at the end of 2015.
Iran is MTN's second largest subscriber base after Nigeria, with SA coming in as the third largest. The group now has a total of 229 million subscribers across all operations, a drop from 232.5 million at the end of 2015.
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