Uncertain future for MTN's Benin ops

By Damaria Senne, ITWeb senior journalist

Johannesburg, 16 Jul 2007

The fate of South African mobile operator MTN's Benin operations hangs in the balance, pending negotiations between the mobile operator and the West African country's telecommunications regulator.

Last week, Benin's Telecommunications Regulation Authority cut off two mobile operators - MTN and AtlantiqueTelecom - for changing the names of their Benin operations without its permission.

The move followed an earlier suspension, where the regulator demanded the two mobile operators provide documentation as to how the names of their local operations were changed.

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

MTN would not confirm whether it would pay the new licence fee, as demanded by the Benin regulator. However, the mobile operator says it is committed to finding an amicable solution to the issue.

MTN also insists it did nothing wrong, and diligently applies strict international corporate governance standards across all its operations. "Similarly, MTN complies with relevant legal and regulatory requirements in all the countries where the company operates."

Financial impact

MTN would not comment on how the dispute is impacting its revenue. The mobile operator's 2006 annual report indicates the Benin operation generated $41.2 million (R288.4 million) in revenue. It also shows MTN's average revenue per user in Benin is $21 (R147) per month.

Balancing Act CEO Russell Southwood says the Benin government has a point when it says it wants to correct the irregular practices of the previous government. However, it is behaving in a manner that can only drive international investors away from the country, he notes.

"Going to war over name changes smacks of being a heavy-handed negotiating gambit, but clearly one to be taken seriously as it is now impossible to reach subscribers of each network," he says.

BMI-TechKnowledge senior analyst Richard Hurst says the Benin situation reinforces a view that the regulatory environment in Africa is uncertain and unclear. However, he does not believe other African regulators will follow suit and increase telecoms licence fees at will. Most regulators would like to engage network operators, he says.

Southwood adds: "Benin's independent regulator has clearly forgotten that it has a dual set of responsibilities: to ensure the industry grows and thrives, and consumers have their interests looked after. It is not clear yet how increasing the licence fee by over 600% serves either of these objectives."

Benin has a population of eight million and 1.57 million subscribers, which translates into a mobile penetration of 18%. MTN holds 40% market share, and reported 514 000 subscribers in Benin in March 2007.