MTN cleans house

Johannesburg - MTN is fairly confident it won’t have any further disastrous run-ins with the law in the 22 countries it operates in after paying a record multibillion-rand fine in Nigeria and suffering its first loss in 20 years.

Phuthuma Nhleko, MTN executive chairman, said this week: “We made a concerted effort to ensure, after the Nigerian situation, that we – within reason – turned every single operation upside down in terms of compliance as best as we can. It has been costly because we had to disconnect subscribers and just take a very, very conservative view.

“There is nothing – that we are aware of – that is a big regulatory issue. Could something pop up? There are 22 operations – you can never say that something won’t emerge somewhere. But, hopefully, it is nothing of materiality.”

However, MTN has come under fire over its use of transfer pricing.

“We have charged management fees like many multinational companies do. The most important point, those management fees that have been charged need to be demonstrated to having substance [so that we] don’t have [a] case where someone is saying that you are charging management fees that are not justified by the value you bring to the country. Does it get queried? Yes, it does get queried,” Nhleko said.

Last year, MTN was hit with allegations of money laundering of up to $14 billion by the Nigerian government. The group has vehemently denied these allegations.

READ: MTN shares soar after it agreed to pay Nigeria fine 

“We are clear that there is absolutely no basis for any challenge to the repatriations that we had out of Nigeria over the years,” Nhleko said this week.

For 2016, MTN reported a loss of R3.1 billion, its first loss since 1996, partly due to a R10.5 billion Nigerian fine. In 2015, MTN generated profit of R23.6 billion.

Chris Maroleng, MTN spokesperson, said that 2016 had been “an incredibly challenging year for MTN”.

In October 2015, the Nigerian government fined MTN $5.2 billion (R68 billion) for failing to disconnect up to 5 million unregistered SIM cards in that country, before settling the fine in June last year.

To restore confidence, MTN is bringing in a new CEO and a new chief financial officer (CFO).

On March 13, Rob Shuter will be joining MTN from Vodacom as its new CEO while Ralph Mupita will be joining MTN from Old Mutual on April 3 as CFO.

MTN is also looking to inspire confidence with new board appointments.

Nhleko said that the group was still looking to list MTN Nigeria and close a “localisation deal” in Ghana that will see 35% of MTN Ghana sold to Ghanaian shareholders.

For the listing of MTN Nigeria to proceed, Nhleko said spectrum and other issues in the country needed to be resolved.

READ: MTN inches closer to listing in Nigeria 

In Iran, MTN has a stake in Snapp, which is a smartphone taxi application and rival to Uber.

The recession knocks Nedbank's Ecobank

The recession in Nigeria and other factors saw Ecobank suffering a loss last year, but Nedbank will keep its stake in the Pan-African bank, despite having to take a R3.8 billion write-down on the asset.

Nedbank said that the performance of Ecobank – in which Nedbank has a 20% stake – was hurt by weaker conditions in west Africa and currency volatilities, particularly in Nigeria where the economy went into recession for the first time in 25 years.

Foreign currency liquidity constraints, especially in Nigeria, were also an issue that hit Ecobank, which is present in 36 African countries and has its headquarters in Togo.

Nedbank has a 20% stake in Ecobank, which was bought for $493 million (R6.5 billion) in 2014.

READ: Nedbank first-half profit slows as Ecobank makes losses 

The write-down reduced the holding value of Nedbank’s Ecobank stake to R4 billion. However, Nedbank said at the end of December the Ecobank stake’s market value was R2.4 billion.

Nedbank CEO Mike Brown said that the bank remained optimistic about the long-term prospects for Ecobank, which makes up about 3% of Nedbank’s market value.

“Conditions in the key markets in which Ecobank operates are currently expected to remain difficult in 2017, before improving in 2018 and beyond,” Brown said.

In another development, Nedbank this week launched a new brand identity for the first time since 2010. A Nedbank “brand repositioning” document said that the new brand identity was being launched owing to a “fast-changing consumer and competitive landscape” and followed an 18-month process. The new tagline is “see money differently”.

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