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June15

MTN learns its lesson the hard way

ALMOST a year ago, brand watchers were left scanning the market horizons with squinting eyes, wondering what would happen after MTN [JSE:MTN], South Africa’s mobile giant, got slapped with a whopping $5.2bn fine by the Nigerian Communications Commission (NCC).

A man walks past a MTN notice board in Lagos, on October 27, 2015.  Nigeria's telecommunications regulator has fined South African mobile giant MTN $5.2 billion for missing a deadline to disconnect unregistered SIM cards, the company announced on Monday. The penalty saw shares in Africa's largest telecommunications company crash more than 12 percent to 167 rand on the Johannesburg Stock Exchange, the biggest fall the firm has suffered in a day since November 1998. AFP PHOTO/PIUS UTOMI EKPEI

A man walks past a MTN notice board in Lagos, on October 27, 2015. Nigeria’s telecommunications regulator has fined South African mobile giant MTN $5.2 billion for missing a deadline to disconnect unregistered SIM cards, the company announced on Monday. The penalty saw shares in Africa’s largest telecommunications company crash more than 12 percent to 167 rand on the Johannesburg Stock Exchange, the biggest fall the firm has suffered in a day since November 1998. AFP PHOTO/PIUS UTOMI EKPEI

This was after MTN had been found guilty of disregarding a clear government directive to either cut off some five million unregistered SIM card users, or to have them registered within a stipulated period. In addition, the company faced a further litany of 28 charges for disregarding various aspects of Nigerian law.

This had been going on for a number of years, apparently since 2011. While all other local networks responded positively to the NCC directive, similar to South Africa’s Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA), MTN failed to do so within the stipulated deadline.

The income generated from this corporate greed must have been too good to ignore.

Nigeria watchers do not need any reminder that the country has been fighting the scourge of Islamist terror for a number of years now. Boko Haram, the local perpetrator of this terror, has been blamed for the wanton murder of hundreds of thousands of innocent men, women and children, as well as the abduction of several hundred young girls who are now suspected of having been sold into slavery or given away as wives to Islamist fighters.

Many of the Boko Haram attacks are said to have been planned by using unregistered SIM cards linked to the MTN network in Nigeria. Because they were unregistered, there was no way for the Nigerian authorities to trace and nab their users, making it hard for them to effectively fight terror on Nigerian soil.

 

Heads did indeed roll at MTN

I wrote at the time that because of the carelessness of management and the seriousness of the situation, heads needed to roll. This came to pass within weeks with the forced departure of MTN’s then group president and CEO Sifiso Dabengwa, the CEO of MTN Nigeria Mike Ikpoki, and Akinwale Goodluck, who headed the company’s regulatory and corporate affairs in Nigeria.

There is no indication that either the group’s reputation management advisers or its communication people were given even a slap on the wrist for having failed to foresee the reputational risk before it arrived at MTN’s doorstep, or for issuing conflicting communiqués following the SENS announcement of the fine.

The announcement itself was unreasonably delayed, leaving the situation exposed to possible insider trading. It is not clear whether anything came of the JSE probe of this aspect of the development.

It is the task of corporate reputation advisers to scan their charges’ operational environment for reputational risk, and to bring any reasonable fears to their attention. Allowing them the benefit of the doubt, it is possible that they did all of this but that their advice had fallen on deaf ears at MTN management.

If the opposite were true and they were not aware of the risk, I would have given them the boot – period. Corporate reputation advisers should make it their business to offer early warning systems to their clients, and not just position themselves as fire fighters.

 

Corporate values must be maintained in cross-border operations

Fast-forward to June 2016: Phuthuma Nhleko, who has been acting as group CEO since Dabengwa’s departure, is now preparing to hand over the reins to a new CEO whose identity is yet to be revealed.

He has managed to bring a semblance of order to the business. He has also succeeded in negotiating the Nigerian fine to a ‘paltry’ $1.7bn, down from the $3.9bn it had been reduced to after MTN’s initial plea for clemency in late 2015. The reduced fine will be paid over a three-year period. As part of the sweeteners for the Nigerian authorities, MTN will also list on the country’s stock exchange at a date still to be determined.

With the market having responded positively to the settlement and the share price having gone up to R137.31 as at 15:00 on Tuesday – but still below the R190.40 it traded at prior to the fine – one hopes there will be a more sober regard for corporate governance issues, and a better appreciation of corporate reputation, at MTN.

Companies that operate across national borders have the added responsibility of ensuring that their corporate values are integrated seamlessly throughout their cross-border operations. They cannot have one set of values in one country and a different one in another.

Big brother, in the form of digital and social media, is now omnipresent. Corporate values have to be repeatedly communicated and integrated in performance plans and reward schemes. In the end, a values-based integrated reporting regime offers a level of predictability to investors.

 

But bad heads in government refuse to roll

It is a real pity that, unlike the case with corporate leaders, our political leaders can keep going with their middle fingers in our collective face, despite the obvious harm brought about by their continued presence in public office. There was a time when we needed to look elsewhere for bad examples. That time is gone – but hopefully not forever.

Despite all the constitutional and high court judgments, despite reports by the public protector, despite many media reports of continued Zupta capture or our state-owned companies and other institutions, despite the courageous stances taken by former ANC politicians, directors general and other senior government leaders, the bad heads refuse to roll.

Thanks ostensibly to the bizarre protection of the president, the cantankerous Dudu Myeni is still running South African Airways and Finance Minister Pravin Gordhan will never dare touch her if he knows what’s good for him; Hlaudi Motsoeneng still runs the SABC like it belongs to his father; hundreds of millions of rands’ worth of tenders still get signed over to Gupta-linked companies by the likes of Transnet, Eskom, Denel – all of them seemingly uncaring about how the rest of us feel.

SA Inc is still in trouble!

  • Posted by donvalley
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