MTN Group Ltd. awarded former group chief executive officer, Sifiso Dabengwa $1.6 million and Mike Ikpoki, former CEO of MTN Nigeria $1.2 million payouts for resigning after the company was fined a record N1.04 trillion ($5.2 billion) by Nigerian Communications Commission for not deactivating 5.2 million subscriber lines.
The payout equates to almost three years’ basic salary and took Dabengwa’s total 2015 remuneration to 40.6 million rand, Johannesburg-based MTN said in the company’s 2015 Integrated Report published yesterday according to Bloomberg.
The two executives were rewarded even after they resigned to take
responsibility for the Nigeria penalty, which equates to about three years of MTN’s earnings before interest, taxes, depreciation and amortization in the country. MTN shares fell 1.3 percent to 145.47 rand as of 12:47 p.m. in Johannesburg, valuing the company at 268 billion rand.
Nigeria is the biggest of MTN’s 22 markets across Africa and the Middle East, with currently 57 million subscribers. MTN Nigeria and MTN South Africa collectively account for 63 per cent of the Group’s total revenue. The CEOs of these operations therefore sit on the executive board.
The stock has declined 24 percent since the fine, later reduced to $3.9 billion, was made public in October. Phuthuma Nhleko, the former CEO who returned as executive chairman to resolve the Nigeria crisis after Dabengwa resigned, was paid five million rand for work from Nov. 9 until the end of the year. His contract is for six months, indicating a total payout of 17.5 million rand. He may also be due a bonus when his contract expires on May 9, according to the annual report.
MTN and Nhleko have yet to settle the fine, despite hiring former U.S. Attorney General Eric Holder to represent the company and making a 50 billion naira ($251 million) down payment. In March, the wireless operator proposed a $1.5 billion package that included cash, government access to its wireless network and an offer to buy Nigerian sovereign debt.
While the offer hasn’t been formally rejected, negotiations are not currently underway, Nigeria Minister of Communications Adebayo Shittu said April 20. Nhleko said “The $5,2 billion fine imposed by the NCC for the late disconnection of 5.1 million improperly registered subscribers, and its subsequent reduction at the NCC’s discretion to $3,9 billion, was the most material and multi-faceted challenge the Group faced in 2015.
He said months of intense engagement with the NCC led to a good faith payment of US$250 million to the Federal Government of Nigeria on 24 February 2016, on the basis that this would be applied towards a settlement.
“Furthermore, we agreed to retract our legal action against the NCC in support of an environment conducive to reaching an amicable settlement on the matter. Negotiations are ongoing. Our subsequent engagement with the regulator has shown its willingness to work with all operators to address the difficulties encountered in this process.
“Irrespective of these extenuating circumstances, the board concluded that MTN Nigeria’s response to the directives from the regulator pertaining to improperly registered subscribers could have been handled differently and with a high sense of urgency. Turning to some of the challenges that hampered
our operational execution in the year, and linked to the subscriber registration issue, MTN Nigeria faced disruptions in the course of stringently enforcing the disconnection of 6,7 million subscribers following the imposition of the fine, which was followed by a further 4,5 million at the end of February 2016.
Nhleko said by and large, improper registration is not a case of customers having no proof of identity but rather of incomplete forms. We continue to engage actively with subscribers to rectify this and reconnect them and this process is progressing well. MTN Nigeria’s competitiveness was also compromised by the suspension of regulatory services in October 2015. This entailed the NCC withdrawing its approval of new tariff plans and promotions until certain tariff plans and promotions, which were deemed to be linked to its determination of MTN as a “dominant operator”, were removed from the market.”
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