Should Nigeria Be Blamed For MTN’s Woes? [READ]

Should Nigeria Be Blamed For MTN’s Woes? Photo: File

On Monday, international rating agency, Moody’s, raised concerns that telecomns giants, MTN Group, may not be able to borrow, sell more debt or raise funds in the money market should the company’s financial outlook remain the same.

According to Moody’s, MTN Group has limited room to increase its debt levels, due to lack of dividend flow from Nigeria – its biggest market.

It would be recalled that last week, MTN announced that it made a $200m loss in 2016 – the first ever loss in its 20 years of operations. The company cited the huge fine it has to pay Nigeria authorities and currency challenges in key markets as the reason behind the loss.

“MTN Group’s financial results for 2016 reflect the most challenging year in the company’s 22-year history,” the company said in a statement.


Although analysts put the lion share of the blame of MTN’s loss on overall performance which they say was hindered by lower than expected growth in both South Africa and Nigeria as well as the depreciation of the rand against the dollar, the impact of the $1 billion fine by Nigerian Communications Commission, NCC, is also a major worry.

But is Nigeria to blame for the company’s woes?

The company dug itself into a hole when it failed to meet a deadline to disconnect of 4.5 million subscribers in February 2016 in compliance with the Nigerian Communications Commission subscriber registration requirements.

A development the Nigerian government claimed negatively affected its effort to fight terror and deadly crimes in Nigeria’s north east region.

Add this to the fact that there were already many Nigerians who believed that foreign companies operating in the company has made it a habit to flout the country’s laws.

It is also interesting to note that MTN’s infringement came at a period when Nigeria was looking for ways to get non-oil revenues due to the global oil price crash and the crisis in the Niger Delta did not also help MTN case even though the fine was later reduced.

Apart from the regulatory fines it is paying, the company is also facing a tougher position in how it books its revenue. Over-the-Top (OTT) applications such as WhatsApp, Facebook and Instagram are now getting more usage amongst the critical mass of its customer base who now subscribe to data bundles. This accounted for a sharp drop in industry revenue due to drop in international calls.

There are also systemic challenges faced in South Africa, its home country. There were technical problems and strikes in its customer care unit that disrupted its operations. Nigeria’s Forex drought is not also helping matters.

Last year, MTN Group sold some debts with other notes and bonds to be due in the next few years.

SEE ALSO: Why Investment Is Not The Problem With Nigeria’s Electricity (CLICK)

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