NCC Fine Forces MTN To Sell Bonds

MTN Group Limited is currently seeking fresh funds through the sale of bonds to offset a N330bn ($1bn)

Nigerian fine, pay dividends and address capital expenditure.

This came just as the Executive Vice-Chairman, Nigerian Communications Commission, Prof. Umar Danbatta, on Wednesday opened up on the dispute leading to the imposition of N1.04tn on the telecoms company for failing to disconnect 5.2 million improperly registered subscribers on its network.

The telecoms operator is set to weigh investor interest in the possible bond offering. It has, therefore, mandated Barclays Bank Plc, Bank of America Corporation’s Merrill Lynch, Citigroup Incorporated and Standard Bank Group Limited to arrange a series of fixed-income investor meetings in the United States and the United Kingdom starting from September 9, Bloomberg quoted the Johannesburg-based company as saying in a statement on Wednesday.

The dollar-denominated bond offering “is expected to follow subject to market conditions,” the firm said.

MTN’s move to attract funding comes after the company reported its first-ever half-year loss this month, partly caused by an agreement to settle the fine with the Nigerian regulators and the Federal Government.

The subscriber base of 233 million did not grow during the six months through June, while MTN was struggling to repatriate 15.4 billion rand ($1.1bn) tied up in its Iran unit, the report stated.

“Pre-dividend free cash flow won’t cover payments of dividends and the fine in Nigeria this year and in 2017,” a credit analyst at Gimme Credit LLC in Tel Aviv, Alexandre Dray, said in e-mailed comments, adding, “Therefore, the company needs to raise new debt or equity to keep a comfortable liquidity position.”

MTN issued a $750m note in 2014 that matures in 2024, according to Bloomberg data. The company sold a 1.25 billion rand bond in 2010 which matures in July next year.

MTN is due to pay an outstanding N280bn of the Nigerian fine in six instalments over the next three years. The first payment, which MTN Nigeria says it has already settled, was due on July 8.

The company “is right to consider issuing bonds so as to make the most of the low-yield environment,” Dray said, adding, “This is a good time to sell bonds as there is a strong demand for emerging-market corporates amid a hunt for yield.”

In a related development, the Executive Vice-Chairman of the NCC, Dambatta, answering questions when he met with foreign defence attaches in Abuja, said enforcement officers from the regulatory agency were chased away from MTN premises when they went to ascertain the level of compliance with the directive to disconnect the improperly registered subscribers.

He said, “The NCC issued a directive in conjunction with the Office of the National Security Adviser to ensure that all categories of SIM cards were properly registered.

“Jointly with the office of the NSA, the NCC issued a directive to all mobile network operators directing them to disconnect improperly registered SIM cards. A period was given to disconnect all improperly registered cards.

“We insisted that we were going to be consistent with our mandate and monitor compliance. Enough time was given for this exercise. There was a period of moratorium after the period expired. It happened before I assumed duty but I remember that there was an extension given in order to allow telecommunications operators to comply.”

He added, “At the end of this period, we mounted a check; an enforcement check in order to establish the level of compliance to this directive. We discovered that there were about 36 million SIM cards that were improperly registered. We engaged the major operators – MTN, Etisalat, Glo, Visafone and Airtel in a reconciliation process, which significantly brought the number down from over 30 million improperly registered SIM cards to 6.5 million SIM cards.

“There was another engagement with the operators to determine the actual number of noncompliance. Through this elaborate process of reconciliation, we discovered that with the exception of MTN, all the other operators complied with the directive. It was either they had disconnected all of them or they had disconnected more than the number that was attributed to them.

“At the end of this, MTN was found to have 5.2 million improperly registered SIM cards on its network. The enforcement team drew their attention to it. I will leave out the nitty-gritty of what happened but our enforcement team were virtually driven out of the MTN premises.

“To cut a long story short, we have come a long way. Our action was not to bring MTN to its knees. We are very much conscious of the role MTN plays in the socioeconomic development of this country.

“We have since reached amicable resolution to the fine imposed and they were asked to pay N330bn instead of the N1.04tn that they were fined initially. So, they were given a huge remission. They accepted they committed the breach, tendered an apology for committing the breach and had written a letter of undertaking to be of good behaviour.”