Sanction: MTN To Down Size Workforce By 50%

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Unless major mobile telephone operator MTN Nigeria secures a reasonable reduction in the recent N1.04 trillion fine slammed on it by the Nigerian government, the company is mulling a considerable downsizing of its work force by a whooping 50% reduction to be able to remain in business, it was gathered at the weekend.

Insider sources in the company yesterday disclosed that the development has brought about what was described as ‘palpable fears’ among the employees of the company who are already inundated with the planned ‘major job cut.”

“We are still keeping our fingers crossed. When you close at work today, for instance, you don’t know whether you will still retain your job the next day. We just hope they won’t sack half of us in the employment of MTN in the coming months if no appreciable reprieve is gotten from the government regarding the fine,” a source said.

MTN currently has between 5, 000 direct staff and over 500, 000 in the value chain of distribution and retail segments where about 97 per cent of whom are Nigerians.

In MTN’s ecosystem are diesel suppliers, generator suppliers, app developers, Original Equipment Manufacturers (OEMs) and a host of others.

“MTN provides the ICT backbone for Nigeria supporting banking, oil and gas and many other sectors. These are critical individuals and corporate organisations that will be affected due to the fine and will, no doubt, have adverse impact on the economy.
“So, if MTN should resort to rationalising things, including the workforce, majority of us who are Nigerians may lose our jobs,” another source said on phone.

MTN has over $15 billion investment both in fixed infrastructure and other assets in the country with more than 10,000 of the total 30,000 base stations in the country.

Investment in the country’s telecoms industry stood at over $32 billion as at the middle of 2014, according to the telecoms regulator.

“MTN has also invested more than N10 billion in various social investment activities focusing on health, education and economic empowerment and with this fine, further attention to such social investment areas may suffer going forward.
“The company sets aside about one per cent of its annual revenue for corporate social responsibility,” adds the second source.

Already, MTN’s violation of SIM registration regulation is claiming casualties within its management.

MTN Nigeria’s Chief Executive Officer (CEO), Mr. Michael Ikpoki, and Head of Regulatory and Corporate Affairs, Mr. Akinwale Goodluck, were sacked last week with immediate effect.

Consequently, Ikpoki and Goodluck were subsequently replaced by Mr. Ferdi Moolman as MTN Nigeria CEO and Ms Amina Oyagbola as its Head of Regulatory and Corporate Affairs, respectively.

On November 9, the fine crisis led to the forced resignation of Sifiso Dabengwa as Group CEO of the telecoms company, even as the telco continues search for new management helmsman.
A non-Executive Chairman of MTN, Phuthuma Nhleko, took over as executive chairman for a maximum period of six months while the company looks for Dabengwa’s successor.

Majority shareholder in MTN Group, South African-based Public Investment Corporation (PIC), had, on November 2, demanded more people must take collective responsibility for the fine.

“A lot more people need to take collective responsibility for the fine that was imposed on MTN Nigeria for alleged failure to comply with regulatory requirements in that country,” the Chief Executive of the PIC, Daniel Matjila, was quoted by Bloomberg as saying.

As such, analysts say Nigeria’s government is at risk of scaring off investors it can’t afford to lose after imposing a $5.2 billion fine on the telecoms company, the nation’s biggest mobile-phone company.

Analysts say the fine is excessive and unprecedented in the history of telecoms not only in Africa but also in the world.

“No doubt, the fine is staggering and unprecedented. Hypothetically, were MTN forced to close its operations in Nigeria and stifled of making further investment as a result of this fine, there is no doubt that Nigerian economy will suffer in many ways because banks, e-commerce platforms and other government establishments and a lot more Nigerians rely on MTN networks,” says an analyst, Amana Ibiano.

MTN Nigeria, in December 2014, accounted for 11 per cent of Nigeria’s non oil tax revenue and five per cent of total taxes paid in 2014, according to data from the firm’s FY 2014 results presentation.

The total payment made by MTN Nigeria to government from inception in August 2001 stood at N1.3 trillion, even as it paid N176 billion as taxes in 2014.

MTN Nigeria says beyond paying taxes, it has also used its platform to stimulate growth in other sectors of Nigeria’s economy, such as the banking, insurance, e-commerce, oil and gas and creative/entertainment industry.

“The ICT industry with MTN as leader is a critical enabler of socio-economic growth in Nigeria,” MTN Nigeria said.

In 2014, MTN generated over N5 billion for the Nigerian music industry through the monetisation of Caller Ring Back Tunes utilising local musical contents.

Recent rebasing shows the contributions of the entertainment and music sector at $7billion to the total value of $510 billion. This represents 1.37 per cent of the total Gross Domestic Product value in 2013 while total telecoms sector currently contributes 11 per cent to the nation’s GDP.

The fine equates to more than 20 per cent of Johannesburg-based MTN’s market value.

“It’s the last thing Nigeria needs, given the economic and political struggles it’s contending with at the moment,” McIlroy, chief investment officer at Alquity, which oversees $100 million of frontier market stocks, including MTN shares, told Bloomberg by phone from London. “It’s concerning for MTN and in terms of the wider implications for foreign investment.”

Nigeria is MTN’s biggest market, where it had over 63 million customers by September. This represents about 45 per cent of the total 152 million subscribers on all the telecoms networks in the country.

“The magnitude of the fine doesn’t seem to bear any relation to the scope of the alleged offence,” said McIlroy.

Chief Executive Officer of Lagos-based Financial Derivatives Company Limited, Mr. Bismarck Rewane, said though “the country cannot tolerate corporate arrogance, but this may also deter other investors because of the size of the fine.”

“We understand that the money imposed on MTN was much. We, as regulator, hardly conceived that any operator would violate this regulation because we found it painful ourselves but we have to abide by rules,” said an NCC director, Mr. Tony Ojobo, in an interview at the weekend.

“Though quite impossible because this is the large market of MTN, seeing MTN gradually packing out of the country because of the fine is unthinkable and if imagined, it would cost us as a nation a lot because more than one-third of Nigerians rely on MTN for telecoms services,” says President, National Association of Telecom Subscribers (NATCOMS), Chief Deolu Ogunbanjo.

Ogunbanjo advocated further reduction in the fine for the telecoms firm.

“That is why we are requesting that the sanction be further reviewed downwards by up to 75 per cent,” he added.

The government on December 3 reduced the sanction by 25 per cent from N1.04 trillion to N780 billion but analysts say the fine still remains high and could discourage foreign direct investment.

Recent investigation revealed that the country was facing a telecoms infrastructure deficit of about N1.6 trillion and in base stations.

“Our estimate shows that by now, we are supposed to have nothing less than 70,000 base stations in the country for the operators to be able to provide high quality of service but all the operators put together currently have about 30, 000. This represents a deficit of 40,000 telecoms towers,” an Executive Commissioner at NCC, Engr. Ubale Maska, said in an interview.

Ojobo said that the regulator was “aware and conscious of the level of investment MTN has made in this country. There is no doubt that MTN has the largest number of subscribers.”

He said that the regulator made the sanction for SIM registration violation high in the hope that no operator would dare to violate it as the punishment is known to everybody

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