MTN’s Nigerian standoff

MTN. (Duncan Alfreds, Fin24)
MTN. (Duncan Alfreds, Fin24)

Johannesburg - Trade in MTN shares on Monday morning, and potentially over the past two months, could be scoured for evidence of insider trading.

The “timing” of MTN’s announcement of the potentially ruinous R72 billion fine from the Nigerian Communications Commission two hours after the opening of the JSE raised eyebrows, especially since even journalists in Nigeria had known about it the previous day.

The delay could have allowed people in the know to offload shares before the stampede that ensued later in the day.

The mobile giant on Friday belatedly confirmed that it could get into more trouble at home in South Africa and that “senior management of the company and its advisers are currently engaging with the JSE”.

“The JSE can confirm it is investigating the timing of the MTN ... announcement,” read the stock exchange’s own short statement.

It downplayed the risk of a sudden new sanction and added that it “can be a lengthy process”.

The potential transgression would amount to insider trading – proving that would mean combing through trade in MTN shares on Monday morning before the official announcement caused the shares to plummet.

If the JSE finds that someone with knowledge of the fine had got rid of their shares before the general body of shareholders were told about it, the matter would go to the Financial Services Board, which could impose a fine related to the value of the shares sold.

MTN is being raked over the coals for failing to disconnect SIM cards on its network that were not registered in terms of Nigeria’s equivalent of the Regulation of Interception of Communications and Provision of Communication-Related Information Act, popularly known as Rica here.

There were 5.1 million MTN SIM cards on the network in the country when a deadline on August 11 came and went.

A fine of about $1 000 (R13 800) per SIM followed. MTN says it had disconnected all the offending SIM cards by the end of August.

In its set of results released just over a week ago (October 22), MTN reported how it had also re-registered 3.4 million of the 5.1 million subscribers.

MTN’s announcement about the fine was made on the JSE’s news service at around 11am on Monday. News of the fine had, however, already been leaked to the Nigerian Technology Times and published the previous evening. By 4am on Monday, Nigeria’s Leadership magazine had also followed up on the story.

The JSE will presumably look into any trade in shares on Monday morning before the official confirmation by MTN.

MTN Group CEO Sifiso Dabengwa was in Nigeria this week to bargain with the communications commission about the fine.

The fine of 1 trillion naira (R72 billion) amounts to almost a quarter of the Nigerian government’s federal budget.

It is worth 20% of MTN’s total market value on the JSE – at least it was before the announcement.

It would claim more than a year’s profits for the entire MTN Group.

Enough investors took the threat seriously to offload about 90 million shares this week at prices last seen in 2013, turning the R352 billion company into a R292 billion one.

Ratings agencies Standard & Poor’s and Moody’s downgraded the company’s bonds, potentially costing MTN more money if it intends to raise debt.

The share sell-off will cast a massive shadow over what MTN had hoped would be a good-news week, as its broad-based BEE scheme, Zakhele, starts trading on the JSE’s special BEE segment on Thursday.

Shareholders in the scheme – which owns 4% of MTN – who had hoped to cash in, will have to take a massive loss or hold on to the shares.

The old over-the-counter system for trading Zakhele shares closed last month to prepare for the transition.

After this week’s plunge, the entire Zakhele scheme’s value dropped from R14 billion to R11.4 billion, before the traditional discount that BEE schemes suffer because anyone buying shares has to be approved and confirmed to be a black South African.

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