MTN CEO resigns after $ 5.2 billion fine in Nigeria

MTN CEO Sifiso Dabengwa has announced his resignation from the company. The development comes after the telco was fined US $ 5.2 billion in Nigeria – Africa’s most populous country and MTN Group’s largest market where it had over 62.8 million subscribers by the second quarter of 2015 – by the telecoms industry regulator.

Mr. Sifiso Dabengwa , MTN Nigeria CEO tendered his resignation after Nigerian Communications Commission (NCC) fined the firm over SIM card deactivation.

“Due to the most unfortunate prevailing circumstances occurring at MTN Nigeria, I, in the interest of the Company and its shareholders, have tendered my resignation with immediate effect,” Dabengwa said in a statement.

MTN’s shares have declined about a fifth since news of the penalty was reported a week ago, and are trading near three-year lows. The stock closed 6.1% lower at R148.17 on Monday last week. The resignation comes as the deadline to pay the penalty draws closer. MTN was given until November 16 to pay the penalty, which relates to the timing of the disconnection of 5.1 million subscribers and is based on a charge of 200 000 naira ($1 005) for each unregistered customer.

The fine, which amounts to double MTN’s profit last year, was due to SIM card deactivation failure.

MTN said Phuthuma Nhleko, the current non-executive chairperson has agreed to act as executive chairperson for a maximum period of 6 months while the company identifies a successor for Dabengwa.

Nhleko has been with MTN since 2001 when he served as non-executive director and chairperson. From June 2002 he has been an executive director, Group President and CEO until March 2011. He has subsequently chaired the Group in a non-executive capacity for the past two and a half years (29 May 2013).

“I will assume responsibility as Executive Chairman for the next 6 months as I proactively deal with the Nigerian regulator and will continue to work with them in addressing the issues around unregistered subscribers as a matter of urgency,” commented Nhleko.

To ensure compliance with King III, Mr. Alan van Biljon will continue to serve as the Lead Independent Director on the MTN board of directors (“MTN Board”) whilst Mr. Nhleko takes over executive responsibility.

Nhleko said in his new role he will proactively deal with the Nigerian regulator and will continue to work with them in addressing the issues around unregistered subscribers as a matter of urgency.

“Together with the MTN Board, my second priority will be to find an appropriate Chief Executive Officer to take MTN forward. I will then revert to my Non-executive Chairman role,” he said.

South Africa’s Public Investment Corporation (PIC) said it’s concerned that MTN Group didn’t anticipate or take steps to prevent being fined $5.2 billion in Nigeria after failing to deactivate the unregistered SIM cards.

Stakeholders are reminded that MTN will continue to inform them of any material engagements with the Nigerian authorities via the Stock Exchange News Service of the JSE Limited (SENS).

Shareholders are advised to continue to exercise caution when dealing in the Company’s securities until a further announcement is made.

PIC CEO, Daniel Matjila said in an email that they were in talks with MTN management and that they would take all facts into consideration before deciding on their next steps. The PIC owns 16.5% of Johannesburg-based MTN.

“We are, however, hopeful that this matter will be addressed soon for the benefit of all interested stakeholders,” Matjila said.