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MTN out of the fire, into the frying pan

As MTN prepares for a new year boom, it has received a timely Christmas present from Nigeria, writes ARTHUR GOLDSTUCK.

MTN has turned an $8-billion demand from the Nigeria government into a $52-million fine, but still faces a $2-billion demand for back-taxes. But, as it prepares for a boom in new year’s day messaging, it has sent a confident signal that it will also be able to overturn that claim.

The Central Bank of Nigeria (CBN) has alleged improper repatriation by MTN Nigeria of US$8.1-billion between 2007 and 2015, meaning that MTN was accused of taking money out of the country illegally through dividend payments to shareholders – with the biggest being the MTN Group itself.

“MTN Nigeria has held various engagements in order to find an equitable resolution to the matter. In particular, a series of meetings were held in Lagos with CBN officials during November 2018,” MTN said in a statement on Christmas eve. “At these meetings, MTN Nigeria provided additional material documentation which satisfactorily clarified its remittances. The CBN upon review of the additional documentation concluded that MTN Nigeria is no longer required to reverse the historical dividend payments made to MTN Nigeria shareholders.”

However, the CBN would not budge from its position that proceeds of $1-billion from preference shares from a private placement by MTN Nigeria in 2008 were irregular. The claim is that they were based on certificates of capital importation (CCIs) that only had the CBN’s approval-in-principle, but not final regulatory approval.

However, compared to the intended $8-billion fine, the CBN gave MTN Nigeria a slap on the wrist. MTN has to make a notional reversal of the 2008 placement at a cost of $52.6-million. MTN Nigeria and the CBN have agreed that the former will pay the amount without admission of liability, thereby bringing to a final resolution all incidental disputes arising from the matter.

MTN may not have to incur even that cost, as it plans to extract payment of the amount from the commercial banks that advised it on the transaction.

“MTN Nigeria relied on certain commercial banks to ensure all approvals had been obtained prior to the CCIs being issued and to ensure the CCIs were properly utilised in the private placement,” the company said in the Christmas Eve statement. “MTN Nigeria will be engaging with the banks in relation to the issues dealt with in the resolution agreement.”

MTN Group warned shareholders that it is still trying to settle a claim by Nigeria’s Attorney-General of the Federation (AGF), for back taxes amounting to $2-billion. It has taken out an injunction against the AGF and the matter will come before the Federal High Court of Nigeria Lagos Judicial Division on 7 February 2019.

MTN is so confident of its case, it hasn’t made provision for the fine. This suggests that it has a strong argument to present in court.

“MTN Nigeria continues to maintain that its tax matters are up to date and no additional payment, as claimed by the AGF, is due, and consequently no provisions or contingent liabilities are being raised in the accounts of MTN Nigeria for the AGF back taxes claim,” it said in its statement.

Meanwhile, along with Vodacom, Cell C and Telkom Mobile, MTN is preparing for another festive season boost on New Year’s Day, traditionally the biggest day of the year for personal messages. SMS is declining in use at all the mobile networks, and the bulk of the messaging is expected to occur on WhatsApp and Facebook Messenger. The former will boost data revenues for the operators, while a free version of Facebook Messenger tends to make it a less profitable channel.

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