Series of blunders tarnish MTN’s reputation
TELECOMS giant MTN could scale down on its forays into foreign markets, following a series of blunders that had cast aspersions on the company’s international profile.
Analysts said it would be risky for MTN to continue with an aggressive expansion programme after this month’s fallout with the Nigerian Communications Commission (NCC) over its failure to disconnect unregistered subscribers. But they said the possibilities of MTN offloading some of its foreign owned assets were slim and the firm was likely to bounce back from the negative publicity it was getting.
Huge knock
“This has been a blow for MTN and its reputation as a competitive company has taken a huge knock,” said Dobek Pater, Africa Analysis Telecommunications analyst.
“What the company needs to do is to show that the current team at group level and in Nigeria can be able to restore confidence and can take the company forward,” Pater added.
Two weeks ago, MTN announced that the NCC had slapped it with a $5.2 billion (R73.52bn) fine after it failed to deregister 5.1 million unregistered subscribers as required by the country’s rules, sending its share price plunging. MTN is still in negotiations with the NCC about the fine, which it has until Monday to pay.
Three years ago, a Turkish cellphone company Turkcell opened a lawsuit against MTN seeking damages for losses incurred as a result of MTN’s actions in Iran, where MTN won the licence to operate IranCell. MTN owns 49 percent of IranCell, Iran’s second-biggest mobile phone network operator with 44.4 million subscribers.
Turkcell claimed that the licence was first awarded to it in 2004, but claimed that MTN used “corrupt acts” – including promises of bribes and the giving of gifts to Iranian and South African government officials – to secure the licence.
Bad name
Equity analyst at Imara SP Reid, Sibonginkosi Nyanga, said while the Turkcell allegations had not been proven, they had left the company with a bad name.
“Turkcell caught the public eye with the allegations, but although they were proved to be without substance, they did not put MTN in a good light.”
In February, reports emerged that MTN was losing clients to its rivals. The JSElisted Blue Label Telecoms said MTN had lost 2 percent of its customers in the pre-paid airtime sales segment to Cell C over the six months between June 2014 and November 2014.
In July, MTN SA chief executive Ahmad Farroukh resigned after grappling with a two-month strike led by the Communication Workers Union.
On Monday, MTN group chief executive Sifiso Dabengwa resigned as a result of the ongoing feud with the Nigerian authorities. Nyanga said MTN should not sell its stakes in other countries.
He argued that the company should continue with its investments as it had managed to position itself as one of the market leaders in telecommunications. But he said the company should have handled the Nigerian debacle differently to protect its reputation.
“Perhaps it was an oversight on the part of the company, because it left the shareholders confused,” said Nyanga, “but you cannot blame it because that information would have been relayed in their annual report or when it tables its results. So whichever way you look at it, shareholders should have been alerted as soon as the problems started.”
Another analyst, who spoke on condition of anonymity, said the furore over the Nigerian fallout would settle soon.
The analyst said MTN should now focus on ensuring that it protected its market share. “Protecting its client base would be much more important than trying to fight the fires that are already burning.”