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November 09, 2015

MTN CEO Dabengwa Resigns After $5.2 Billion Nigeria Penalty

MTN Group Ltd. Chief Executive Officer Sifiso Dabengwa unexpectedly resigned from Africa’s biggest mobile-phone operator to take responsibility for a $5.2 billion fine in Nigeria that’s wiped almost a fifth off the market value of the company.

Dabengwa will be replaced by former CEO and Chairman Phuthuma Nhleko, 55, for as many as six months while the company searches for a permanent successor, Johannesburg-based MTN said in a statement on Monday. Nhleko, who led MTN for almost nine years until 2011 and increased subscriber numbers 30-fold through rapid international expansion, said he will deal with the Nigerian Communications Commission personally about the penalty. Talks are at an advanced stage, according to people familiar with the matter, who asked not to be identified as discussions are private.
Nhleko said he will “pro-actively deal with the Nigerian regulator and will continue to work with them in addressing the issues.” MTN shares traded 1.8 percent higher at 160.35 rand as of 11:43 a.m. in Johannesburg.

Dabengwa, 57, resigned over the weekend after consultation with the board and his financial compensation hasn’t been decided, spokesman Chris Maroleng said by phone, describing the move as an “honorable gesture.” The company has until Nov. 16 to pay the Nigerian fine, which was imposed for missing a deadline to disconnect 5.1 million unregistered subscribers and is based on a charge of 200,000 naira ($1,008) for each unregistered customer.

“We’ve been anticipating this but not the timing,” Arthur Goldstuck, an analyst at World Wide Worx, said by phone. “One can only assume his role in the negotiations was not effective.”

MTN shares have declined about 16 percent since the Nigeria penalty was made public two weeks, valuing the company at 289 billion rand ($20.4 billion).

“The departure of Sifiso Dabengwa is the beginning of a clearing out that is necessary to regain the confidence of investors,” Goldstuck said.

MTN expanded into markets such as Iraq and Syria under Nhleko and now has more than 230 million customers in 22 countries. Nigeria is the company’s biggest market with more than 62 million subscribers, or almost a quarter of the total. The NCC last week approved the renewal and extension of MTN’s license for another five years until 2021 pending the payment of $94.2 million.

“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 the statement. He didn’t answer calls to his mobile-phone seeking further comment.

“Sifiso leaving is a loss to the industry,” Shameel Joosob, CEO of MTN competitor Vodacom Group Ltd., said by phone. “I see this issue as a bump in the road. They will probably negotiate a settlement on the fine.”’

Text by Bloomberg
 

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