During the several public meetings Karl Toriola, the Nigerian-born MTN Chief Executive Officer (CEO) held to explain the reason for the public share offering targeting Nigerian investors, one theme he harped on severally was, the company was becoming more Nigerian.
The Osun State-born (Ife/Modakeke) CEO and his largely Nigerian executive team not only herald a new era of leadership at the South African-owned Nigerian-owned telecommunications company, but it is also the strongest statement the company has made about its desire to play like a local.
Apart from the CEO, MTN has recruited Adia Sowho as Chief Marketing Officer, Modupe Kadri as Chief Financial Officer, Esther Akinnukawe as Chief Human Resources Officer, and Adekunle Adebiyi as Chief Sales and Distribution Officer, among others.
There are numerous vicissitudes that come with being a Nigerian company. Thousands of businesses that have died and those hanging by some thin thread trying to survive as a local will certainly say it is not for the faint-hearted. In fact, one of the best strategies to survive and even thrive as a startup in the technology ecosystem is to be incorporated outside the country.
MTN, however, is neither a startup nor a struggling company by any revenue calculation, going by its 2021 Full Year Audited Financial Statement which showed that it grew its revenue by 22.90 percent from N1.35 trillion to N1.65 trillion.
Also important to note that years of playing as an outsider hasn’t quite done MTN much favours. While it was among the first telcos to grab the country’s GSM licence, 3G licence, 4G licence, and now 5G licence, it has often found itself at the receiving end of the regulators’ short stick no thanks to its size and ambitions.
MTN, as of December 2021 accounted for 73.5 million voice subscriptions ensuring it held 37.7 percent and maintained the leadership of the market. It is also the preferred internet network for 58.1 million subscribers, making it the top operator with a market share of 50.4 percent. But MTN has always had grander designs for the Nigerian market, creating verticals in music streaming, USSD in which it controls about 80 percent of the market, and one of the top two providers of mobile money agents in the country.
Not Nigerian enough
Ordinarily, the mere incorporation of the company in Nigeria should give it a legitimate claim to an indigenous player. However, MTN Nigeria is a subsidiary of MTN Group which was incorporated in South Africa. It means the Nigerian unit gets its administrative approval from the parent company in South Africa.
MTN Group’s outsider approach to running its business in Nigeria made it an easy target for Nigerian regulators and even individuals. In the wake of the xenophobic uprising that targeted citizens from other African countries in South Africa, MTN Nigeria found itself in the unfortunate position of being lumped among South African countries that should be targeted in Nigeria.
Also, until Toriola, the company has only had one Nigerian CEO – Michael Ikpoki – since 2001 when it was granted a GSM license to operate in Nigeria. Ikpoki only had a two-year stint, from 2013 to 2015, at MTN before he was forced to resign following the N1.4 trillion fine the Nigerian Communications Commission (NCC) slammed on the company for failing to comply with the deactivation of improperly and pre-registered SIM cards in the country. Ferdi Moolman who replaced Ikpoki later announced that MTN reached a compromise with NCC to pay the sum of N330 billion in full and final settlement of the fine in line with an agreed payment plan.
For all the rough patches it has had with regulators, MTN chose to look inwards.
In 2018, MTN was once again the target of a major fine this time from the Central Bank of Nigeria (CBN). The apex bank asked the telco and four Nigerian banks to refund $8.134 billion for breaching Nigeria’s forex regulations. Following several meetings to resolve the dispute, the CBN said it has asked MTN Nigeria to pay $52.6 million in a settlement.
The CBN fine was also coming at a period MTN was preparing to diversify its investment by becoming a mobile money operator in Nigeria. The company applied for the Payment Service Bank (PSB) licence in 2018 with the expectation that it will be granted to enable it to commence mobile money operations in 2019. It wasn’t to be even though the CBN had released a draft guideline that showed that MTN was eminently qualified to secure the licence.
In 2020, when the financial regulator decided to issue the licence to telcos, it chose 9Mobile and Globacom which had no footprint in the space, ignoring MTN and Airtel which had thriving mobile money units across Africa. Today, two years after, only 9Mobile has deployed its mobile money business while Globacom has given no indication of what it plans to do with the licence. The two telcos were also conspicuously absent at the 5G spectrum auction in December.
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Becoming a Nigerian company
For all the rough patches it has had with regulators, MTN chose to look inwards. In doing so, it sought a strategy that would ensure regulators no longer made it an easy target.
In May 2019, MTN was listed on the Nigerian Exchange (NGX) where it traded under the ticker MTNN. The N2 trillion flotation turned it into the exchange’s second-largest stock by market value.
According to one expert, MTN had agreed to the listing as part of a settlement to long-running disputes with the Nigerian government. The listing enabled local investors and indeed international investors, the opportunity to buy into the telecoms story in Nigeria.
But the company would soon realise that this was not enough for many Nigerians, especially as people threatened to target its facilities following the xenophobic attacks in South Africa. Even after the listing, the MTN Group still held 78.8 percent of the Nigerian business.
In July 2019, the telco announced that it had appointed Ernest Ndukwe, a former executive vice-chairman of the NCC, as the Chairman of the company following the retirement of Pascal Dozie and five other board members. The telco also appointed several new board members including Muhammad Ahmed, former chairman of the technical committee of the Nigerian Code of Corporate Governance; Omotola Johnson, a former minister for communication; and Ifueko Okauru, a former chairman of the Federal Inland Revenue Service (FIRS).
The board composition was so outstanding in its composition that the Securities and Exchange Commission (SEC) received a petition from a group known as the Human and Environmental Development Agenda (HEDA) against the appointment. The petitioner claimed the appointees were picked to offer MTN undue advantage in Nigeria’s political and economic environment.
After securing a power board, MTN turned its attention to Nigeria’s developmental issues. In August the company said it was embarking on the reconstruction of the Enugu-Onitsha expressway, under the road infrastructure task credit (RITC) scheme. Toriola insists the project is primarily part of the Nigerianisation agenda.
“In line with our desire to plant deeper and more permanent roots in Nigeria, we have also initiated plans to commission a purpose-built, state of the art MTN Head Office, designed to act as a central hub for our network, a catalyst for creativity and innovation, and a showcase for the flexible working structures that are driving efficiency gains in this new normal working environment,” Toriola said.
However, the company would also benefit from tax holidays that come with the scheme. The RITC grants income tax credit to companies and individuals that provide funding for the refurbishment and rehabilitation of roads. The Dangote Group and Flour Mills are some of the companies benefiting from their participation. NNPC also recently announced it would be taking advantage of the scheme to construct a total of 1,804.6 kilometres of roads.
Sharing the MTN wealth
Much has been said of the 575 million shares MTN Nigeria made available for specifically Nigerian retail investors in December 2021. The company later announced in February 2022 that it had received a total application for about 802 million units and decided to allocate 661.3 million shares higher than its original offer.
Some pundits said the move was a strategy by the telco to tackle the foreign exchange challenges it has faced especially with its foreign investors. Opening up its business to Nigerian investors ensures that most of its transactions are denominated in naira.
Others see it as a plan to raise more capital to fund many of its infrastructural ambitions. Ernest Ndukwe, chairman of MTN Nigeria had in August announced the company’s plan to invest over N600 billion in network infrastructure over the next three years to improve telecommunications services across the country.
“We plan to connect approximately 1000 rural communities to our network this year with an additional 2000 communities in 2022,” he said.
Toriola says the goal is to sell down the 65 percent stake held by the MTN Group in the Nigerian unit. This automatically leaves Nigerian investors with a controlling stake in the company.
“It’s a brilliant strategy that effectively protects MTN from unwholesome regulatory threats,” says an expert who wouldn’t want to be named to speak freely. “Imagine the CBN or the Nigerian government wants to slam a fine on MTN, Nigerians who are their shareholders will rise up to fight.
Toriola, however, says MTN is only making Nigerians a part of its journey.
“We’re not going anywhere; it is a genuine intention to share the wealth with more Nigerians. But MTN itself is going nowhere. And we’re continuously investing more and more to anchor ourselves on a permanent basis to this country,” Toriola said in an interview with BusinessDay.
The next step for the company is to secure the CBN‘s final approval for PSB after it got an Approval-in-Principle (AIP) last year. MTN has also suggested that it is going to make its fintech business separate from the telecommunication business.
