Nigeria fine deals massive blow to MTN

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A poor financial performance in Nigeria and South Africa – on top of a massive fine being imposed by the Nigerian government – will push MTN’s headline earnings per share into the red, the group announced.

MTN said that expects to report negative basic headline earnings per share (HEPS) and basic earnings per share (EPS) for its half-year results for 2016, compared to the reported HEPS of 654 cents and EPS of 653 cents in the year prior.

The expected decline in the HEPS and EPS is primarily as a result of the Regulatory fine imposed on MTN Nigeria, following a resolution with the Federal Government of Nigeria on 10 June 2016.

The Nigerian regulatory fine is expected to have an estimated negative impact of 474 cents on HEPS and EPS, respectively.

The Nigerian Communication Commission (NCC) hit MTN with a $5.2 billion fine last year, for failing to disconnect more than five million unregistered SIMs on its network.

This fine was later reduced by 25%, but MTN elected to take the matter to Nigeria’s courts. It later dropped the case and paid a “good faith” sum of ₦50 billion (R3.8 billion at the time) in an effort to achieve an amicable settlement.

The groups finally settled on an amount of ₦330 billion, paid over three years  – the equivalent of R25 billion.

The ₦50 billion (R3.8 billion) paid in good faith and without prejudice by MTN Nigeria forms part of the monetary component of the settlement – leaving a balance of ₦280 billion outstanding which will be discharged over time to 2019.

Other poor performances

Foreign exchange losses in a number of operations, losses from joint ventures and associates and hyperinflation adjustments on MTN Irancell are also expected to have a negative impact on HEPS and EPS for HY2016, MTN said.

“The results are further expected to be negatively impacted by the under-performance of MTN Nigeria and MTN South Africa,” MTN said.

“MTN Nigeria’s performance was impacted by the disconnection of 4,5 million subscribers in February 2016, the final batch of subscribers to be disconnected in compliance with the Nigerian Communications Commission subscriber registration requirements.”

“MTN South Africa is expected to report a decline in the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin, impacted by the marked increase in handsets sold during HY2016,” it said.

MTN is currently in the process of finalising its financial results for the six months ended 30 June 2016, which will be announced on SENS on Friday, 5 August 2016.

By 11h45, MTN’s shares were trading lower on the JSE, down R3.78 or 2.7%, at R137.90.

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