SOME GOOD NEWS

MTN renews its license in Nigeria despite the prospect of a $5.2 billion fine

Obsession
The Next Billion
Quartz africa
Obsession
The Next Billion
Quartz africa

In the midst of negotiations over the payment of a record $5.2 billion fine to the Nigerian government, MTN has managed to get its operational license for Nigeria renewed and extended for an additional five years.

“With this renewal and extension, MTN’s operating spectrum which was issued along with the Digital Mobile License (DML) in 2001, has now been extended to 31 August 2021,” Africa’s largest mobile phone company, said in a statement. The extension will cost the company $94.2 million and the amount needs to be paid by Dec. 31 for the renewal to take effect.

MTN, the leading mobile carrier in Nigeria, is in the midst of its worst business stretch since it entered the country in 2001. The fine issued last week was due to the company’s failure to adhere to an edict by the Nigerian Communications Commission (NCC) to disconnect users with unregistered sim cards. The deadline to comply with the fine is Nov. 16.

The company is also a subject of an insider trading investigation in South Africa around trades made in the run-up to the announcement of the fine to shareholders. The whole crisis has been immensely costly to MTN. Since news of the fine became public, the company’s shares have lost 22% in value, according to Bloomberg. Or put another way, over the course of a week, the company lost over $5 billion in market cap.

The decision by the regulator to renew MTN’s operating license may be the Nigerian government’s way of calming down jittery foreign investors. Ever since the fine’s announcement, some analysts have suggested that the decision could undermine investor confidence about Africa’s largest economy. “However way this ends, the lag effects will alter investors’ perceptions about the business environment in Nigeria,” Manji Cheto, vice president of Teneo Intelligence, told Quartz.

By re-issuing MTN with a license, the Nigerian government may be saying to prospective investors that, as long as you follow the law, you are welcome to do business.

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