Africa’s largest mobile network is now being probed for possible insider trading

A customer leaves an MTN shop in Johannesburg April 10, 2012.
A customer leaves an MTN shop in Johannesburg April 10, 2012.
Image: Reuters/Siphiwe Sibeko
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It has been two weeks from hell for MTN, Africa’s largest mobile phone company.

First, there was the news the company had been hit with a $5.2 billion fine in Nigeria for failing to adhere to a government edict to disconnect its unregistered mobile phone users.

Then came the revelation that the Johannesburg Stock Exchange (JSE) was investigating the company for insider trading. The charge relates to the manner in which the company broke the news of the fine to its shareholders. The news became public on the morning of Oct. 26. But MTN only confirmed it to shareholders later that afternoon. This discrepancy is now the subject of an investigation by the regulator.

“As with all price sensitive announcements, the Market Regulation team is looking into trades that took place before the announcement in order to determine if there is any evidence of possible insider trading,” Peter Redman, a senior technical advisor at the JSE, said in a statement on Friday.

The bad news hasn’t stopped there. On Monday morning (Nov.2), the JSE suspended MTN from trading after the company’s shares fell by as much as 8% following reports out of Nigeria that MTN had agreed to pay the fine.

Quoting unnamed sources, the Vanguard newspaper said that, following meetings between MTN executives and vice president Yemi Osinbajo over the weekend, the company had agreed to “stagger payments” on the $5.2 billion fine.

But Bloomberg contradicted the Vanguard report, suggesting that negotiations between the parties are still ongoing and that MTN hasn’t agreed to the fine and are, in fact, challenging it. Additionally, MTN said in a statement that it was in talks with Nigerian officials in an attempt to resolve the matter, Reuters is reporting. Sifiso Dabengwa, the company’s chief executive, is in Abuja trying to convince the Nigerian government to reduce the fine. Following the news, the MTN shares resumed trading on Monday afternoon in Johannesburg.

Ever since the news of the fine became public last week, MTN’s shares have fallen by 25%, wiping out $4.37 billion of the company’s market value. The company’s credit rating has also taken a hit after Moody’s changed its outlook to negative, citing liquidity fears. “The change in outlook to negative from stable reflects the potential for deterioration in the group’s credit metrics and liquidity profile if MTN has to pay the full equivalent $5.2 billion fine in Nigeria,” the ratings agency said in a note. The government has issued a deadline of Nov. 16 for the fine to be paid.

There are also fears about MTN’s future in Nigeria. The country is its biggest market, where it boasts 63 million subscribers of the country’s 146 million users. It also generates significant revenue for Nigeria’s economy. But some analysts are suggesting that the fine is a way for the government to plug a hole in its income deficit following declines in oil revenue.

Another explanation may be that the decision has its roots in national security with terrorist and kidnapping incidents frequently being organized using mobile phones. And reports out of Nigeria suggest that MTN has been frustrating officials by showing no sense of urgency in complying with the law. The large fine was a way for Nigerian officials to make an example of MTN. “The government insisted they must be sanctioned to make the right statement,” an unnamed official told News 24.