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A general view of the headquarters of South Africa's MTN Group
Reuters/Mike Hutchings
It’s all over.
CASE CLOSED

Africa’s largest phone company will pay $1.7 billion to settle its Nigerian sim card dispute

By Yomi Kazeem

Eight months after being initially slapped with a record $5.1 billion fine, MTN has reached an agreement to settle its sim card dispute with the Nigerian government for $1.7 billion.

MTN shares jumped more than 20% on the Johannesburg Stock Exchange after news of the deal broke on Friday (June 10). Shares later settled around 13% ahead of the previous day’s close.

The initial fine was imposed as a result of MTN’s failure to disconnect unregistered sim cards which the government claimed were being exploited by insurgents in the country’s North East. The $1.7 billion settlement will be paid over three years.

MTN also said it would be moving ahead with listing its shares on the Nigerian Stock Exchange, which appears to be one of the terms worked out in the negotiations. Nigeria is the South Africa-based company’s biggest market. Its shares are currently primarily listed on the Johannesburg Stock Exchange, where they have been on roller-coaster ride with every twist and turn in the nine-month long dispute.

 

The journey to reach a final settlement has been long and convoluted . After imposing the $5.1 billion fine last October, Nigerian authorities postponed the deadline for payment which was due only a month later. The fine was then reduced to $3.9 billion (after the Nigerian Communications Commission said an initial reduction to $3.4 billion was “a typo”). Despite the 25% reduction, MTN sought to challenge the fine in court, specifically questioning the Nigerian regulator’s authority to impose the fine. But rather than lead to a full-blown litigation process, both parties sought to reach an out-of-court settlement. To manage its negotiations, MTN hired Eric Holder, the former attorney general of the United States who has negotiated major settlement deals (paywall). Afterwards, the company dropped its court case and made a “good faith payment” of $250 million towards an eventual settlement.

Asides the eventual $1.7 billion agreed settlement, the eight month saga has been particularly costly for MTN as it resulted in a personnel shake-up and stock market losses. With its operations in Nigeria previously under threat, Phuthuma Nhleko, MTN chairman says the settlement “is the best outcome for the company.”

“The relationship between MTN, the Nigerian government and the Nigerian Communications Commission has been restored and strengthened,” Nhleko added in a statement. The company also says it will ”take immediate steps  to ensure listing of its shares on the Nigerian Stock Exchange as soon as is commercially and legally possible.”