Nightmare for South African multinationals as hammer falls on MTN, IBTC

stanbic ibtc mtnMonday was a bad day for South African multinationals, MTN and Standard Bank, as sanctions imposed on their operations in Nigeria caused panic back home.

Bloomberg reported that MTN Group Ltd plunged the most in nearly 17 years after the Nigerian Communications Commission (NCC) fined Africa’s biggest wireless company $5.2 billion for failing to disconnect customers with unregistered SIM cards.

The movements came as another major South African multinational, Standard Bank Group, Africa’s largest lender by assets, saw directors of its Nigeria unit – including its chief executive officer and chairman – suspended, after they were accused of posting misleading statements over two years.

MTN’s stock declined more than 12%, the biggest one-day decline since November 1998, to 167 rand. That’s the lowest closing price since June 2013 and values the Johannesburg-based company at 308 billion rand ($23 billion). MTN was the biggest decliner in percentage terms on the benchmark FTSE/JSE Africa All Share Index, while also weighing more on the gauge than any other security on Monday.

The penalty relates to the timing of the disconnection of 5.1 million MTN Nigeria subscribers in August and September and is based on a fine of 200,000 naira ($1,005) for each unregistered subscriber, Johannesburg-based MTN said in a statement on Monday. MTN Nigeria is in talks with the NCC  to resolve the matter, the company said.

The magnitude of the penalty “is way, way higher than the profits they’re going to make from Nigeria for many years to come,” Wayne McCurrie, a Pretoria-based money manager at Momentum Asset Management, which owns MTN shares, said by phone.

MTN, which has about 233 million customers in 22 countries in the Middle East and Africa, cut its full-year forecast for subscriber numbers on October 22 after the 5.1 million Nigerian customers were disconnected following a review into how they were able to register for phone contracts.

Nigeria is the company’s biggest market, with about 62 million customers at the end of September.

“We acted within our mandate as a regulator,” Tony Ojobo, head of public affairs at the NCC, said by phone. “It is only MTN for which we have been able to establish clear infractions. 5.2 million SIMs had to be forcefully disconnected by the NCC.”

Also on Monday, the Financial Reporting Council (FRC) ordered the suspension of four past and current Stanbic IBTC Holdings Plc directors.

CEO Sola David-Borha and Chairman Atedo Peterside were the two current directors of the unit of Standard Bank Group Ltd. to be suspended, the regulator said in a statement on its website on Monday.

Also suspended were KPMG’s Arthur Oginga and Daru Owei.

The FRC is investigating to establish the “extent of their negligence in the concealment, accounting irregularities and poor disclosures” in the company’s financial statements of 2013 and 2014.

The council pointed out several inconsistencies in the bank’s reporting, including IBTC’s failure or refusal to disclose what exactly millions of naira grouped under “donations” and “others” were used for.

In one instance, the total fee IBTC bank paid to KPMG Professional Services for non-audit services was found to be inconsistent with what was disclosed in the financial statements for the years under review, the council said.

“The Council observed that Stanbic IBTC regularly flouts CBN regulations. In 2014 for instance, a total penalty of N28, 000,000 was imposed on the group.

“Stanbic IBTC seems to have a penchant for poor disclosures which further corroborates the findings in this report,” the statement said.

The company’s directors have been directed to withdraw the annual reports, the FRC said in the statement.

FRC also asked the Securities Exchange Commission (SEC) to “consider withholding her authorisation of any request made by Stanbic IBTC” on its rights issue until those statements are corrected.

SEC suspended Stanbic’s proposed share sale in September as the FRC began an investigation into the company’s financial statements. The company received approval in June to issue 800 million shares, after announcing plans a month earlier to raise 24 billion naira ($121 million) of equity.

The allegations are inaccurate and Stanbic “does not agree that its accounts are defective or require rectification,” the bank said in a statement e-mailed by spokesman Usman Imanah, adding that a legal case was ongoing.

“The directors of Stanbic IBTC have not been ousted,” he argued.

Stanbic’s shares fell 5% to 21.85 naira by the close of trading in Lagos, dropping the most in more than two months.