Violation: MTN Faces §5.2bn Fine by NCC Over Falae's Abduction

By: Chijioke Ohuocha and Tiisetso Motsoeneng

By September, other operators, had cut off those they could not verify while MTN had made a "partial attempt. Photo: REUTERS/SIPHIWE SIBEKO

LAGOS/JOHANNESBURG Nov 6 (Reuters) - When Nigeria failed to trace owners of SIM cards used by kidnappers of a prominent politician in September, it was the final straw for the west African country after what it called a string of violations by telecoms firm 

Africa's biggest mobile phone company was given a $5.2 billion penalty by the Nigerian Communications Commission (NCC) last month after the South African company failed to cut off users with unregistered SIM cards from its network.

Nigeria has been pushing industry players to verify the identity of their subscribers on worries that unregistered SIM cards were being used for criminal activity in a country facing Islamic militant group Boko Haram's insurgency.

The fine, which is based on a $1,000 for each phone line MTN failed to cut off, has left investors, including its biggest shareholder, wondering how the company failed to comply with the law that carried that such a heavy penalty.

"We are equally concerned that MTN seems to have failed to anticipate the fine and take preventative actions," said the Public Investment Corporation, MTN biggest shareholder with about 16.6 percent stake.

The NCC raised the prospect of a penalty on MTN Group and other players in Africa's biggest economy at least two months before imposing the fine on the Johannesburg-based company.

But the final straw for MTN, according to an NCC source, came a month after the high profile kidnapping of former Nigerian Finance Minister and runner-up candidate in the 1999 presidential election, Olu Falae, on Sept. 21.

CONFLICTING NUMBERS

The company said this week that it was in talks with Nigerian authorities about a penalty which would wipe out more than two years of annual profit.

When the NCC imposed the penalty MTN had been talking with the regulator about the exact number of people that needed to be disconnected from the network, two sources familiar with the matter.

In a meeting with the state security agency and all operators on August 4, the NCC had asked MTN to cut off between 10 and 18.6 million users but MTN told the regulator that it only had 5.2 million users whose identity could not be verified, an NCC source said.

"MTN was under the presumption that it can carry on business as usual because it was still in discussion with the regulators," the source said.

MTN has said the fine related to the "timing of the disconnection" of subscribers and is expected to argue that it could not cut off any subscribers by the deadline date because it had been in talks with regulator.

By September, other operators, which include United Arab Emirates' Etisalat and India's Bharti Airtel, had fully verified their users and cut off those they could not verify their identity while MTN had made a "partial attempt", the NCC said.

Then, on Oct. 22, four weeks after the abduction of Falae and about two months after the August deadline, the NCC, on advice from the state security agency, decided to impose the fine but only made it public four days later.

“When I told the kidnappers that my family could raise N2m for ransom against the N100m they demanded, they rejected it and told me, ‘Is it Boko Haram you are giving N2m to?’ stated, Chief Olu Falae, while recalling his ordeal in the hands of kidnappers upon his release.

"These SIM cards with invalid registrations pose a grave security risk to the country," the NCC memo said. "The recent kidnapping of the former finance minister Chief Olu Falae is one example of this risk."

MTN also faces a Johannesburg bourse investigation on the timing of its announcement of the penalty. The company declined to comment.

($1 = 13.7782 rand)

($1 = 199.0000 naira) (b
Sources: Thomson Reuters