MTN Nigeria is steadily, but unconsciously, erecting for itself a notorious reputation for romancing with controversy. It might be a leader in the telecoms sector today (in terms of subscriber base), but since berthing in Nigeria's shores in 2001, courting controversy has become its second nature.
In less than two decades of operations, MTN's recurring brushes with the regulatory authorities casts it in a negative frame. Its latest sanction by the Central Bank of Nigeria (CBN) for regulatory infractions as well as its being accused by the Attorney General of the Federation of tax evasion only confirms, like the leopard, it never changes its spots.
Those outside looking in may be hoodwinked into believing the narrative that CBN's decision a fortnight ago to wield the big stick against MTN along with four of the country's top banks was a witch-hunt.
Some analysts have cited CBN's decision as another manifestation of the "rising arbitrary behaviour of policy, regulatory and law enforcement authorities" contributing to the country's failing economic health.
Coming on the heels of the second quarter 2018 gross domestic product (GDP report by the National Bureau of Statistics (NBS), the witch-hunt narrative sounds a sexy argument.
The report, which showed the economy declining further by -0.45 per cent points, from about 1.95 percent in the first quarter, to about 1.5 percent, identified the communications sector as the main driver of the modest growth.
Telecoms sector accounted for 11 of the 11.8 per cent GDP growth in the second quarter.
Some analysts say CBN's sanctions on MTN, a leading player and major employer in the sector, will slow down investment and ultimately dissuade foreign direct investments (FDIs) to the entire economy.
Others see a tinge of blackmail in the argument. True, MTN is a major player in the telecoms sector. True, it has created jobs for many Nigerians, but that should not be a license for lawlessness.
MTN's penchant for disobeying established rules of engagement, abuse of laid down procedures, or deliberate subversion of regulatory directives could as much be adversarial to the economy.
Where a leading player see itself above the law and engage in below the line activities, because of what it thinks it has contributed, could be injurious to the economy.
Per second billing controversy
May 16, 2001, MTN launched out as the first GSM network to make a call ahead of ECONET (now Airtel), which got the operational license first from the Nigerian Communications Commission (NCC).
But, Nigerians would still recall MTN claimed per second billing was impossible for subscribers, despite evidence to the contrary in other climes, including South Africa, where MTN comes from.
Not even NCC's repeated regulatory directives on the issue could sway MTN from its position. For over three years, MTN creamed off huge profits from the excess costs by millions of its subscribers in per minute calls.
On December 1, 2003 Globacom, Nigeria's premier indigenous telecoms firm, came with a different promise. Globacom's roll out of Glo-Mobile on August 22, 2003 changed the narrative and gave MTN a reality check.
With Globacom's per second billing, MTN lost a sizable chunk of its subscriber base. Globacom's per second billing stirred ECONET to join on November 26, 2003.
To save its rapidly depleting subscriber base, MTN was compelled to, grudgingly, introduce per second billing it said was technologically impossible a few years earlier.
Clearly, MTN never had Nigeria' interest at heart from the get go. Its belief appears to be, in business, the end justifies the means, irrespective of whose ox is gored.
Unregistered subscriber SIM controversy
In 2013, the NCC directed all operators in the Nigerian telecoms sector to disconnect from their networks all unregistered subscriber identity module (SIM) cards on or before July 1 of that year.
The penalty was well known to operators. NCC cautioned operators against the risk of failing to comply.
Every SIM card not disconnected before the deadline attracted a fine of N200,000, pursuant to Regulations 19 and 20, Section 15(2) of the Registration of Subscribers Regulations, Act 2011.
For over two years, MTN ignored the regulatory directives. In October 2015, NCC slammed a N1.04 trillion (about $5.2 billion) fine on MTN for failure to disconnect 5.1 million unregistered subscribers' SIM cards from its network.
Shortly after the fine was announced, MTN stirred another controversy, claiming it got a 35 per cent reduction from the NCC.
The Commission denied, confirming that 25 per cent was actually granted, with MTN expected to pay N780 billion, and not N647 billion.
Regardless, at the expiration of the deadline on November 15, 2015, MTN failed to pay up, compelling the NCC to extend the deadline to December 31, 2015.
Yet, no dice, except another controversy about an alleged bribe to a senior presidency official who allegedly facilitated the reduction in the fine.
Although the official accused of receiving the bribe denied any involvement in the allegation, the presidency approved a massive cut in the fine from N780 billion to only N330 billion, fueling suspicion.
To date, apart from the initial N50 billion paid in February 2016, and perhaps two additional tranches out of six, MTN has only paid only half of the total fine.
Promise deferred on shares listing
MTN is believed to have also used a bait to convince the Presidency to approve the cut in its fine. The firm promised to enlist its shares in the Nigerians Stock Exchange (NSE), just as it has done in the Johannesburg Stock Exchange (JSE) in its South Africa country home.
The NSE listing would have given Nigerians opportunity to buy stakes in the company as a demonstration of MTN's genuine interest and commitment to the growth of the Nigerian economy.
However, over two years since the promise was made, the Securities and Exchange Commission (SEC) confirmed recently MTN was yet to file any application requesting the beginning of the initial public offer (IPO) process.
Attempt to frustrate fine
To frustrate the enforcement of the fine, MTN began secret moves to transfer funds from its accounts in about 21 commercial banks. But, a ruling by the Federal High Court in Lagos in a case filed by the office of the AGF stopped the move before it went far.
In its 2015 financial statement, MTN Group published massive losses in its operations during the year, citing declining performance in the Nigeria subsidiary based on the regulatory sanctions.
Billions repatriated abroad
Same year, PREMIUM TIMES uncovered how MTN had been funneling billions of Naira abroad through complicated and obnoxious transfer pricing schemes to deny Nigeria its fair share of tax revenues.
The report showed MTN was shipping the billions to two of its overseas affiliates in tax havens - MTN Dubai and MTN International in Mauritius.
For instance, in 2013 alone, MTN Group set aside about N11.4 billion from MTN Nigeria to pay to MTN Dubai.
Details revealed MTN made the questionable transfers without the official authority of the National Office for Technology Acquisition & Promotion (NOTAP) responsible for authorizing such transfers.
Even when the agreement MTN had with NOTAP on the issue expired in 2010, the company continued to make illegal transfers abroad.
In total, reports said MTN may have wired about N90.2 billion out of Nigeria in management fees alone since arriving the country in 2001.
Apart from transfer pricing, MTN was equally accused of creating artificial operating costs in its operations to swindle Nigeria of more billions by under-declaring its profits for tax purposes.
Senate, CBN probe irregular CCIs
In 2016, the Senate Committee on Banks, Insurance and Other Financial Institutions probed how MTN, between 2006 and 2016, allegedly repatriated illegally about $13.9billion from Nigeria after side-stepping the due process for issuing Certificates of Capital Importation (CCIs) within 24 hours of conversion.
On August 29 this year, the CBN came out with the report of its March 2018 investigations on the matter.
The report indicted MTN and the four banks (Standard Chartered Bank, Stanbic-IBTC, Citibank, and Diamond Bank) for being complicit in alleged remittance of foreign exchange using irregular CCIs issued on behalf of some of its offshore investors.
The CBN spokesperson, Isaac Okorafor, said the transactions violated the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 and the Foreign Exchange Manual, 2006.
Consequently, the CBN sanctioned MTN and the four banks. While the banks were asked to refund a total of N5.87 billion (Standard Chartered N2.4 billion; Stanbic IBTC N1.89billion; Citibank N1.27billion and Diamond Bank N250 million), MTN was to return about $8.134 billion (about N2.5 trillion) to the CBN.
Mr Okorafor said Standard Chartered repatriated about $3.45 billion; Stanbic IBTC $2.63 billion; Citibank $1.77billion and Diamond Bank $348.9million.
Besides, the office of the AGF also accused MTN of illegally converting about $399.6million of its shareholders' loan to preference shares (interest free loan) and repatriating along the $8.134billion.
The CBN said between 2001 (when MTN commenced operations in Nigeria) and 2006, shareholders invested about $402.59million in the telecoms firm through foreign currency cash transfers and equipment importation using the four banks.
Further details were that although about $59.44million of the investment was as shareholders' loan and $343.15million as equity, MTN's financial statements for the year ended December 31, 2007 captured $399.6million as shareholders' loan and $2.996million as equity investment.
Although the transactions were in accordance with the shareholder's agreement, the CBN said they not only contrary to the CCIs issued by the banks, they also constituted a rendition of false returns.
Following MTN's request through Standard Chartered Bank for regulatory approval to convert the shareholder's loan to preference shares, the CBN said an approval-in-principle was granted on November 13, 2007.
The final approval was subject to MTN implementing its November 08, 2007 board resolution and submission of documentary evidence of compliance to the director of the CBN's Trade and Exchange Department.
Also, MTN was not to remit any interest or principal repayment to shareholders from the date of the loan to the date they were converted to preference shares.
Following MTN's failure to meet the conditions, CBN withheld issuance of a final approval to the company's request.
But, MTN still went ahead to convert the shareholders' loan to preference shares, with Standard Charted issuing new CCIs, which facilitated the repatriation of $8.134billion between 2007 and 2015.
The CBN said three CCIs were issued outside the regulatory 24 hours without its approval.
Contrary to CBN's foreign exchange manual requiring CCIs transfers based on customer's instructions to a bank of its choice along with the transaction history, Standard Chartered proceeded to give confirmation to Citibank and Diamond Bank, rather than transfer the CCIs to them as required by law.
Role of the banks
The CBN said Standard Chartered equally failed to issue a letter of indemnity to the CBN against double remittance in respect of 10 CCIs transferred to it by Diamond Bank and Citibank as required under law.
For Stanbic IBTC, the CBN accused it of receiving eight of the CCIs totaling $377.2million to repatriate $929.05million as proceeds of divestment valued at $42.7million.
The CBN also accused Stanbic IBTC of falsely reporting 35 CCIs worth $313.7million inappropriately as "other purchases" in its returns for February 2008, instead of "capital importation."
Besides, Stanbic IBTC also illegally issued eight CCIs of $58.36million of foreign exchange sourced locally as shareholders' loan. About $905,260.20 dividends was repatriated on the CCIs issued based on locally sourced capital.
CitiBank allegedly issued seven CCIs of about $42.13million, which were subsequently transferred to Standard Chartered at MTN's request on February 6, 2006.
The CBN said four of the irregularly re-issued CCIs by the bank outside the 24 hours period as capital imported as cash contravened the law.
The bank also purchased $535million based on photocopies of Form "A" provided by Standard Chartered.
For Diamond Bank, the CBN said it issued three CCIs outside the regulatory 24 hours in favour of Dantata Investment for $5million without converting the foreign exchange received into Naira as required by law, and allowing about $102.55million to be repatriated out of the country.
Central bank of Nigeria building
CBN said a review of the CCIs also showed no Form "M" was opened as evidence of the utilization of the FX for the importation of goods (as "Not valid for FX") into the country.
Again, Diamond Bank remitted about $348.9millionas dividend to MTN offshore corporate shareholders without any documentary evidence of the audited account of the company to justify the payment of the dividend declared and paid by the company in violation of the law.
About $352.2million was issued by the bank on behalf of Standard Chartered and Stanbic IBTC for various CCIs issued to MTN.
Regardless, Standard Chartered, on December 10, 2009, described its issuance of all the CCIs as an "unintended omission."
On May 25, 2018, CBN's Committee of Governors met with the four bank's managements and MTN representatives who claimed they did nothing wrong to deserve the sanctions.
To shoe fair hearing, the committee gave them seven days to come forward with documentary evidence to back their positions. After the deadline, the CBN said another 21 days was given without any response, before the August 29 sanctions were announced.