MTN’s top investor forces board shakeup in push for fewer disputes
The Public Investment Corporation aims to avoid regulatory, legal and political problems that have hit MTN’s share price
MTN Group’s biggest shareholder is pushing for changes at Africa’s largest mobile-phone company to avoid the regulatory, legal and political disputes that have cut its share price by more than half over the past four years.
The Public Investment Corporation (PIC) built a 26% stake in Johannesburg-based MTN by late November 2018 and used that to call for the replacement of chair Phuthuma Nhleko, people familiar with the matter said.
Africa’s biggest fund manager, which is state-owned, also sent a letter to MTN demanding a board reorganisation, said one of the people. That resulted in the appointment of more politically connected directors.
In May, the carrier obliged, announcing Nhleko’s planned departure and replacement, along with other director changes and a new separate group of prominent advisers.
The PIC did not respond to a request for comment. Nhleko declined to comment.
Interactions with the PIC have been at the board level, MTN CEO Rob Shuter said in an interview in London last week.
“An important thing for them was on our board evolution,” he said. MTN’s media office did not comment further.
The PIC was moved to act following a series of disputes in Nigeria, Iran and elsewhere, the people said, asking not to be identified as the concerns were not disclosed publicly.
The biggest of those was a $5.2bn fine in Nigeria in October 2015, which was eventually settled for less than $1bn after about eight months of negotiations.
The PIC, which manages the pension funds of SA government workers, wants the new chair, SA’s former deputy finance minister Mcebisi Jonas, and the board to resolve outstanding issues such as a $2bn tax dispute in Nigeria, the people said.
MTN’s separate advisory board is a council of “wise old men”, who can directly contact MPs and decision-makers in the countries where MTN operates, one of the people said.
The board does not have a Nigerian director even though that country is MTN’s biggest market by subscribers. From July, it will include Lamido Sanusi, a former Nigerian central bank governor who is now emir of Kano, the second-most influential Islamic position in the west African country.
Jonas is set to take over as chair in December, MTN said on May 3. Vincent Rague, a Kenyan International Finance Corporation veteran, is also joining.
The advisory board will be chaired by former SA president Thabo Mbeki, who has mediated in a number of political disputes across the continent, and will include a former Ghanaian president, John Kufuor, and Mohamed Elbaradei, the one-time head of the International Atomic Energy Agency.
Nhleko, who is credited with playing a large part in building the company into a continent-wide giant with 221-million customers, will also sit on the advisory board.
A catalogue of disputes in MTN’s markets, which include nations at war in the Middle East and Africa, have depressed the share price and allowed rival Vodacom to surpass MTN in terms of market capitalisation.
Since MTN disclosed that the PIC had a 26% stake on November 29 2018, the share price has gained 20% compared with a 6% decline for Vodacom.
The PIC “need us to manage portfolio risk”, MTN CFO chief financial officer Ralph Mupita said in the London interview. “As a company we operate in markets such as the Middle East and others, so we manage the risk that come with sanctioned markets and other issues.”
In October 2015, MTN was fined $5.2bn by a Nigerian regulator for not disconnecting 5.1-million subscribers that did not have proper documentation. While the penalty was eventually reduced to less than $1bn, it cost then CEO Sifiso Dabengwa his job.
The PIC, which held 13% of the company at the time, said the board should have taken more responsibility.
In August 2018, Nigeria ordered MTN and four banks to refund $8bn in dividends that it said were illegally expatriated in the eight years through 2015. The company ended up agreeing to pay $52.6m four months later.
In September 2018, Nigeria’s attorney-general ordered MTN to pay $2bn in taxes it says are owed. The dispute continues.
In February, SA police arrested a former ambassador to Iran on corruption charges related to the award of a mobile-phone licence to MTN after it was initially given to Turkcell. Turkcell has been taking legal action against MTN for several years.
Also in February, the head of MTN’s business in Uganda was deported over what the government there calls a “national security matter”. Three other executives were also deported. The CEO was cleared to return last week.