Contrary to the federal government’s expectations, audited and unaudited financial results of MTN Communications Nigeria Limited have revealed that it may be impossible for the telecoms firm to pay the N1.04 trillion fine imposed on it by the Nigerian Communications Commission (NCC) in one tranche.

Last October, NCC, the telecoms industry regulator, imposed the fine on the Nigerian subsidiary of the South African firm for failing to deactivate 5.2 million unregistered subscribers on its network.
Following pleas to the federal government, NCC reduced the sanction by 25 per cent to N780 billion and gave MTN till December 31, 2015 to pay the fine.
But instead of paying the revised fine, MTN sued NCC and the Attorney General of the Federation, challenging the regulator’s powers to impose the fine.
On this basis, the federal government reversed the concession it had granted MTN on the fine and is now demanding that the company pays the entire N1.04 trillion.

However, the Consolidated Statement of MTN Niger and its subsidiary as at December 31, 2014, which was exclusively obtained by THISDAY at the weekend from an official in NCC, showed that the company had current assets comprising inventories, trade and other receivables, current investment, restricted cash, and cash and cash equivalents of N402 billion.
The amount is far less than the reduced fine of N780 billion or even the higher fine of N1.04 trillion.
MTN’s 2014 financial result was audited by PricewaterhouseCoopers (PwC).
Conventionally, if a company is faced with a fine or levy, it would not be expected to sell any of its non-current assets such as property, plant and equipment, or to borrow to pay the fine, but would be reasonable to generate such sums from its current assets which are liquid in nature.
However, its profit and loss accounts showed that it posted revenues of N824.8 billion, a profit before tax of N290.6 billion and profit after tax of N209 billion in 2014.

Furthermore, in the documents obtained from the NCC source, MTN Nigeria’s unaudited (management) accounts up till December 31, 2015, showed that its total cash and investment available stood at N355 billion.
It was gathered that the documents were present by the telecoms company to NCC when it pleaded for leniency on the fine.
In the presentation to NCC, MTN explained that the N355 billion was available to run the business, of which N100 billion has to be paid to banks in less than 12 months with the balance payable in 2017.
In the documents, MTN showed it had a shareholders’ fund (capital of the business) of about N260 billion, including the 2015 profit after income tax of about N190 billion (unaudited) and historical profit of about N6 billion.
Its loan repayments and annual capital re-investments (which averaged about N200 billion in the past five years) are funded with the profit and loans obtained from local and foreign banks.

Precisely, MTN Nigeria currently has a loan portfolio of about N350 billion, of which as indicated earlier, N100 billion is payable in less than 12 months and a tax liability of N90 billion, payable in full by June 30, 2016.
This implies that the telecoms giant’s available cash as at December 31, 2015, can fund the loan repayment (N100 billion) and tax obligation (N90 billion) due in less than 12 months, which is usually the cycle every year.
In addition, it revealed that MTN Nigeria keeps a working capital (in cash) of between N40 billion and N50 billion to ensure the smooth running of its business at any point in time.

When contacted on its financial statements, an MTN official confirmed that the company had made the presentation to NCC and the federal government, adding, however, that the Nigerian government had remained adamant that the fine must be paid.
He acknowledged that MTN had acted with impunity and brought this problem on itself, but was concerned that the fine could bankrupt the company, which should not be the intention of NCC or the federal government.
“We hope that we can get a reprieve and will keep meeting with the federal government while the matter is in court to arrive at an amicable settlement. We have learnt our lesson, but the government should not kill the business and throw thousands in the job market at a time like this,” he said.

Since the fine was imposed, MTN’s parent company in South Africa has lost 25 per cent of its market value and faces lower revenue, as the economic downturn takes its toll on subscribers in Nigeria, its biggest market in Africa.
Meanwhile, the founder and retired Chairman of Visafone Communications Limited, Mr. Jim Ovia, has said that Visafone remains open for business and will be leveraged to expand the MTN’s roll out of its LTE broadband services.
In a statement at the weekend, he said this would ensure the continuity of the Visafone trademark broadband, enterprise solutions and voice services to its customer base.
According to Ovia, the acquisition of Visafone by MTN was clearly a very healthy development that would further accelerate the growth of ICT in Nigeria.

“The advent of mobile telecommunication services into the country over a decade ago has impacted Nigeria positively and created a new industry powered by technology and innovation.
“Looking back, we have recorded progress and achievements that have positively impacted the growth of other sectors such as banking, e-commerce and entertainment.
“We recognise that the industry holds greater potential that can further catalyse Nigeria’s economic growth generally,” he said.
With regard to manpower development, Ovia stated that contrary to media reports, MTN did not sack any staff of Visafone after the acquisition.

He said of the 350 professional staff that Visafone had prior to the acquisition, some voluntarily resigned and were adequately compensated.
Ovia further revealed that in a bid to ensure a seamless transition of the process and maintain business continuity, some staff of Visafone are being re-engaged by MTN in order to maximise the use of key assets such as network and technology