MTN South Africa’s share price took a severe pounding yesterday as news broke over a $2 billion back taxes slammed on the company by authorities in Nigeria broke yesterday.
Trading opened on the Johannesburg Stock Exchange (JSE) yesterday at 8684 ZAR and began to slid once news of the back taxes broke. The stock closed at 7225 ZAR down 16.8%. The stock has lost over 30% since the crisis began. Year to date, the shares are down 46.1%.
In dollar terms, market capitalization has also dropped 35.2% from $13.07 billion on the day news of the refund broke out to $8.46 billion as at yesterday.
Nigeria’s Attorney General (Mr Abubakar Malami), while conducting an investigation into corporates’ tax compliance in Nigeria, calculated that the company owes the Nigerian Government the sum of $2 billion in back taxes.
The taxes span over a ten-year period and are related to the importation of foreign equipment into the country as well as payments to the suppliers of the said equipment.
Barely a week ago, the Central Bank of Nigeria (CBN) ordered it to refund the sum of $8.1 billion; being funds that were illegally remitting to South Africa over time.
In line with the development, Nigeria’s apex bank also imposed a fine of ₦5.86 billion on the four banks which were accused of facilitating the illegality; including Standard Chartered Bank, Stanbic IBTC, Diamond Bank Plc and Citibank.
Despite the challenges, CEO of the Group, Mike Shutter has stated that the challenges presented by the issue ($8.1 billion refund) will not affect the company’s ‘partnership’ with Nigeria.
“We have a proud history of being a major partner to the people of Nigeria and notwithstanding our current difficulties are firmly resolved to continue to do so.” -Shutter
Nigeria is a crown jewel
The country plays a key part in the group’s operations. Nigerian operations amounted to 24% of the group’s 217 million subscribers and 20% of its 69 million active data subscribers
In terms of profit, Nigerian operations accounted for 30% of group EBITDA of R47 billion in 2017 and 32% of its Profit Before Tax of R32 billion.
Data from the group’s half-year results for the period ended June 2018 show Nigeria accounted for 25% or 55.2 million of MTN’s subscriber base of 223 million as at June 2018.
