On 26th October 2015, MTN Group was fined $5.24 billion (N1.4trillion) by the Nigerian Communications Commission (NCC) for failing to disconnect non-registered SIM cards. In light of this recent decision, I hereby recommend the following on how they can survive the impact of this decision.
Shareholders should approve the payment of the $5.2bn before the due date. Changes in Shareholding structure is imminent and no delays is expected from the Group in this regard.The top echelon of the organisation should be re-organised starting with its management.
The business topline for the remainder of the financial year i.e 1 November 2015 – 31 March 2016 should be revised. No doubt, subscribers would leave the network and earnings would drop significantly especially voice. Therefore profit and loss account should be revised to include the periods when the sanction becomes effective in this case since 2012.
C. Cost of Sales:
This would remain as there are already commitments with service providers based on scheduled plan. There is no need to revise the factors in profit and loss sheet.
D. Cost of Labour:
Management should as a matter of fact begin the process of reviewing contract costs with expatriates, already, there is an exchange rate hit (20%), a function of the devalued currency early in the year is significant cost to the company in the course of the financial year. An option to locate other expatriates in Asia is due e.g India, China and Indonesia. These professionals can be hired on need basis and terms of employment clearly chalked out.
An important note is that other outsourcing agencies can be engaged to commence the process of providing comparative and lower service cost from next financial year i.e 1 April 2016 – 31 March 2017.
Local employees can be committed to contract with non-key positions placed on secondment. No need to downsize.
E. Cost of Marketing:
-Local budget for marketing should be adopted. BTL (below the line) option most recommended.
-Highly capitalised marketing should be banned for next 5 years i.e post Year 2020
-Aggressive marketing in hinterland to be promoted.
-Discount on data and bundle opportunity should be created.
-Discount on voice should be created for youth and group target. New target should be created in this segment.
F. Cost of Finance:
Of course, the burden of settling NCC fine requires a huge cashflow. A phased payment/settlement is recommended. MTN Nigeria should enter into a phased settlement plan with NCC. A letter of comfort stating how and when this payment would be made should be made in line with Shareholders approval.
– cashflow concerns: as a result of the expected massive exit by subscribers in the short term, there might be deficit in cashflow of the local business. Therefore, a massive inflow of capital is now required. This can be achieved through local banks with a consortium likely to create the balance needed. Another option is find another partner in form of shareholder.
– finance cost: with the current interest rate of 16%-18% from local banks, an additional terminal loan would lead to increased liabilities and exposure to banks.
G. Partnership: Business to provide opportunity for corporate partnerships in the form of sell-off of non-performing part of the business. A proposal to sell its data arm and concentrate on voice would be a great idea.
In conclusion, communication is key for the business in Nigeria. Shareholders should address the public directly in the case of regulators, customers, public (internal and external) regularly. There is no need to apologise but rather provide action plans on how to keep the business going and to overcome the existing challenges in the country.
In the face of a new management and focus, the company can turnaround this enormous challenge in the next three to four years and bounce back in winning ways.