Here are four things that could happen to MTN following the resignation of the Group CEO
Over the past few weeks, the MTN Group has been battling with the Nigerian government due to its failure to adhere to one of the country’s laws. The company was initially accused of evading tax payments before it was asked to pay a record fine of $5.2 billion for failing to unsubscribe customers who did not complete a valid SIM registration.
It was reported that the Group CEO of the South African company, Sifiso Dabengwa, made a trip to Nigeria to negotiate with the government on cutting the $5.2 billion fine, which analysts say is about 22 percent of Nigeria’s annual budget. However, since the trip to Nigeria yielded no results, the Group CEO has apparently decided to resign in the interest of the company and its shareholders.
Sifiso’s resignation did not come as a surprise as analysts and market watchers had predicted that he would do so. Based on his resignation as the Group CEO of MTN, here are four things that could happen to MTN.
Job cuts: Following the fine of $5.2 billion, MTN will be forced to reduce the number of its staff in order to cut cost. The company will start by laying off its temporary workers before proceeding to permanent staff.
MTN share price: Since the announcement of the $5.2 billion fine, MTN has lost about a fifth of its share price in the stock market. The market capitalization of the company plummeted to R289 billion and its stock is now at the same level as it was around October 2012. Although analyst has said that, the share price of MTN would not fall further as it is expected to stabilize.
Access to loans: In view of the negative ratings by rating agency, Standard & Poor’s (S&P), from ‘BBB’ and ‘zaAA+’ to ‘BBB-‘ and ‘zaAA’ MTN may be forced to fall on financial institutions. This is because they may not be able to pay the fine since it is double the company’s annual group profit after tax. It will be hard for them to access credit facilities.
Other agencies may follow suit: The controversies currently surrounding MTN may lead other agencies such as security ones to place further sanctions for breaching the SIM registration law. This could see the company spending more than the fine levied by the National Communications Commission (NCC).
Although analysts have said that this controversy could affect the relationship between MTN and NCC. This sanction will cause other foreign owned companies to adhere more strictly to the country’s laws in order to avoid been sanctioned.
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