MTN Needs a Magic Wand

the story of the big brother in a card

Aiding and abetting: In SA it is the norm as MTN, Africa's largest telecommunication provider has perfected means of circumventing laws. But things are falling apart for the company in Abuja where in power now sits the no-nonsense President Buhari.

In Brief

  • As MTN, Africa’s largest mobile company, moves to ask Nigeria for leniency on the US$5.2 billion fine, uSpiked’s journalist, Hassan Ali, looks at the company’s blatant flouting of regulations at home
  • The telco, which failed to cut off its unregistered mobile phone users in Nigeria, continues to distribute pre-registered SIM Cards in South Africa in contravention of The Regulation of Interception of Communication and Provision of Communication-related Information Act (RICA). ICASA has failed to do what its Nigerian counterpart has the balls to do.
  • Why should the Presidency and South Africans be roped in to rally behind the company, which seems to have exported its dirty ways to Nigeria?

Since being slapped with a $5.2 billion fine for failing to deactivate improperly registered SIM cards in Nigeria, the narrative peddled by MTN’s PR machinery has created the impression that the telecommunication giant is being targeted for being South African. The investigation by this journalist proves otherwise.

As the Group’s PR machinery got to work on the South African public to rally support, top executives jetted to Abuja for a sit-in with the Nigerian Communications Commission with some reports adding, political leadership. But they may have underestimated how things have changed in Abuja since Muhammadu Buhari ascended to power. No chats, small or big, could make the Commission look any other way.

MTN’s operations in Nigeria may share the names, but nothing it does in Africa’s most populous country benefits South Africa. Its interests in the Nigerian operation are wrapped in a convoluted system that minimises collectable revenue by South Africa. With 78.83% of its shares being owned and held by a Mauritian registered subsidiary of the Group, MTN International - by the time the proceeds reach the South African shores, it’s been watered down to an extend that the taxmen and women at SARS would not even know which of the funds would belong to what. uSpiked’s consulting economists call it ‘smart accounting’, a system that has been perfected over the years by many Silicon Valley technology companies.

The only South African thing in the entire Nigerian saga is the fact that the Group appears to have imported its South African ways of contravening laws and regulations. That small card - Subscriber Identity Module otherwise called SIM – that we insert into our gadgets can and should tell much about us; that is, if the network operators cooperate. The SIM can tell what type of gadgets it has been used in and possibly where we have been. It is the big brother in a card.

In October 2008, thugs broke into the Constantia home of Pam Gorre, beat and robbed her family before taking off with goods including her cellphone. The robbers proceeded to make 405 calls using the cellphone, but when Gorre requested from MTN for the log of the called numbers, the request was declined.

Fortunately a humane employee at Tokai’s MTN outlet decided to disregard the directive of the Group’s head office and printed out the log, which was ultimately handed to police detectives.

A year later, The Regulation of Interception of Communication and Provision of Communication-related Information Act (RICA) was passed into law and all networks and cellphone users were required to be in compliance by July 1, 2010.

With networks aggressively seeking to expand subscribers-base, MTN found a way of gaining the upper hand. A local monthly news magazine exposed how the network had its agents distributing pre-registered SIM Cards to asylum seekers at various Refugee Reception Centers in South Africa. This was happening nearly three years after the law came into effect. The majority of asylum seekers do not have proofs of their physical addresses demanded by the legislation, yet they do need working cellphones to make huge volumes of international calls. It makes economic sense to cash-in on this dilemma, and MTN offered a solution.

As uSpiked reported, tackling corruption is a top priority for President Buhari’s administration. But, this fight has not been easy especially when criminals of all sorts are shielded by the anonymity of their communication if the SIMs remain unregistered.

In August, the Nigerian Communication Commission hosted all telecommunication providers and read the riot act to the executives. MTN, with 60 million subscribers in Nigeria was dully represented. The ultimatum was clear, ‘regularise your respective subscriber register and deactivate non-compliant subscribers.’

Notice from the Nigerian Communication Commission website on the importance of registration of SIM cards

Due to its size and because they have got away with it for so long, the telecommunication giant didn’t seem bothered. The size of President Buhari’s anti-graft stick turned out to be longer than the network had imagined – on top of fighting unending and complicated corruption cases, the administration is also faced with a major security issue in the form of Boko Haram.

When uSpiked learnt of the directive, this journalist was assigned to check whether MTN had changed its ways since the 2013 distributions of pre-RICA-ed SIM cards to asylum seekers in South Africa.

The practice continues unabated, and with more zeal. From Durban, Johannesburg, Port Elizabeth to Cape Town, this journalist has collected just over two hundred (200) pre-RICA-ed SIM cards in the last two months at public transport hubs in these cities.

[All the illegal SIM cards this journalist collected from MTN agents were recorded, photographed and destroyed by uSpiked. Editor]

All the agents, adorned in MTN jackets, are not just offering the pre-registered SIM Cards for free but are also armed with handsets that enable them to sell airtime to recipients of the SIMs. The minimum airtime for every free SIM card is R5.

Some of the agents who gave more than one SIM card to this journalist were more afraid of being discovered by MTN inspectors; “Are you sure you are not an inspector from MTN?”, asked one agent before handing five SIM cards to this journalist.

So, how do they get paid for hawking on behalf of the cellphone giant?

One agent explained: “MTN knows what cards I have been given. “If you buy airtime of up to R50, I get paid a commission of R20 into my airtime trading account. All you have to do is load R50 airtime and I would get my commission of R20.” Several agents echoed this narrative as this journalist collected the pre-registered MTN SIM cards.

As this assignment was going on in South Africa, a story of the for-ransom kidnapping of former finance minister, Olu Falae, was unfolding in Nigeria. It was only until CityPress reported on the link to MTN’s unregistered SIM cards that we were able to appreciate the impact of the provider’s complicity.

To victims of crimes, be it fraud, for-ransom kidnappings or burglaries, the $5.2 billion would never be enough. Another issue in the MTN mess is the misconception that Abuja is targeting South African companies in Nigeria.

The Network’s Nigerian operation is substantially held off-shore. With 78.83% of the shareholding being held by MTN International (the Group’s subsidiary operated from Mauritius) and the rest by other entities including Shanduka Group, how can this be a South African company?

Why Mauritius? The answer is simple, shielding the returns from the Group’s foreign operations from the South African Receiver of Revenue in what would be considered as smart play. The Island offers harmonized corporate and income taxes of a mere 15%, no capital gain tax, no withholding tax on interest and dividends, free repatriation of profits, dividends and capital. With the employment of smart accounting, MTN via its Mauritian connecting has been outsmarting the South African tax laws.

But now with its head on the block, if the media report is to be believed, MTN executives after having failed to buy their way out of the hefty fine are attempting to rope in the South African presidency. While they are within their rights to ask the Presidency to intervene, the Iranian Turkcell saga comes to mind. How often will this ‘uncle we would rather not introduce to our friends’ continue to get away with underhand deals?

To counter Turkcell's claim, the Group hired its own friendly policeman in the name of Leonard Hoffmann who, despite presenting a 203-paged report, failed to tie-up all the loose ends.  

The Group has exported its dirty ways to Nigeria and maybe in several other countries it operates in. Should the public of South Africa be pulled in to rally behind it? Why hasn’t ICASA taken any action against MTN’s contravention of RICA legislation? Is the company too big to be held accountable?

As the executives at No 216, Fourteenth Avenue, Fairland continue with their shenanigans, the shareholders should demand more answers. Is this what they (shareholders) signed up for? If not, who has been sleeping on the job?