MTN Nigeria shares dropped on Thursday June 27, 2019 by almost 3%. This came after a court adjourned a case where the government sued the telecom company for owing it $2 billion in taxes. The taxes were imposed as a result of the company’s importation of foreign equipment and making international payments to suppliers since 2008. The court set a date for the hearing to October 29, 2019.
According to analysts, the adjournment caused uncertainty among investors on what next as a result of the tax dispute. If it takes longer, then the company’s value will drop throughout that period. Barely five weeks after listing its IPO, the company’s shares fell by 2.4% to 128.75 Naira each. That was the lowest it had ever attained since May 21. After listing on May 16, 2019, the shares were above their IPO price of 99 Naira.
Nigeria’s attorney general had sent a demand notice to the company in September 2018 alleging unpaid taxes and dues between 2007 and 2017. In August 2018, MTN Nigeria submitted documentation to the AGF’s office on their initial assessment of the period.
The documents suggest the telecom company had made payments that amounted to $700 million in regards to imports, VAT, excise duties, and other fees. But in the letter, the AGF claimed the government had made calculations and that MTN should have paid $2 billion.
For their part, MTN filed a suit challenging the AGF’s powers to deal with tax issues and seeking damages for the same. MTN also insisted that even if the rule is not in their favour regarding the attorney general’s powers on tax issues, it will not imply that the government’s assessment of the $2 billion tax calculation is legitimate.
Committed to Tax Laws
After the slapping of the $2 billion lawsuit, MTN maintained that it was fully compliant with the country’s tax laws. The group also said they were committed to meeting their fiscal responsibilities and contribute to Nigeria’s social and economic development.
MTN battles with Nigerian Authorities
The $2 billion lawsuit is the latest skirmish between Nigerian authorities and MTN group. In the last five years, the company has faced many fines that could have easily accumulated to $15 billion. Most of those fines come from a range of alleged misdoings by the company. In May 2019, the telecom had to pay off $1.5 billion to the government for failing to disconnect unregistered subscribers. In December 2018, MTN made another payment of $53 million to the authorities to resolve a dispute levelled by the central bank for money transfer out of Nigeria.
Nigeria is MTN’s most lucrative market. When it listed its stocks, the company had a valuation of $6.5 billion or 2 trillion Naira. The amount made it the second-biggest company on the Nigerian Stock Exchange. A few days after listing its IPO, the share per price climbed to 159.30 Naira.
With a population of over 200 million people, Nigeria is MTN’s biggest market. It currently has more than 58 million subscribers in the country compared to 31 million users in South Africa. The number also accounts for a third of the group’s primary profit. Despite that, MTN continues to face many challenges in the country. Unlike in other markets where they have to battle other telecoms, in Nigeria, the challenge is the government.
For the telecom and investors, a permanent resolution is vital. MTN Nigeria will continue its operations in the country because it is their key market. The prolonged disputes will only be expensive for investors and are likely to drop the company’s share price to below 99 Naira.
Despite the challenges, the group said they would continue selling more shares to investors and the general public. The company continues to encourage more locals to own its stocks as they wait for the final resolution of the tax row. MTN also said they would be seeking to increase the company’s value by adding more products and services.
Indeed, the group hinted at launching a new mobile money service by the end of 2019. For now, MTN tariffs remain fairly accessible for Nigerian people. Those seeking to invest should do it now while the prices are low or wait until a final resolution of the tax case. The current rates are available here: https://www.legit.ng/1216918-mtn-tariff-plans-benefits.html.