MTN AND THE NIGERIAN FINE
SYNOPSIS
The case deals with the fine that the Nigerian authorities imposed in 2015 on MTN, the large South
African telecommunications (telecom) operator. The initial fine of US$5.2 billion
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was at the time of the
COURSE USAGE
The case is intended for use in international business or strategy courses. In international business, it may
be used to illustrate how macro forces impact multinational enterprises (MNEs) operating in emerging
markets and impact MNE relations with host governments. It illustrates the difficulties in measuring
RELEVANT READINGS
ASSIGNMENT QUESTIONS
The case begins with the questions “How could MTN, an emerging-market MNE that operated in some of
the riskiest countries, and that had operated in Nigeria since 2001, find itself in this situation? What
should it do now?”
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directly leads to a reduction of the fine. This is described in the What Happened section of the teaching
note.) However, if MTN is to avoid these problems in other countries, or avoid seeing them repeated in
Nigeria, it needs to build multinational flexibility (see Exhibit TN-4).
1. Why was MTN successful in so many difficult markets?
2. What are the main features of the Nigerian telecom sector?
1. Why was MTN successful in so many difficult markets?
Students need to understand that MTN is an emerging-market specialist, and that its success is tied to its
ability to manage in uncertain and risky emerging markets. There is no doubt that MTN has been
successful; evidence of this is its rapid growth and the fact that it is the leading operator in 15 of its 22
markets. Students may list some of the reasons for its success as:
• MTN comes from an emerging market, South Africa, and was formed during the collapse of apartheid
and the transition to democracy under Nelson Mandela. MTN understands societies and economies
undergoing transition, and this would have undoubtedly influenced its view of risk.
2. Describe the main features of the Nigeria telecom sector.
a) Begin with Nigeria as a country: Students should be able to conclude that Nigeria is a complex and
difficult place for an MNE to operate in. Nigeria is rated 127th out of 138 countries in the World
Economic Forum Global Competitiveness Ranking (see case Exhibit 1 and case Exhibit 7 gives more
Nigeria is Africa’s largest economy and its largest democracy. It generally experienced good economic
growth until 2015, and then slowed in 2016, but this was largely due to oil exports. Case Exhibit 8 shows
b) Now look at the Nigerian telecom sector: Case Exhibit 5 shows that although there are about 150
million telephone lines in Nigeria, there is more room for growth. This will, however, be in data and
c) There are four players and MTN is the dominant market leader: MTN has managed to dominate the
market by avoiding emerging-market challenges that have affected its competitors. This is probably due
to its well-developed ability to operate in emerging markets similar to Nigeria.
3. What was MTN’s strategy going into 2015?
MTN’s strategy and reasons for the strategy are shown in case Exhibits 2 and 3. The strategy is
essentially to provide customers with new services (not voice) as efficiently as possible. Customers will
be demanding more Internet and data services with smartphones. This is reflected in the risks and
4. Is the fine appropriate?
Begin with referring students back to case Exhibit 7, which shows the risk of doing business in Nigeria.
These risks have been well managed by MTN since 2001—so what has changed? The answer to whether
Arguments for (a) (i.e., that MTN is a “target”) are:
Arguments for (b), that MTN is not a good corporate citizen, are:
• MTN was fined minor amounts over the past two years, and should have known that the regulators
were serious. In any event, it was given sufficient time
The first view is essentially a political view and supporters of this view would argue that the politics
changed when Buhari was elected, and that the Nigerian economy could not support his political
promises. The second view is also somewhat political and supporters of this view will argue that Buhari
5. What do you think of MTN’s posture in Nigeria in 2015? What is your advice to Nhleko?
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Chapter 8 of Bartlett and Beamish’s text (see “Relevant Readings” and Exhibits TN-6 and TN-7)
describes four postures that an MNE may take in a developing country. These are exploitive,
transactional, responsive, and transformative. Exploitive postures are those where an MNE takes
advantage of cross-country differences in wages, working conditions, legal requirements, and living
MTN’s changing environment has led to declining revenues per subscriber and increased costs. With
these market changes, cost containment and standardization strategies make sense. However, the danger
with such strategies is that they require coordination from the group (see case Exhibit 3) and operating
For the part of the question more specific to MTN, the advice to Nhleko is partially answered by adopting
a responsive or transformative posture. However, the adoption of such a posture is not simply achieved
without sufficient multinational flexibility (see Exhibit TN-4). Multinational flexibility is the ability of a
company to manage the risks and exploit the opportunities that arise from the diversity and volatility of
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WHAT HAPPENED
In early December, MTN announced that it had reviewed its operating structure to strengthen operational
oversight, leadership, governance, and regulatory compliance across its operations (the new operating
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structure is shown in Exhibit TN-5). This meant that MTN would re-implement its previous reporting
structure and MTN would be structured into three regions—West and Central Africa (WECA), South and
East Africa, and the Middle East and North Africa. MTN announced Jyoti Desai as Group chief operating
On December 2, 2015, MTN received a letter from the NCC informing it that the fine had been reduced to
₦674 billion
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(a 35 per cent reduction in the original fine and equivalent to $3.38 billion) to be paid by
December 31, 2015. However, this was followed by another letter the following day informing MTN that
the previous letter should be ignored, and that the fine had actually been reduced to ₦780 billion ($3.9
billion), a 25 per cent reduction in the original fine. The payment period remained December 31, 2015.
Neither letter stated how these reductions had been determined.
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This change of approach coincided with MTN hiring former U.S. Attorney General Eric Holder to assist
in negotiations with Nigerian authorities. Holder had presided over some of the largest corporate
settlements in U.S. history when he was the attorney general; the most notable were the settlements with
some of the banks responsible for the 2008 financial crisis—JPMorgan Chase & Co. (settled for $13
billion in 2013)
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and Bank of America (settled for $17 billion in 2014).
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Holder’s approach was to engage directly with Nigerian Attorney General Abubakar Malami, who would
discuss the proposals with the NCC. This was in line with Nigerian law, which allowed for the attorney
MTN announced that compliance with the registration requirements following the announcement of the
fine had led to the disconnection of 6.7 million subscribers in Nigeria, and that similar registration
requirements in Uganda had led to 3.7 million subscribers being disconnected. The chairman and acting
CEO summarized MTN’s Nigerian experiences in the 2015 integrated report:
The above quote is instructive, as it very much suggests that MTN had taken a “responsive” posture, one
where the MNE “acts in a way that is sensitive and responsive to the needs of all its immediate
stakeholders.”
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MTN expects to report a loss in basic headline earnings per share (HEPS) and basic earnings per
share (EPS) for [fiscal year] FY 2016. In the prior year comparable period MTN reported HEPS
of 1,204 cents and EPS of 746 cents.
Other contributing factors to the negative HEPS and EPS for FY 2016 were foreign exchange
losses in a number of operations, losses from joint ventures and associates, additional
depreciation resulting from prior hyperinflation adjustments in MTN Irancell, the Zakhele Futhi
tax and share-based payment charges, and professional fees incurred in respect of the settlement
of the Nigeria regulatory fine and planned listing.
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EXHIBIT TN-1: MULTINATIONAL CORPORATION–HOST GOVERNMENT RELATIONSHIP—A
STUDY IN LOVE/HATE
EXHIBIT TN-2: SOURCES OF CONFLICT
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EXHIBIT TN-3: SOURCES OF POWER
EXHIBIT TN-4: BUILDING MULTINATIONAL FLEXIBILITY
(2015)
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EXHIBIT TN-6: DAMAGED REPUTATION OF MNEs
EXHIBIT TN-7: FOUR TYPES OF MNEs