MTN Group faces a $2 billion demand for taxes in Nigeria, the latest in a series of skirmishes with authorities in the South African mobile phone company’s most lucrative but increasingly problematic market.
The announcement of the tax bill incurred over the last decade comes days after the west African country’s central bank ordered MTN’s Lagos-based unit to hand over $8.1 billion that it said was illegally sent abroad.
Mobile operator MTN disclosed it had been in talks with Nigeria’s Attorney General about an investigation into tax compliance in a statement outlining the background to the case of the money sent out of the country.
“In this process, his (the Attorney General’s) office made a high-level calculation that MTN Nigeria should have paid approximately $2.0 billion in taxes relating to the importation of foreign equipment and payments to foreign suppliers over the last 10 years,” MTN said.
MTN, whose Nigerian business brings in a third of its annual core profit, or EBITDA, said its total payment of around $700 million over the 10-year period fully settled the amount owing under the taxes in question.
The latest demands come two years after MTN, Africa’s biggest telecoms company, agreed to pay more than $1 billion to end a dispute with Nigeria over unregistered SIM cards.
Shares in MTN dropped 5.6 percent to 81.95 rand as of 1250 GMT, bringing losses since last Thursday, when the central bank issued the $8.1 billion demand, to nearly 25 percent.
“These are old issues that have been investigated and closed but now they are being reopened,” said Byron Lotter, a portfolio manager at Vestact in Johannesburg.
“I’m not surprised that a lot of people are selling and saying ‘these guys are just too volatile, I’m out’. I wonder if MTN are thinking the same.”
PULLING OUT
South African hotels and casino group Sun International said it was in final stages of exiting Nigeria following clashes with regulators and shareholders.
It is following in the footsteps of retailer Woolworths and foodmaker Tiger Brands, both of which quit Nigeria over the last three years.
MTN, which has expanded in more than 20 frontier markets that include war-ravaged Syria and Afghanistan, called the latest demands by Nigerian authorities “regrettable and disconcerting”.
“MTN Nigeria will continue to engage with the relevant authorities on all these matters, and we remain resolute that MTN Nigeria has not committed any offences and will vigorously defend its position,” the company said.
Nigeria’s attorney general, Abubakar Malami, declined to comment, referring Reuters to a spokeswoman at the ministry of justice. She could not immediately be reached by phone.
MTN’s regulatory troubles in the oil-rich country come ahead of next year’s presidential election, in which Nigerian President Muhammadu Buhari, who swept to power on promises of tougher regulations and a stronger fight against corruption in a 2015 election, is seeking re-election.
But analysts say Nigeria’s demands against MTN risk further undermining its efforts to shake off an image as a risky frontier market for investors.
Source: Reuters
