Do you know that MTN Group is operating largely below 50% of its highest valuation in the last five years? This company is a very fine technical company. But it has many really careless leaders in South Africa. Someone is always suing MTN and MTN itself is always getting into troubles.As that happens, investors panic and the stock continues to struggle. MTN Group is valued about $16 billion, down from the peak of $40 billion few years ago. One problem is Compliance and Governance.
MTN Nigeria is a private company, in Nigeria, though publicly traded via its Group in the Johannesburg Stock Exchange. According to Bloomberg, the company is worth about U.S.$16.5 billion in total market capitalization. This makes MTN Group one of the most important African companies. It has lost more than 10% since this year, largely correlated with its compliance problems in Nigeria. Around August 2014, MTN Group was worth around $40 billion.
Just like that, MTN is getting sued over the award of its Iranian operating licence. Turkcell, the plaintiff, is going after not just the South African telco, but some influential telco heavyweights in their personal capacities, even though they no longer work at MTN.
TN’s Turkcell headache just won’t go away. The JSE-listed telecommunications group is headed to court after a legal challenge from the Turkish operator, this time in Johannesburg, over the awarding of its operating licence in Iran, which Turkcell alleges was granted after MTN paid bribes to officials in that country. It is seeking US$4.2bn (about R53bn) in damages.
The case, which was first filed in South Africa by Turkcell in November 2013, may finally go to trial after the high court agreed to hear the case last month. Turkcell is pursuing not only MTN, but former MTN Group CEO Phuthuma Nhleko (now its nonexecutive chairman) and former director Irene Charnley (who now leads wireless broadband operator Smile Communications). Both executives were intimately involved in the negotiations with the Iranian
—MTN has rubbished the charges and said this week that it will defend itself against the claims should they come to trial in South Africa, as now looks likely. It said this week that Turkcell’s application to the high court is the fourth such action it has brought since it lost the Iran licence and amounts to “a last resort”. It said Turkcell’s claims are “defective in many respects”.
MTN Group could be totally exonerated. But the problem is that as you get into troubles, you cause investors to lose money. What former US Attorney General, Eric Holder, did in Uber, to clean its devil of sexual harassment may be needed in MTN. They need to find better ways of doing business to avoid these legal compliance challenges.
Sure, legal issues are part of business, but is is safe to note that MTN is having more than its share. That is causing investors lots of value. The company must change.