MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK
MTN's head office in Johannesburg. Picture: EPA/KIM LUDBROOK

TELECOMMUNICATIONS group MTN closed 18% lower on Friday, its worst one-day collapse since August 1998, following a shock profit warning.

The company said it expected its basic headline earnings to December last year to be 20% lower than the corresponding previous period, largely because of struggles faced by its Nigerian operations, which contribute 37% of group sales.

MTN’s Nigerian operations have had a torrid time, with the company losing millions of customers, and talks with the Nigerian authorities still unresolved over a disputed $3.9bn fine for failing to disconnect unregistered SIM-card users.

However, MTN said that the profit warning did not include the penalty.

The fine has been revised down from an original $5.2bn, which had been based on penalising MTN with $1,000 for every unregistered SIM-card in use.

The company has said the reduced fine, which equates to more than twice MTN’s annual average capital expenditure over the past five years, was still too high.

But sources in Nigeria said at the weekend that MTN could end up paying a "reasonable" amount following further negotiations.

A Lagos judge last month gave the parties until March 18 to reach a settlement.

Though MTN’s run-in with the authorities made the headlines, other South African companies operating in Nigeria have also struggled lately, as a result of curbs on imports that the government had imposed in response to the fall in its oil revenues.

Last year’s plunge in the oil price and the government’s subsequent attempts to limit the depreciation of the naira against the dollar, by implementing wide-ranging import controls, have left a number of retailers without stock.

Truworths said when it announced its interim results last week that it had exited Nigeria due to import restrictions. The clothing retailer said it also had struggled to gain access to foreign exchange following the collapse in oil prices.

South African property developer Resilient Reit said earlier this month that it had to change its plans to build 10 shopping centres in Nigeria because retail tenants were struggling to be profitable, given the import restrictions.

Resilient became the first major South African-listed real estate group to enter Nigeria, through a joint venture with Shoprite. It targeted investment of R2bn and planned to build 10 shopping centres, but in the past four years only Delta Mall has been completed. Two more are under construction, Asaba Mall and Owerri Mall. Resilient has invested R712m in Nigeria and committed a further R397m.

Resilient MD Des de Beer said its subsidiary, Resilient Africa, would reduce the size of the two malls under construction.

Retailer Shoprite, which entered Nigeria in 2005 and has a large presence, has managed to stave off the effects of import bans because most of the products which it sells at its Nigerian stalls are locally produced foodstuffs and goods.

South African firms operating in Nigeria have also faced regulatory challenges. The Standard Bank Group’s Nigerian subsidiary, Stanbic IBTC, recently received injunctions to stop the country’s Financial Reporting Council from interfering in its operations and imposing a $5m fine for alleged accounting breaches.

With Reuters