Mobile operator MTN has had a rough week: following news that its Nigerian operation is facing a fine of some R72.2bn, its share price has dropped by a full fifth over the last five days. The firm has just over half a calendar month before it has to pay the fine or come to some settlement with the Nigerian Communications Commission (NCC).

The background to the drama is that under Nigerian law, MTN was required to cut off around 5.2 million customers using unregistered or improperly registered SIM card (registration is broadly similar to RICA here, but includes biometric data capture) by a deadline set for almost two years ago. While there are infrastructure issues in Nigeria which have made gathering all the information needed to correctly register cards tough (Moneyweb reports that blurry fingerprints are problem) the reason the fine is so high is because the regulator thinks MTN has been dragging its feet, so has calculated a punishment of ₦200 000 fine per user (R13 892-odd), which tallies up to a staggering ₦1.04 trillion, or R72.2 billion.

Businesses get fined all the time, and often factor such risks into their planning. But here’s an idea of how big the NCC action is and why some think it poses an existential threat:

MTN's Profits vs the fine it faces

Essentially, the fine works out to double the group’s post-tax profit for last year. Quite a dent on the bottom line.

Of course, when news like this happens it’s always the case that folks jump on the worst possible view of events. There is a silver lining for MTN that has been forgotten in the latest discussions: it’s share price has actually already had an even bigger drop this year, just not over as short a period of time. Before the strike actions by workers in the summer the company hit a peak of R24 602 on 28th April. By the end of August it was down to R16 809. That was a 32% drop in value from which the firm was just starting to recover. The graph at the top of this story shows the last five days, but the last few months is even more dramatic.

 

MTN shareprice, April to date (Google Finance).
MTN shareprice, April to date (Google Finance).

So, um, cheer up then MTN?