Editorial: MTN tells investors to hold the line

THE RESIGNATION of MTN CEO Sifiso Dabengwa, like everything else in the way the company has handled its Nigeria crisis, came later than it should have. His statement refers to “unfortunate prevailing circumstances”, which seems to vaguely imply that bad luck rather than bad management was the cause of the huge US$5,2bn fine — which is, after all, more than twice the entire group’s profit for 2014.

The clear impression remains that MTN did not take the Nigeria regulators seriously and, having failed to judge the mood in that country, then failed to manage the crisis proactively and transparently.

It makes sense, in the heat of battle, to have appointed Phuthuma Nhleko as executive chairman while the company identifies a successor for Dabengwa. Nhleko served as MTN group CEO for nine years until 2011, and then was brought back as nonexecutive chairman in 2013 to replace Cyril Ramaphosa. If anyone has the experience, authority and credibility to make an impact in negotiations with the Nigerian authorities, it is Nhleko.

And yet, the questions regarding MTN’s governance remain. Did Nhleko and the board apply their minds to MTN’s previous regulatory infractions in Nigeria? Were they aware of the looming crisis?

Did they know, and do they yet know, whether the failure to disconnect millions of unregistered subscribers was a result of negligence, or a calculated gamble to maintain revenues in tough times? Was there an attitude of, to use a traffic enforcement analogy, “everyone’s speeding without being stopped, so we’ll just continue speeding”.

There are broader points to be made about how corporates need to manage a crisis, especially a strategic one where shareholder value could be threatened.

MTN needed to be proactive — not reactive. It said it was not warned of the announcement of the fine, but this is difficult to believe. Surely it had to have been aware, and surely it should then have alerted shareholders to the risks?

Once the fine was known, MTN was cryptic about the reasons and communicated only through spokesmen.

Instead, the CEO needed to seek as many personal media interviews as possible — not avoid them. At such a time, a reputation for being arrogant and inaccessible, which MTN’s executives had developed, becomes detrimental to the business of the company.

After all, MTN’s share price fell 25% in a week — partly as a reaction to the fine itself, but also in part undoubtedly due to the company’s lamentable failure to communicate and manage perceptions.

In a crisis, the corporate instinct is to deny, delay, conceal and avoid. But the opposite response is necessary.

The problem must be acknowledged and regret should be expressed, with an apology if necessary. The CEO must take responsibility and be the public face of the response. There must be maximum disclosure of what happened, and detailed explanation of how it came about. At the same time, the company must make it clear that, though it is under pressure, it is in control. It must have a plan to manage a recovery, and to prevent a recurrence. Shareholders understand that things go wrong: the issue is what is being done about it?

Behind the tactics of response to a particular crisis, there has to be a strategic posture that is both continuous and adaptable.

Does the company understand the environment in which it is operating — and not just the policies and regulations, but also the economic, political and social factors as well? Is it responsive to that environment? What weight should be given to individual personalities in assessing risk? Is there regular and reliable intelligence available?

The bigger and more successful the company — and MTN is very big and has been very successful — the greater the risk when something goes wrong. That is why board oversight and interrogation is so important, informed by an acute consciousness that the multiple jurisdictions where the company operates present varied and complex challenges.

It remains to be seen whether Phuthuma Nhleko can regain the initiative for MTN, while demonstrating a newly proactive attitude by the board. There is a lot of catching up to do.