MTN’s Biggest Shareholder Pushes for Board Changes

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A worker walks past an outlet of South Africa's MTN Group in Johannesburg, South Africa, February 23, 2016. REUTERS/Siphiwe Sibeko/File Photo

Emma Okonji with agency report

MTN Group Limited’s biggest shareholder is pushing for changes at the board level to avoid the regulatory, legal and political disputes that have cut its share price by more than half over the past four years.

The Public Investment Corporation built a 26 per cent stake in Johannesburg-based MTN by late November and used that to call for the replacement of MTN Group’s Chairman, Phuthuma Nhleko, people familiar with the matter, have said.

According to Bloomberg report, Africa’s biggest fund manager, which is South African state-owned, also sent a letter to MTN demanding a board reorganisation, which resulted in the appointment of more politically-connected directors.

Last month, the carrier obliged, announcing Nhleko’s planned departure and replacement, along with other director-changes and a new separate group of prominent advisers.

The PIC didn’t respond to Bloomberg’s request for comment.

Nhleko had however declined to comment.

Interactions with the PIC have been at the board level, MTN Chief Executive Officer, Rob Shuter, said in an interview last week in London, where he was giving presentations to investors.

“An important thing for them was on our board evolution,” he said when asked about the company’s relationship and discussions with the PIC, without commenting on the specific changes on the board.

The PIC was moved to act following a series of disputes in Nigeria, Iran and elsewhere, the people said, asking not to be identified as the concerns weren’t disclosed publicly.

The biggest of those was a $5.2 billion fine in Nigeria in October 2015, which was eventually settled for N330 billion after plea bargain.

The PIC, which manages the pension funds of South African government workers, wants the new chairman, former South African Deputy Finance Minister, Mcebisi Jonas, and the board to resolve outstanding issues such as a $2 billion tax dispute in Nigeria, the people said.

MTN’s separate advisory board is a council of “wise old men,” who can directly contact lawmakers and decision makers in the countries where MTN operates, one of the people said.

The current board doesn’t have a Nigerian director even though that country is MTN’s biggest market by subscribers.

From July, it will include the Emir of Kano, Lamido Sanusi, who is a former governor of Central Bank Governor of Nigeria (CBN).

The advisory board will be chaired by Thabo Mbeki, a former South African president who has mediated in a number of political disputes across the continent, and will include a former Ghanaian president, John Kufuor, and Mohamed Elbaradei, the one-time head of the International Atomic Energy Agency.

Nhleko, who is credited with playing a large part in building the company into a continent-wide giant with 221 million customers, will also sit on the advisory board.

A catalog of disputes in MTN’s markets, which include nations at war in the Middle East and Africa, have depressed the share price and allowed Johannesburg-based rival Vodacom Group Ltd. to surpass MTN in terms of market capitalisation.

Since MTN disclosed that the PIC had a 26 per cent stake on November 29, the share price has gained 19 per cent compared with a six per cent decline for Vodacom. MTN’s stock fell 0.4 per cent to 104.35 rand by the close of trade in Johannesburg, Bloomberg said .