PR disaster haunts Africa's largest mobile telecommunication giant

Last week turned out to be the worst for mobile telecommunication giant MTN on an announcement from the NCC that it will be fining the company $5.2 billion because they had failed to disconnect unregistered subscribers within the time parameters set out by the regulatory body. Most commentary that has swirled around is such a fine is too exorbitant for the scale of the crime with some saying this could be a way for the Nigerian government to raise money after the collapse of oil which contributes  a large portion of economic activity.

But perhaps the biggest contention was the failure by MTN management to disclose this fact to shareholders based in Johannesburg where the company has it's main listing. Reports had come out hours before management released any sort of statement thereafter silence with investors left scratching their heads.

Today more reports surfaced from Nigeria indicating that the company had failed on its appeal to the NCC to lower the fine and caved in into the demands and will pay the fines with rumours abound that management was able to negotiate to pay off the fine in a series of payments. As of now there has been no confirmation from the company so we treat these reports as speculation.

This sent the stock price plummeting below the R150 mark reaching a low of R142.50 shortly before bouncing.

#huh? $JSEMTN bows to pressure, agrees to pay N1.04trn fine - https://t.co/QDjrB9E6xX

— Vector Equilibrium (@Mercedarians) November 2, 2015

There was initial confusion as to why the share was suspended from trading with most believing it was due to the excessive movement experienced in the first two hours of opening trade, however this notion faded fast as the usual time up counter had passed and no trading resumed. This resulted in even more speculation of what was developing.

Looks like trading on MTN halted? #MTN $JSEMTN

— Shaun Murison (@ShaunMurison) November 2, 2015

Until finally, an hour after the suspension of trade the public was informed of a decision taken by the JSE group to halt trading saying there was a pending SENS announcement in a vague statement released by the exchange.

JSER GEN - General - MTN Group Limited - Trading Halt https://t.co/gPiEY6Hcnh

— JSE_SENS (@JSE_SENS) November 2, 2015

There's a few things that I'd like to address;

1. Why is information that has a material effect on the business of MTN kept being released to the media before it's dissemnated to shareholders?  Today was the second time in less than a week that reports were found in Nigerian media which eventually filtered its way through to shareholders which is a clear violation of exchange rules. Being amongst the bigger listed stocks on the JSE the company can't play ignorant in this respect as it sets a precedent for the smaller players. 
2. Management's silence hasn't helped investor confidence and ignoring questions only serves to increase the uncertainty of trade around the stock.  
3. The JSE needs to address its own communication channels as informing the market only an hour after trade was suspended is simply unacceptable. Shareholders rely on the prompt and effectiveness of the delivery of information to make a decision and leaving them in the dark only heightened speculation. 

These raise serious doubts over positive sentiment finding it's way back into the stock anytime soon with many long term investors now questioning management's handling of the whole situation which could have been dealt with in a better way. Whatever happens from here onwards is anyone's guess but I think management is going to have a hard time convincing shareholders that it's actions were in the best interest of all.