Pascal Dozie’s Goodbye: Understanding MTN’s ‘Ring Fencing’ Board Game

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Thursday, July 25, 2019 /  06.10PM / Teslim Shitta-Bey, Managing Editor / Header Image Credit: Pulse.ng


Pascal Dozie long-standing Chairman of Nigerian telecommunication sector giant, MTNN, has decided to step down from presiding over the company’s Board. A few analysts have seen this as an end of a Boardroom era at the company with the sagely presence of Dozie likely to be sorely missed. The interpretation that the newly constituted Board of MTNN represents a change of guards at the company is false. Indeed, the new Board of MTNN is a strategic defense by the company to protect itself from a variety of potential political and regulatory headwinds, and has in some quarters, been seen as a ‘ring fencing’ political masterstroke. 

 

MTNN has had a variety of challenges over the years with local regulators and tax authorities, hence scarring its balance sheet and scalding its operating performance.  More recently, the company after listing on the Nigerian Stock Exchange (NSE) found itself in a peculiar situation where its share price rose by roughly 10% per day for a week as the stock rose from N90 on 16 May 2019 at listing to N149 per share on 23 May, 2019.  Trading activity on the stock, mainly by way of cross deals, raised the concern of one of the stock market’s principal regulatory authorities (the Securities & Exchange Commission) and led to the initiation of an investigation by the Economic and Financial Crimes Commission (EFFC).


Chart 1 MTNN Share and Volume Movement May-July 2019

Proshare Nigeria Pvt. Ltd.

Source: NSE


Since June the company’s share price has settled within a range between a support price of N126.00 per share and a resistance price of N133.00 per share (see table 1 above). The company’s shares have, therefore, been locked inside a narrow trading channel based on thin traded volumes; mainly the consequence of a lack of free market float.

 

The Art of Ring Fencing

MTNN’s recent Board member selection represents a brilliant strategic move to quarantine the organization from adverse local political action given its recent history with the regulatory agency, the National Communications Commission, NCC, and the office of the Attorney General of the Federation, AGF. A few of the new directors offer strong local pull with the Regulatory Commission and the Office of the Presidency.

 For example, its designate Chairman Ernest Ndukwe, an engineer, was one time Executive Vice Chairman of the NCC. The presence of Ndukwe on its Board affords the company the benefit of having a regulatory ‘insider’ available to intervene on its behalf in troubled times. Mr. Muhammad Ahmed is a former Chairman of the Technical Committee of the Nigerian Code on Corporate Governance; he will bring to the telco’s Board technical guidance and public credibility on issues related to the company’s internal control processes and overall governance standards. In addition Ahmed Chairs the Boards of two local banks and is on the interim Board of International Energy Insurance Company (IEI). Ahmed seems to have been brought to the Board to provide a sounding Board for governance and protect the company from the intrusion of third party investigators.

The presence of Mr. Andrew Alli on the MTNN Board as a non-Executive director provides MTNN with the technical expertise of a seasoned banker and the extensive local contacts of a long-standing local Boardroom executive. Alli’s nomination also seems to give the outgoing Chairman, Dr. Dozie, a backdoor channel to the Board as Alli is known to be a longtime associate of Dozie and was at one time speculated to have been head-hunted as a possible managing director of Dozie’s now defunct, Diamond Bank. Alli, a chartered accountant, has extensive investment banking experience and was at one time on the Board of MTNN representing the International Finance Corporation (IFC). Alli will likely be Dr. Dozie’s principal liaison with the MTNN C- suite. Alli’s Electronic and Electrical Engineering background may equally make him a useful addition to the Board at a technical engineering level.

 Meanwhile another non-executive director, Omobola Johnson, was a former Minister for Communication between 2011 and 2015, her extensive knowledge of the Nigerian telecommunications business, and her deep and wide local and international contacts brings a further robustness to the company’s Board and reinforces its efforts at ring fencing its local Nigerian operations from potential institutional and political headwinds. As a non-executive director of MTNN, Johnson a Ph.D. holder in Business Administration also has degrees in engineering and digital electronics this adds technical capacity to the Board and ensures robust engagement with emerging technical issues. 

A clear strategic appointment to the MTNN Board is the appointment of Mrs Ifueko Okauru who is a former executive chairman of the Federal Inland Revenue Services (FIRS) and remains a respected local authority on taxation. Okauru brings to the Board immense tax experience and will help the organization untangle the knots in its tax situation which has been a problem for the Telco in recent times. With Okauru covering the corporate tax base and Ndukwe helping out with regulatory issues at the NCC, MTNN should have a less turbulent operating environment in years ahead.


Running Without Executive Directors

The MTNN business model mimics its continental group were the management is light without an executive director in the case of the Nigerian operation but with only one executive director in the case of Group holding company. MTNN has a business model that emphasizes flexibility, speed and management engagement by way of an executive committee; according to those familiar with the company’s local operations, it is not unusual for other operational staff to attend Board meetings even though they are not listed as directors. The view is that the company may require a certain number of non-executive directors to leverage technical experience, local contacts and political weight to smoothen operations and external relations without violating the provisions of the memorandum and article of incorporation of the company or MemArt.

The approach has enabled the company run with a strategically selected Board membership and a lean but effective non-Board level executive management structure. The same kind of arrangement exists at the company’s South African headquarters (see table 2 below).


Table 1 MTN Nigeria Board of Directors

MTN NIGERIA BOARD OF DIRECTORS

S/N

NAME

DESIGNATION

1

Dr. Ernest Ndukwe

Chairman Designate

2

Mr. Ferdinand Moolman

Chief Executive Officer

3

Mr. Michael Onochie Ajukwu

Independent Non-Executive Director

4

Mr. Muhammad K. Ahmad, OON

Independent Non-Executive Director

5

Mr. Rhidwaan Gasant

Independent Non-Executive Director

6

Mr. Andrew Alli

Non-Executive Director

7

Mrs. Omobola Johnson

Non-Executive Director

8

Mr. A.B. Mahmoud, OON

Non-Executive Director

9

Mr. Ralph Mupita

Non-Executive Director

10

Mr. Paul Norman

Non-Executive Director

11

Mrs. Ifueko Okauru, MFR

Non-Executive Director

12

Mr. Jens Schulte-Bockum

Non-Executive Director

13

Mr. Rob Shuter

Non-Executive Director

14

Mr. Karl Toriola

Non-Executive Director

Source: MTN Nigeria

 

Table 2 MTN Group Board of Directors

MTN GROUP BOARD OF DIRECTORS

S/N

NAME

DESIGNATION

1

Mr Phuthuma Nhleko

Non-Executive Chairman

2

Mr Rob Shuter

Chief Executive Officer/Group President

3

Mr Paul Hanratty

Independent Non-Executive Director

4

Mr Stanley Miller 

Independent Non-Executive Director

5

Mr Nkululeko Sowazi

Independent Non-Executive Director

6

Mr Alan Harper

Lead Independent Non-Executive Director

7

Ms Koosum Kalyan 

Independent Non-Executive Director

8

Mr Nkateko Mageza 

Independent Non-Executive Director

9

Mr Azmi Mikati 

Non-Executive Director

10

Ms Christine Ramon 

Independent Non-Executive Director

11

Ms Marione Marole

Independent Non-Executive Director

12

Mr Jeffrey van Rooyen 

Independent Non-Executive Director

13

Mr Shaygan Kheradpir

Independent Non-Executive Director

14

Mr Ralph Mupita 

Executive Director

15

Mr Mcebisi Jonas 

Independent Non-Executive Director

16

Mr Khotso Mokhele

Independent Non-Executive Director

17

Ms Bajabulile Tshabalala 

Independent Non-Executive Director

Source: MTN Group



The typical MTNN structure runs with two operational committees; the Executive and Compliance committees made up of departmental heads who drive daily operations (see illustration 2 below). The company uses a flat structure that depends heavily on high quality technical competence rather than lower quality networks of efficient paper pushers. The MTNN model may increasingly become a useful organizational paradigm to be emulated by companies in other industries as it has so far sustained operational effectiveness and underlying corporate profitability.

 

Illustration 2 MTNN Executive Structure



Proshare Nigeria Pvt. Ltd.

Source: MTN Group

 

Conclusion

MTNN’s new Board appointments play a masterful game of corporate checkers. The new members of the Board help the organization relieve a myriad of institutional challenges that have emerged from a lack of authoritative and knowledgeable interface with regulatory and tax authorities. The recent appointments plug these holes. With the new Board settled and set to fend-off the distractions of local politics and regulation the company can confidently resume its digital transition (see illustration 3 below). 

 

MTNN’s recent moves of corporate checkers have been bold and brilliant, but investors await the company’s Q2 2019 financial performance; this is what will tell whether flat management, and clever Board appointments translate into robust bottom lines .

 

 

Download PDF Here – MTN Nigeria Plc Market Memorandum

 

 

Illustration 3 MTNN’s Digital Transition

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Proshare Nigeria Pvt. Ltd.


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