How MTN Nigeria paid billions on professional fees, bad debts, others – Report

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By Bassey Udo

The biggest chunk of MTN Nigeria’s operating expenses in 2019 went into payments for professional fees, bad debts and maintenance costs, the company’s latest financial statement has revealed.

The statement filed at the Nigerian Stock Exchange on Wednesday showed MTN Nigeria gulped about N36.6 billion as operating expenses against the MTN Group’s expenditure of about N37.3 billion.

The financial statement was for the nine months’ period ended September 30, 2019.

Details of the report showed the professional fees by MTN Nigeria for the period was about N14.5 billion, maintenance cost (N9.6 billion), and bad debts written off (N9.4 billion), against MTN Group’s N15 billion, N9.6 billion and N9.4 billion respectively.

Compared with the figures for the corresponding period for 2018, the report showed MTN Nigeria expenditure for professional fees stood at about N19.3 billion, maintenance cost (N9.8 billion), and bad debts written off (N7.8billion).

Similarly, MTN Group expenditure for 2018 showed about N20 billion went for professional fees; maintenance cost N9.8 billion and bad debts written off N7.8 billion.

Details of the services for which the professional fees were paid were not disclosed.

Other operating costs

Other operating expenses recorded in the statement included about N4 billion on rent, rates, utilities and other office running costs for MTN Nigeria, against similar expenses (N4 billion) by MTN Group for the period.

Also, expenditure on Information Technology Development Levy by MTN Nigeria took about N3.7 billion, same as MTN Group (N3.7 billion); Fixed assets written off (N3.04 billion) for both MTN Nigeria and the Group, and trainings, travels and entertainment cost N2.3 billion for MTN Nigeria, against N2.24 billion for the Group.

In addition, MTN Nigeria spent N1.1 billion, same as the Group (N1.1 billion) for Insurance cost, audit fees (N213 million) by MTN Nigeria and Group respectively.

About N1.42 billion and N1.5 billion respectively were for other expenses by MTN Nigeria and Group.

The company said other expenses covered bank charges, subscriptions, office refreshments and security costs by both MTN Nigeria and the Group.

The report said MTN Nigeria lost about N8.9 billion for reversal of impairment losses on contract with various customers against N9.1 billion lost by the Group for a similar reason for the period.

Another N3.1 billion each were lost by MTN Nigeria and the Group for Reversal of impairment/(impairment) of property, plant and equipment, in addition to about N242 million each lost by both MTN Nigeria and the Group.

Direct network operating costs

Beyond these expenses, the report said MTN Nigeria incurred about N178.1 billion for the period direct network operating costs, consisting of N121.9 billion as BTS leases; N33.5 billion as network maintenance; N22.1 billion as regulatory fees, and N732.8 million as an annual numbering plan.

The same expenditures were recorded for the Group in all the subcategories of direct network costs, except for the annual numbering plan and network maintenance expenses, for which about N845.8 million and N33.2 billion respectively were paid.

On income tax expenses, the report said out of about N64.5billion by MTN Nigeria and N63.7 billion by the Group, Company Income Tax (CIT) took N52 billion (MTN Nigeria), N52.4 billion (Group); Education Tax N6.5 billion each (MTN Nigeria and Group) and Nigerian Police Trust Fund N10.7 million each for MTN Nigeria and Group.

Also, the report includes additional N5.97 billion as deferred tax by MTN Nigeria and N4.84 million by the Group for the period.

Since MTN began business in Nigeria in 2001, it has made payments to its overseas affiliates located in known tax havens, including MTN Dubai and MTN International in Mauritius.

For instance, a PREMIUM TIMES investigation in 2015 revealed how MTN used a well laid out transfer pricing schemes to funnel about N23.2 billion to its Dubai offshore account through the MTN subsidiary in Ghana in 2013.

Transfer pricing is the practice of shifting earnings or cost from a high tax to low-tax jurisdictions through a network of individual entities in multi-department, multi-office, or multinational firms for various tax purposes.

Related parties transactions

During the period, the report said MTN Nigeria carried out transactions with related parties by way of transfer of resources, services or obligations between them and the Group, regardless of whether a price is charged.

The report said MTN Nigeria entered into various intra-group transactions with related parties at ‘arm’s length’ terms, and are eliminated on consolidation.

Those familiar with the workings of transfer pricing schemes say suspicious shifting of profits are often perfected through such intra-group or related parties transactions.

The holding Company is MTN International (Mauritius) Limited, a Company incorporated in the Republic of Mauritius, with its ultimate holding Company as MTN Group Limited incorporated in South Africa.

MTN Nigeria subsidiaries include XS Broadband Limited, Visafone Communications Limited and Yello Digital Financial Services Limited.

Dividends

During the period covered by the report, about N42.3 billion was paid by MTN Nigeria as dividends (excluding withholding tax) to MTN International (Mauritius) Limited.

Between December 31, 2018 and September 30 this year, the report said various sales and purchases transactions between related parties were carried out by MTN Nigeria and MTN Group Management Services, MTN Guinea Bissau, MTN Guinea Conakry, MTN Holdings, and MTN International (Mauritius) Limited.

Other transactions were with MTN Irancell, Lonestar Communications Corporations (Liberia), MTN Rwanda, MTN Namibia, MTN Sudan, MTN South Sudan, MTN South Africa, MTN Swaziland, MTN Syria, MTN Uganda, MTN Yemen, MTN Zambia, Global Trading Company, Interserve Overseas Ltd, INT Towers Limited, IHS Towers and Mobile Telephone Networks (Pty) Ltd.

 

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