How MTN Nigeria paid billions on professional fees, bad debts, others.
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 ₦36.6 billion as operating expenses against the MTN Group’s expenditure of about ₦37.3 billion.
The financial statement was for the nine months’ period ended 30th-September-2019.
Details of the report showed the professional fees by MTN Nigeria for the period was about ₦14.5 billion, maintenance cost (₦9.6 billion), and bad debts written off (₦9.4 billion), against MTN Group’s ₦15 billion, ₦9.6 billion and ₦9.4 billion respectively.
Compared with the figures for the corresponding period for 2018, the report showed MTN Nigeria expenditure for professional fees stood at about ₦19.3 billion, maintenance cost (₦9.8 billion), and bad debts written off (₦7.8billion).
Similarly, MTN Group expenditure for 2018 showed about ₦20 billion went for professional fees; maintenance cost ₦9.8 billion and bad debts written off ₦7.8 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 ₦4 billion on rent, rates, utilities and other office running costs for MTN Nigeria, against similar expenses (₦4 billion) by MTN Group for the period.
Also, expenditure on Information Technology Development Levy by MTN Nigeria took about ₦3.7 billion, same as MTN Group (₦3.7 billion); Fixed assets written off (₦3.04 billion) for both MTN Nigeria and the Group, and trainings, travels and entertainment cost ₦2.3 billion for MTN Nigeria, against ₦2.24 billion for the Group.
In addition, MTN Nigeria spent ₦1.1 billion, same as the Group (₦1.1 billion) for Insurance cost, audit fees (₦213 million) by MTN Nigeria and Group respectively.
About ₦1.42 billion and ₦1.5 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 ₦8.9 billion for reversal of impairment losses on contract with various customers against ₦9.1 billion lost by the Group for a similar reason for the period.
Another ₦3.1 billion each were lost by MTN Nigeria and the Group for Reversal of impairment/(impairment) of property, plant and equipment, in addition to about ₦242 million each lost by both MTN Nigeria and the Group.
Direct network operating costs
Beyond these expenses, the report said MTN Nigeria incurred about ₦178.1 billion for the period direct network operating costs, consisting of ₦121.9 billion as BTS leases; ₦33.5 billion as network maintenance; ₦22.1 billion as regulatory fees, and ₦732.8 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 ₦845.8 million and ₦33.2 billion respectively were paid.
On income tax expenses, the report said out of about ₦64.5billion by MTN Nigeria and N63.7 billion by the Group, Company Income Tax (CIT) took ₦52 billion (MTN Nigeria), ₦52.4 billion (Group); Education Tax ₦6.5 billion each (MTN Nigeria and Group) and Nigerian Police Trust Fund ₦10.7 million each for MTN Nigeria and Group.
Also, the report includes additional ₦5.97 billion as deferred tax by MTN Nigeria and ₦4.84 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 ₦23.2 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 ₦42.3 billion was paid by MTN Nigeria as dividends (excluding withholding tax) to MTN International (Mauritius) Limited.
Between 23rd-December-2018 and 30th-September-2018 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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