MTN's catastrophic communication failure
- Francis Herd
- 05 Nov 2015 01:13 (South Africa)
MTN only has itself to blame for the alarming drop in its share price, since the news about the staggering fine it faces in Nigeria broke; a drop that initially wiped out more than the R75 billion it stood to lose. The price has been recovering, and MTN shares may even jump all the way back up one day, if any major reduction in the fine is announced. However, the company’s behaviour has left a bad taste in the mouths of regulators, investors, journalists and consumers alike, meaning the fallout will likely continue.
In recent years, crisis management theorists have identified that, just as in interpersonal relationships, history counts in the relationship between a company and its stakeholders. A good reputation, built over time, has been identified as a “reservoir” that a brand can draw on when a crisis hits. Reputation reflects in price/earnings ratios, and it even seems to affect the speed at which the share price resolves, once the storm passes.
Conversely, however, public trust and patience run out over time. And even if MTN survives this crisis, it will be much more vulnerable in the next.
From the start, MTN was evasive and shifty, when it should have been bending over backwards to provide as much information as possible. It kept quiet about the fine, reportedly not only for hours, but for months, and the Johannesburg Stock Exchange is investigating the timing the release of MTN’s first acknowledgement. The company eventually sent the obligatory Stock Exchange News Service (SENS) statement, but after that, MTN executives were not available to the media, and ultimately the public, in order to answer a myriad of burning questions. For excruciating days people were wondering what exactly MTN had done. Then they were wondering why MTN failed to cut off unverified subscribers in a timeframe the Nigerian authorities had specified.
Mind-bogglingly, MTN has yet to provide a good explanation, which seems like an admission that it simply thought it could act above the law. A full explanation or an apology was in order. Immediately. After it was reported that the full fine would be implemented sent the shares into another nosedive, and the JSE went as far as suspending trade in the company’s stock, MTN released another SENS statement that was duller than dull. It urged shareholders to exercise caution about information that did not come from the company itself. Given the gravity of the situation, it seemed like a joke. Given the fact that MTN had been so mum, it was insulting.
If journalists do not receive official information about a story of national interest, we still have a duty to the public, and we have to turn to other sources that may or may not be trustworthy. In its recent, relatively verbose, statement, MTN said it noted “with concern” the speculation and false information in the media. Again, the company should blame itself for trying to stop the flow of information. In serious crises it is, also, now general practice for the Chief Executive Office to become the main spokesperson. Instead MTN has a spokesperson fielding calls in Johannesburg, rather than in Nigeria where the negotiations have been taking place.
The PIC has raised issues about the way MTN communicated to investors and handled matters in Nigeria. But this goes well beyond investors, who can access share prices all day. In a crisis, people are hungry for information, and the open disclosure of information protects ordinary consumers, and South Africans, even if they only have an emotional stake in the company. It stops rumour mongering. More fundamentally, it shows respect.
If companies think in terms of inter-personal relationships it’s simply inconceivable that they would offer “no comments” to the press, as MTN has done frequently in recent days. Imagine meeting a friend with whom you have a relationship you claim to value, and saying “no comment” when they want to discuss a crucial issue.
Of course MTN has been trying to claw its way out of a hole in Nigeria, and any statement threatened to inflame the situation. It's a tough spot to be in. There are so many things it could have said to show openness and respect. The fine is irrational, and it raises concerns about the motives of the Nigerian authorities, and their commitment to investment, but that’s another issue, which should not distract from MTN’s lack of competence in crisis management. Their stubborn refusal to talk means that executives are either being arrogant, reckless or stupid with shareholder’s money.
To be fair to MTN, this attitude towards the press and accountability is quite common in South Africa. Executives are very accessible to the media when there’s good news to be shared, however, when something goes wrong, they are suddenly very busy and start ducking and diving. Too many CEOs think they can pick and choose who they are accountable to, and when and where they should be asked questions. The boards that appoint them need to understand that someone who had been a valuable asset internally, can become your biggest liability when they start acting dodgy on TV. In today’s world of saturated coverage, it’s simply not good enough for leaders not to know and care about media relations, and reputation management.
Woolworths, during the Frankie’s saga, and Cell C, during the banner debacle, are two of many examples of appalling crisis management. Like a medical emergency, the first few hours, and days are crucial in a crisis, and you can never get them back. Some companies can get sick, and appear to recover, but their underlying weakness will be exposed when the next crisis hits. Even if MTN escapes a very harsh punishment in Nigeria, it needs to realise that trust is not an infinite resource. DM