The embattled South Africa telecom giant, MTN, has withdrawn its suit against Nigeria and paid $250 million as an immediate step in seeking an amicable resolution of the $3.9 billion fine crisis.

However, there were conflicting signals from the government on whether the initial payment was a guarantee that the company was now in the clear.

The biggest telecom company in Nigeria with over 70 million active subscribers has been in a dispute with the Nigerian Communications Commission (NCC) since October 2015 after the Commission imposed a staggering fine of $5.1 billion on the company for its failure to deactivate 5 million unregistered sim cards from its network.

The fine was later reduced to $3.9 billion, but the company went to court for it felt the reduced fine was still too high. The federal government counter-sued, prompting MTN to seek an out of court settlement.

On Wednesday, the mobile phone company finally withdrew its case from the Federal High Court in Lagos in response to a request by the Nigerian authorities to demonstrate its seriousness about an amicable resolution.

The CEO of MTN Nigeria, Ferdi Moolman, described the turn of events as “a most encouraging development.”

“It demonstrates a willingness and sincerity by both parties to work towards a positive outcome,” he said.

Government scrutiny

He added that MTN paid the $250 million (N50 billion) to the federal government “as a gesture of good faith.” The government has yet to confirm receipt of the $250 million.

Victor Oluwadamilare, an aide to the Minister for Communications, said the development had not been made official because the matter is still under federal government scrutiny.

“I can confirm to you that the situation is still being studied. To the best of my knowledge, the amount announced is not the fine they are expected to pay. The federal government is still studying [the proposal]. They [MTN] decided to go to court and never wanted an amicable settlement. If they now want a settlement, there has to be an official statement on that soon,” Mr Oluwadamilare added.

MTN shares jumped 9.2 per cent to close at $8 (R122.99) on Friday, lifted by among other things news that the group is seeking an out-of-court settlement with NCC.

MTN challenged the penalty in court, protesting that the amount and the process followed exceeded the NCC’s powers. The Federal High Court in Lagos adjourned the matter to give room for a settlement. The case will resume next month if no consensus is reached.

Analysts believe a fine of up to $2 billion could resolve the dispute. MTN makes about 37 per cent of its revenue in Nigeria and the fine is nearly its annual turnover. The unit projects profit at $955 million for last year.

MTN has come under scrutiny in the markets it operates in and was named in Cameroon last week for not paying $166 million in taxes.

NCC fined MTN for not complying with a deadline to disconnect all non-registered sim cards. Mobile phone users had put the regulator under pressure to hold operators to account for poor services through sanctions. NCC data shows that Nigeria has about 150 million mobile phones in a population of 170 million.