Etisalat and the long walk to lenders’ net

The Nigerian GSM operators were thought to be very rich. The fall of one of them has shown otherwise.

Etisalat and the long walk to lenders’ net

 

Though many small telecom companies have gone under since the full liberalisation of the sector in 2001, none of the big four operators has shown any sign of ailment until April when news broke that Etisalat was having difficulty paying back a $ 1.2billion loan it took from some banks.

How it all started

The telecoms sector had been the second most vibrant sector before recession hit the country in 2016, and is now said to be the most vibrant after the sharp fall in oil prices.

Although it overtook the oil sector, the effects of fall in oil prices which had impacted negatively on the dollar/naira rate and the scarce foreign exchange soon slap the sector hard on its face.

And because the telecom business depends largely on foreign inputs as its infrastructure and expertise are largely sourced from abroad, the operators in the sector need foreign exchange like blood for survival.

They require huge foreign currency to settle liabilities at all times.  This, according to analysts, forced Etisalat to take the $1.2bn loan to modernize and expand its network in 2013 and was scheduled to pay back in dollar.

When it took the loan, macroeconomic indices looked stable, with the dollar exchanging for about N197. But three years after, with an economy in recession, coupled with the free float of the naira, the telco defaulted on the facility.

The takeover

Now, the lenders – Zenith Bank, Guaranty Trust Bank, First Bank, United Bank for African, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank – have taken over the company, after many negotiations failed.

The company, which is the fourth GSM mobile company in terms of size, with a customer base of about 20 million subscribers and a workforce of about 2,000, now has its fate hanging in the balance.

Though the interventions from both the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) have helped to reduce the effects of the takeover on the telco, its staff, shareholders and its customers, many casualties have been recorded already.

First, the UAE-based Etisalat which owned 40 per cent of Etisalat Nigeria, was forced to forfeit it stake due to the loan issue. It was required to transfer its holding in the company to a consortium of lenders to the Nigerian operation.

Also, its chairman Hakeem Bello-Osagie resigned following the approval of the restructuring plan for the telco. Bello-Osagie was the promoter of Emerging MarketsTelecommunications Services (EMTS) which controlled about 15 per cent of the equity holding of the company.

It would be recalled that Bello-Osagie had planned to leave immediately the banks made the take-over move, but was prevailed upon to tarry awhile until a road map for the company was finalised.

A statement announcing the resignation of the chairman  said: “The timing of the resignation was strategically delayed till now when stakeholders have agreed a plan and comes more than a week after Mubadala Development Company directors tendered their resignation. The development also reflects Bello-Osagie’s deep commitment to protecting the interest of all stakeholders.”

According to the statement, “It is now expected that Etisalat Nigeria under its new shareholding structure will navigate through its current loan repayment challenge with minimum impact.

“Over the last several months, the chairman has worked extensively with critical stakeholders to prepare clearly articulated strategies and robust road maps that will mitigate the impact of the new shareholding restructuring and realignment on the operations and management of the 4th largest telecoms player in Nigeria.

“With this development, the new board will assume control of Etisalat. This is coming following interventions, which have been roundly applauded, from regulatory agencies, including the Nigeria Communications commission (NCC) and Central Bank of Nigeria (CBN) and other stakeholders to ensure that the best decisions are taken in the interest of the subscribers, employees and the Nigerian economy.”

The eyeing of buyers

News broke last week that Orange and Vodafone Group were in “strong running” to buy 65 per cent of Etisalat Nigeria following Etisalat’s exit from the troubled operator.

According to Brandish, “no fewer than five” companies have expressed interest in Etisalat Nigeria, although the two international telco giants have shown “concrete interest”. The potential hurdle, the report said, was the restructuring of the debt which caused the current uncertainty for the business.

The report also said the negotiators for Etisalat Nigeria – including representatives of its bankers and Nigerian regulators – are working to “mitigate any collateral damage and brand erosion” which could impact the new owners. Either way, a rebranding is likely to be an early priority for Orange or Vodafone if they become the successful owner, to shift away from the Etisalat name.

After the Nigerian business defaulted on its loan repayments, Etisalat was required to transfer its holding in the company to a consortium of lenders to the Nigerian operation.

‘No cause for alarm’

The Nigerian Communications Commission [NCC] has assured Etisalat Nigeria’s subscribers of quick resolution of the Etisalat issue even after the takeover.

The NCC Executive Vice Chairman Prof Umar Danbatta said the Etisalat loan wouldn’t destabilise the telecom industry.

He said discussions would still be held in coming days for final resolution of the issue.

He said, ‘’ Let me assure millions of Etisalat subscribers that there is no cause alarm; nothing is going to happen to their lines. The issue is being resolved and it would soon be finally put to rest.    The issue wouldn’t be allowed to destabilise the telecoms industry. We are handling it and you will be briefed adequately as events unfold on the issue.’’

A top NCC official also told Daily Trust, “We are the regulator of the industry. As part of our duties and mandates, we liaise with other regulators and other government agencies on behalf of our industry on the issue affecting any of the players in our industry.

“We do this always, and on this issue we are on it; we have met with the parties involved and we are still meeting with them. We are trying to prevent any ugly occurrence in the industry. We wouldn’t allow a telco with about 21million subscribers to leave them out in the cold.”

The restructuring

Stakeholders in the Etisalat Nigeria have agreed on a win-win restructuring plan for the telecommunication firm, a source privy to the restructuring said.

The unnamed source reportedly told a national newspaper that the plan would involve a marriage of representatives of the consortium of 13 banks, Nigerian stakeholders, the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC).

“We are grateful to all those who have mediated to the point we are in now where we have come to an amicable resolution in the interest of all parties. It is a win-win arrangement; a symbiotic exercise at that. All the stakeholders have agreed that the Consortium of the 13 banks would have four representatives on a 7-member interim board; two representatives will come from the Nigerian stakeholders and one will represent the CBN/NCC. The essence of this arrangement is to ensure that all the parties have a stake in the business”, the newspaper quoted the source as saying.

This resolution, which may have prevented likely loss of jobs– one of the concerns of many stakeholders when the story broke — has since been elicited complementary remarks from NCC, CBN and analysts.

Credit Daily Trust


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