A consortium of local and foreign banks has taken over the management of Etisalat Nigeria after debt restructuring talks with the banks failed. But the Federal Government has disagreed with the take-over citing the Nigerian Communications Act (NCA) 2003, Section 38, saying it is too early for the banks to close-in on the debtor telco.
To this end, UAE’s Etisalat said on Tuesday that it has been instructed to transfer its 45 percent stake in Etisalat Nigeria to a loan trustee. Etisalat Nigeria has 20 million subscribers, making the telco the country’s number four mobile operator with a 14 percent market share.
In the last few months, Etisalat Nigeria has been in talks with Nigerian banks to restructure a $1.2 billion loan after missing repayments. The loan is a seven-year facility agreed with 13 banks in 2013 to refinance a $650 million loan and fund expansion of the telco’s network. Although the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) stepped into the fray to prevent a takeover by the banks, those discussions failed to produce an agreement on restructuring the debt. Etisalat said it had been notified to transfer its stake by June 23. It said the stake had a carrying value of zero on its books.
In a statement made available to Independent by Etisalat Nigeria and signed by Ibrahim Dikko, Vice President, Regulatory and Corporate Affairs, it stated that: “Etisalat Nigeria can now confirm the first stage of this has begun with a change in shareholding which was announced to the Abu Dhabi Stock Exchange this morning (Tuesday). “Etisalat Nigeria can confirm discussions are on-going regarding other issues such as the trading name during this transition phase. Operations and services to our subscribers remain normal and will in no way be affected as we continue to deliver quality services to our subscribers.” Dikko said, “We will continue to tap into the rich, creative and innovative resources within our workforce to build a stronger business upon the stable foundation we have laid in our nine years of operations.” Dikko commended the efforts of stakeholders while the negotiations lasted. “Etisalat Nigeria wishes to express its profound gratitude to the government, the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) for their patriotic zeal and tireless efforts at ensuring collaborative and productive engagement. We are also appreciative of the tremendous support we have received from the media since inception and we count on their continued support as we transition to a stronger business. We will update our stakeholders and the public on further developments shortly,” the statement read. Prior to the takeover, Etisalat said its financial exposure to Etisalat Nigeria was related to operational services worth 191 million UAE dirhams ($52 million) and that discussions were ongoing with lenders regarding the use of the Etisalat brand.
NCC Assures Subscribers Of Network Integrity Of Etisalat
Meanwhile, the Federal Government on Tuesday said lenders cannot take over Etisalat Nigeria. In a statement by Tony Ojobo, Director, Public Affairs, Nigerian Communications Commission, it drew the attention of the banks to provisions of the Nigerian Communications Act (NCA) 2003 Section 38: “Sub-section 1 – The grant of a license shall be personal to the licensee and the license shall not be operated by, assigned, sub licensed or transferred to another party unless the prior written approval of the commission has been granted;
“Sub section 2 – A licensee shall at all times comply by the terms and condition of the license and the provision of this act and its subsidiary legislation.” NCC reassured the over 21 million Etisalat subscribers that it will do all within its regulatory power to ensure that Etisalat subscribers continue to enjoy the services provided by the operator. “The commission has taken proactive steps to cushion the impact of the takeover; this is without prejudice to the ongoing effort between Etisalat and the banks toward negotiated settlement. “In view of the recent development, NCC wishes to reassure all stakeholders in the telecommunications sector in particular the subscribers on the Etisalat network that the commission will ensure that the integrity of Etisalat network is not compromised”, Ojobo said.
Analysts Bemoan Development
Speaking with Independent, Olusola Teniola, President, Association of Telecommunications Companies of Nigeria (ATCON), bemoaned the development, saying that it was an issue that could have been avoided if right policies were put in place by government to protect the telecommunications industry. “It is unfortunate that this happened. But reality has come to play. The loan issue which has caused this was taken in 2013 when dollar was about N150. But because of the forex policies and operating economy, things are worsening for the telecoms operators. When I became the president of ATCON, my major concern was that the telecom operators have been overburdened by many impeding policies, including illegal ones. “However, we are appealing to Etisalat’s new investors, old investors and others to continue to give the subscribers a deserving and uncompromising service quality. We have been shouting in recent years that the government has not been giving enough attention to this industry that contributes over 9% to the country’s GDP, but nothing much has been done”, he said. Continuing, Teniola said, “We are praying that CBN would reverse the damaging policy on forex before it is too late; but if the government fails to do the needful, I am afraid, the telecom industry may soon sink. Mind you, the debt issue is not peculiar to Etisalat Nigeria only. This is a fact”.
Challenges Of Operating Environment
Dr. Bongo Adi, economics lecturer at the Lagos Business School, while blaming the company’s woes partly on its strategy, puts the blame on “the challenges imposed by difficult operating environment in the past two years.” This is as he said that this scenario doesn’t send the right signals about the country’s business operating environment. “The implication would be dire for jobs and infrastructure”, says Adi, who also adduced that the banks are likely to “focus on loan recovery”. “Given that the loans were backed with fungible collateral, I guess the first thing a bank that is in dire straits would do in this situation is to embark on an asset stripping spree. The banks would want to draw down on this debt as quickly as possible in order not to allow it to keep growing. So, If they can’t find a ready off taker, the only option would be asset stripping”, he said.