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18 Jun 2017

Etisalat, Banks Talks Deadlocked Over $1.2b Debt

The fate of Etisalat Nigeria, the fourth largest telecommunications network operating in the country, hangs in the balance as the telecom giant battles to pay its creditors.
Etisalat Nigeria had in 2013 obtained a seven-year loan facility of $1.2billion from 13 local banks and their foreign counterparts to refinance a $650 million loan as well as the expansion of its network but the company had missed the payment due to dollar shortfall in Nigeria’s financial system. The loan, which involved a foreign-backed guaranty bond, was for Etisalat to finance a major network rehabilitation and expansion of its operational base in Nigeria.

The 13 local banks involved in the loan deal include: Zenith Bank, GT Bank, First Bank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank, and Union Bank.

Investigation by The Nation revealed that Abu Dhabi state investment fund Mubadala, the second-largest shareholder in the business, had in April presented a final restructuring plan to the banks which they flatly rejected. The banks further gave a one month window for repayment which lapsed in May 31st, 2017.

The Nation gathered that with the telecoms company unable to redeem its payment, the banks have since issued Etisalat a default notice.

This is just as The Nation learnt at the weekend that Etisalat Nigeria is working with its lenders and Abu Dhabi state investment fund Mubadala, the second-largest shareholder in the business, to resolve debt woes it said were caused by a devaluation of the naira currency.

Mubadala spokesman Brian Lott told Reuters on Friday that a local media report saying that the fund has pulled out of Etisalat Nigeria was wrong and that several proposals are under discussion.

He declined to elaborate on the options being considered but said he will know more next week.

The Nigerian affiliate of Abu Dhabi-listed Etisalat has said it is in talks to restructure a $1.2 billion loan after missing a repayment, though sources have said that talks reached a deadlock on April 28.

In a statement by Ibrahim Dikko, Vice President, Regulatory & Corporate Affairs, Etisalat Nigeria, the company described as spurious news report that Mubadala Development Company, the majority shareholder of the company is exiting the business.

In the statement which reads in part, Dikko said: “Whilst it is premature at this stage of the ongoing discussion to affirm that this is the conclusive option, Etisalat Nigeria considers it pertinent to state that parties in the negotiation are considering a number of options and discussions are at an advanced stage regarding the syndicated loan agreement with the banks. It will therefore be presumptive and in bad faith to begin to predict the outcome.”

Etisalat Nigeria, he stressed, “Can confirm that negotiations with the consortium of banks regarding the syndicated loan agreement signed in 2013 have reached an advanced stage. As noted in an earlier statement, we are considering a number of options and are not taking anything off the table at this time.”

Etisalat, he further emphasised, “Remains a viable business, having recorded its best financial year in 2016. So parties are keen to ensure that the ongoing discussions and eventual outcome do not affect the day to day operations of the business whether now or after the announcement of our agreement. All parties have continually demonstrated an interest in the continued operations of Etisalat as a business as it remains a backbone of millions of small business owners; multinationals, government and indeed Nigerian subscribers in general.”

However, it does appear that the apex bank and the regulatory agency in charge of the telecoms sector are not willing to stick their necks out for Etisalat again judging by their mute indifference to the lingering crisis involved the embattled telecom company and the banks.

When our correspondents broached the subject before the CBN spokesman, Isaac Okoroafor, Acting Director of Corporate Communications at the weekend, his rather terse response spoke volumes. “Call the Etisalat people please. We have nothing to say on that.”

His counterpart at the NCC, Tony Ojobo, informed our correspondent that he was going to get back soon but never did as at the time of filing in this report.

In the view of industry experts, the future of the telecoms sector looks bleak without Etisalat. One of those who share this sentiment is Mr. Olusola Teniola, National President, Association of Telecommunications Companies of Nigeria (ATCON), the umbrella body of telecoms companies.

Speaking with our correspondent at the weekend, Teniola said the issue of Etisalat leaving is a very complex question, as the insinuation describes a scenario whereby the subscribers on their network can be easily accommodated by other networks, which is not necessarily the case.

According to him: “No single network as currently configured and engineered can provide the requisite capacity to cater for any additional traffic burden a collapse of any single mobile network operator with over 20million subscribers will cause. It is more feasible that a more likely scenario of a merger or acquisition will occur in the form of an international player coming in to ensure continuity of Etisalat’ operations. This is more of a preferred scenario that should occur anything else will be disastrous for the consumers’ choice.”

Options before Etisalat, banks

Among the many options before Etisalat is to sellout its entire equity. The telco also ran into problem in Tanzania when the owners refused to put in more money. Specifically, United Arab Emirates telecom operator Etisalat had in 2015 sold its 85 percent stake in Zanzibar Telecom Limited (Zantel) to Sweden’s Millicom.

Zantel, which has struggled against larger rivals Vodacom and Bharti Airtel, got up to $32million in net current liabilities at close of the deal, Etisalat said in an emailed statement.

Etisalat received $1 in cash while Millicom assumed the total debt obligations of $74million under the terms of the agreement subject to regulatory approval by the Tanzanian Communication Regulatory Authority.

According to a source in one of the dealing banks who asked not to be named, one of the options the banks proposed to Etisalat management as a middle way out of the crisis was for it to request for a bankruptcy status.

The official, who requested that his name should not be revealed, since he was not authorised to speak on behalf of the consortium, said the bankruptcy option would require having receivership management appointed by the banks to oversee its operations.

The other option before Etisalat is to go into a merger with the existing telcos operating in the country. Already MTN had in the past signified interest to buy Etisalat but had to back pedal following its trouble with the NCC over unregistered sims. However, reliable sources say Globalcom may also be interested in Etisalat buyout but the telecom giant is said to be keeping its plan under wraps.

One of the options before the banks is to approach the court and get the board dissolved and take the company into receivership. But the challenge however is that the banks can’t run the firm because they don’t have operating license neither do they have the technical knowhow to do so.

But, the NCC appears not to be favourably disposed to the takeover proposal, the source said, as it believed that Etisalat is not only a viable going concern but also willing and able to negotiate the servicing of its loans.

Etisalat has the option of running to NCC for help but informed sources say Etisalat has not been carrying them along. But the NCC sources say they are ready to protect the over 21million subscribers on the network.

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