20 July 2017

Nigeria: Lessons for 9Mobile From Mobitel

Photo: Premium Times
An Etisalat Office

The current financial challenges facing 9Mobile are reminiscent of what befell Mobitel in 2005, but the latter could not survive the storm because of the system applied by the lenders in recovering the loan.

Etisalat Nigeria, last week, was compelled to change its brand identity to 9Mobile, following the collapse of negotiations with its lenders, after its failure to repay the $1.2 billion loan it took from a consortium of 13 local banks in 2013 for network upgrade and expansion.

Mobitel in the past faced similar challenge owing to its inability to the loan it borrowed from one of the new generation banks then. The company, which was among the few fast growing ones then went into extinction.

The pressure on Etisalat Nigeria, was so intense, resulting in the withdrawal of Abu-Dhabi-based Emirates Telecommunications Group Company (Etisalat Group) from Etisalat Nigeria, leaving the other two core investors- Mubadala Development Company of the United Arab Emirates (UAE) and Emerging Markets Telecommunications Services (EMTS),which is a Nigerian group of investors.

Few days after it pulled out of the shareholding structure, six Mubadala and Etisalat Group-appointed non-executive directors (NEDs), all nationals of the United Arab Emirates, resigned their appointments, followed by the resignation of its board chairman, Mr. Hakeem Bello-Osagie, who is a Nigerian. Thereafter, its Managing Director/Chief Executive, Mr. Matthew Willsher and the Chief Finance Officer, Mr. Olawole Obasunloye also resigned their appointments. A five-man board was thereafter reconstituted, with Dr. Joseph Nnanna, an economist and Deputy Governor of the Central Bank of Nigeria, as the new board chairman.

Mr. Boye Olusanya, the former Deputy Managing Director of Celtel, which now operates as Airtel Nigeria, as its Md/CEO and Mrs. Funke Ighodaro as Chief Finance Officer. Others are: Mr. Oluseyi Bickersteth and Mr. Ken Igbokwe as none-executive directors.

Unsatisfied with the collapse of the structure of the former Etisalat Nigeria, the Etisalat international, penultimate week, issued a three-week ultimatum to the Nigerian operations to stop using the Etisalat brand name, a situation that compelled the telecoms company to change its brand identity to 9Mobile last week.

The problem of the former Etisalat Nigeria took a worrisome dimension when the banks threatened to takeover the telecoms business, should it fail to repay the loan.

Such was the case of Mobitel, a telecommunications company that also took loan from the defunct Intercontinental Bank. The company was still struggling to repay the loan when the bank dragged it to court and a receiver manager was appointed to retrieve its loan and in the process, the then Managing Director/Chief Executive of Mobitel, Mr. Charles Alaba Joseph died in a mysterious manner on the same day that the receiver manager stormed the premises of the telecoms company with policemen. His death terminated the dream of Mobitel, a once vibrant telecoms company. Industry observers have, however warned the banks to thread softy with 9Mobile concerning its current financial crisis with the banks, in order to keep its dream alive.

The story of 9Mobile

9Mobile, formerly known as Etisalat Nigeria, became the fourth entrant into the GSM space in Nigeria, when it rolled out its commercial service on October 23, 2008.

One of its first television commercials called the 080-9ja4life, was a great hit for the telecoms company, a situation that earned the telecoms company great respect among Nigerian youths, coupled with its innovativeness in product deliveries, especially on data services.

But in order to expand and upgrade its network, the telecoms company in 2013, approached a consortium of 13 local banks for a loan of $1.2 billion. The money was sourced in dollar and naira denominations.

However, citing the economic downturn of 2015-2016 and naira devaluation, which negatively impacted on the dollar-denominated component of the loan, the former Etisalat Nigeria wrote its creditors informing them of its intention to halt the repayment of the loan in installments, until such a time that it was able to raise more money.

Unsatisfied with the excuse from the telecoms company, the banks threatened to take over its operations, should it fail to meet its payment obligations.

The situation forced the telecoms company to enter into series of negotiations with the banks, which eventually collapsed, following disagreement from the banks.

Banks involved in the loan deal were: Zenith Bank, GTBank, FirstBank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank, among others.

A breakdown of the amounts owed the banks showed that Zenith Bank has the highest exposure to Etisalat amounting to $262 million and N80 billion, GTBank has the second highest exposure of $138 million and N42 billion, Access Bank follows with $131 million and N40 billion.

Etisalat also owed UBA $125 million and N38 billion; FirstBank - $79 million and N24 billion; Fidelity Bank - $56 million and N17 billion; Stanbic IBTC - $25 million and N7.5 billion; FCMB - $15 million and N4.5 billion; and Ecobank - $10 million and N3.1 billion.

The unsettled debt

In spite of the pressure mounted by the banks, which raised national concerns, the telecoms company (9Mobile) in a statement, had said that it had paid $500 million out of the $1.2 billion, up till February 2017. It said the outstanding loan to the lenders stood at $227 million and N113 billion, a total of about $574 million if the naira portion is converted to US dollars.

That was the crisis that adversely affected the telecoms company, leading to its name change last week to 9Mobile. Although its new management had said it would return 9Mobile to the track of profitability, industry watchers are skeptical that the matter could wipe out the telecoms company, if poorly managed.

Managing telecoms' indebtedness

Worried about the future survivability of the telecoms company, the NCC has said it would do everything possible to protect the telecoms company from going into oblivion. The Executive Vice Chairman of NCC. Prof. Umar Garba Danbatta, in a letter to the banks, had warned them of what could befall the former Etisalat Nigeria, if the banks are allowed to make do their threats.

The letter from NCC, was a follow up of series of meetings held in the past between the NCC, the Central Bank of Nigeria (CBN) and the banks, at the instance of the NCC, designed to address the financial crisis.

The NCC's letter, which was addressed to the Managing Director of Access Bank, and dated June 21, 2017, was also sent to the Governor of Central Bank of Nigeria (CBN), and the managing directors of GTBank and Zenith Bank, who are part of the consortium.

Part of the letter read: "The Commission, as a responsible regulator, is concerned about the likely implications of the takeover for subscribers on the Etisalat network in particular and the telecoms industry at large."

Citing the Commission's Act 2003, Danbatta insisted that Etisalat's licence cannot be assigned or sub licenced or transferred to any other party, unless the prior written approval of the Commission has been granted.

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