1 February 2018

Nigeria: As Stakeholders Await NCC, CBN's Nod On 9mobile Sale

Although the interim board of 9mobile last week adopted Teleology as the preferred bidder and Smile as the reserve bidder for the sale of the telco. The outcome of the transaction is still subject to the approval of NCC and the CBN.

The interim board of 9mobile, last week, announced its choice of preferred and reserve bidders of 9mobile, based on the recommendation of Barclays Africa, the financial adviser handling the sale of the telecoms company.

Up to 16 telecoms operators and investors had indicated their interests to acquire 9mobile, but the number was pruned down to five before the final bid submission on January 16.

The interim board announced Teleology Holdings Limited as the preferred bidder and Smile Telecoms Holdings as the reserve bidder. The announcement by the interim board may have brought to an end, the keenly competitive process for the acquisition of 9mobile. But the final decision of the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) will put the issue to rest as to who becomes the authentic preferred and reserve bidders between the two finalists, if the laid down decision-making stages for the selection are strictly adhered to.

Decision making stages

Before the bid process for the acquisition of 9mobile was made open to interested investors in June last year, there were set rules that comprise three different stages as to how the true winner of the auction process will emerge. The rules were that at the first stage, Barclays Africa will call for Expression of Interest (EoI) from willing investors, and thereafter allow the investors some time to evaluate the strength, weaknesses and liabilities of 9mobile, before submitting their bids for the acquisition of the telecoms company.

After the final bid submission, which came with a deadline of January 16, 2018, Barclays Africa will then evaluate the bids and make recommendations to the interim board of 9mobile, based on the statistics provided by the bidders.

On receipt of the recommendations from Barclays Africa, which is the beginning of the second stage of the auction process, the interim board will then meet to evaluate the recommendations and then make its selection for the preferred and reserve bidders, based on the recommendation and the statistics presented to it by Barclays Africa. After the preferred and reserve bidders must have been selected by the board, it will then forward the selected names and the criteria for selection to NCC and CBN, and notify them of its preference and selection process, since they are the telecoms industry regulator, and the financial industry regulator respectively. The notification, which marks the end of the second stage, will enable the two regulatory bodies to ratify the recommendations and selection in accordance with the terms of the bid exercise.

While 9mobile belongs to the telecoms industry that is being regulated by NCC, the 13 banks that lent money to the telecoms company, that triggered the planned sale of 9mobile in order to recoup the loan, belong to the money deposit banks that is being regulated by CBN, hence their involvement.

The third and final stage of the bid process is for NCC and CBN to meet and ratify both the recommendations of Barclays Africa and the selection by the board, before giving approval for the actual preferred bidder to commence the process of getting operational licence that will be issued by NCC.

After NCC and CBN must have given their nods to the preferred bidder, the winner will then apply to NCC in order to commence the processes for securing the regulatory approvals from the board of the NCC necessary to give full effect to the transfer of 9mobile operational licence to the new owner before it could legally operate and take full possession of 9mobile.

Based on the three stages in the auction process that will lead to the emergence of the preferred and reserve bidders, all eyes are on NCC and CBN to meet and give their final approval based on the statistics that will be presented to them by the interim board.

Mixed industry views

Having been recommended by Barclays Africa and selected by the interim board of 9mobile as the preferred bidder for 9mobile, Teleology is expected to pay the full value of 9mobile within 30 days from the day of approval and thereafter commence the process of getting regulatory approval for the transfer of 9mobile licence, but subject to the final approval by NCC and CBN.

It is based on this premise that some industry stakeholders are of the view that NCC should accept the recommendations and judgment of Barclays Africa and the board respectively, in order to put an end to the controversies rocking the sales of 9mobile, since the auction process was made open to investors in June 2017.

Some of the industry players, who commended the transparency in the auction process, said it was a positive development for the Nigerian telecommunications sector and for 9mobile, and a positive signal to the international investment community.

One of the stakeholders, who is the President of the National Association of Telecoms Subscribers (NATCOMS), Chief Deolu Ogunbanjo, said: "The NCC took the interest of investors, subscribers, and employees of 9mobile into consideration in ensuring a seamless and transparent process. There would have been a serious problem if 9mobile had gone under, especially with the job of over 2,000 Nigerians on the line. This would also have been a disincentive for the much needed Foreign Direct Investment (FDI). We commend all participants in the process and with the emergence of Teleology, we are sure 9mobile is in safe hands."

A staff of 9mobile, who spoke on condition of anonymity, said: "This news is like a double whopper burger for us. I can tell you there is an air of jubilation among the staff of 9mobile now. We did not want any of the existing operators to acquire 9mobile as they would end up sacking people and throwing people into the unemployment market under the guise of right sizing the business."

Divergent views

Just as some stakeholders are commending the auction process of 9mobile, others are calling on NCC not to depend solely on the financial bid of the two final contenders, but to also consider their managerial skills before giving its final approval. They also based their arguments on the amount of money said to have been promised by Teleology Holdings Limited and Smile Telecoms Holdings during the final submission of their bid documents, which they insist, is in conflict. It was reported that Teleology promised $500 million and Smile promised $300 million in their bid documents. But the stakeholders are insisting that the figures are conflicting since the actual amount promised by both contenders was not officially released by Barclays Africa or the interim board.

Although they admitted that Teleology must have promised an amount higher than what Smile promised, they, however, called on NCC to consider the financial strengths and weaknesses of both contenders, in giving its nod for the preferred and reserve bidders. Instead, they counselled that managerial acumen, industry track record and technology adroitness should be uppermost on the consideration table. They are calling for re-appraisal of the last two companies standing out of the 16 companies that started the race for the acquisition of 9mobile since June 2017.

The final contenders

The two finalists, Smile Telecoms Holdings and Teleology Holdings Limited parade former CEOs of MTN Nigeria as their strongmen for the bid. Teleology Holdings Limited is led by Adrian Wood, the second CEO of MTN Nigeria, who took over from the first CEO, Mr. Karel Piennar, while Smile Telecoms Holdings has one of its leaders, Ahmad Farroukh, who was also one time CEO of MTN Nigeria, after Wood's tenure.

Wood left MTN to become Group Managing Director of Daily Times of Nigeria and currently the CEO of Brymedia West Africa Limited. Teleology Holdings Limited is a consortium of companies believed to enjoy the backing of notable Nigerians including frontline politicians, revered traditional rulers and business executives as shareholders.

It is a Special Purpose Vehicle designed specifically for the 9mobile bid.

Teleology seeks to acquire and develop underperforming telecoms and electronic media operations in emerging markets. It has deep expertise in recovery and transformation of licensed fixed and mobile operators as well as design consulting, application and content service providers.

On the other hand, Farroukh became the Group Executive Director in charge of Operations at Smile Telecoms Holdings, after he left the services of MTN.

Between July 2006 and April 2011, Farroukh increased MTN subscriber base to 40 million and achieved 62 per cent healthy margin. He had the distinction of managing 17 operations of the MTN Group after he left Nigeria.

Smile Nigeria, a member of Smile Telecoms Holdings Limited, launched West Africa's true 4G LTE network in Ibadan in 2013 thereby revolutionising the way people access the internet. The company became the first operator in West Africa to offer its customers Voice over LTE services and give them access to the growing global standard for voice and video calling.

Smile launched Africa's First commercial 4G LTE network in Dar es Salaam, Tanzania in May 2013, revolutionising the way people access information online. Since then, Smile has extended its coverage in Tanzania to seven regions and also launched commercially in Uganda in June 2013, with coverage expanded to 14 cities. In March 2014 Smile launched West-Africa's first 4G LTE mobile broadband service in Nigeria with coverage now extended to eight cities.

By the end of 2015, Smile had the biggest 4G LTE mobile broadband network in Africa and continues to expand its network coverage. In 2016 Smile launched its SuperClear voice, video and SMS services over LTE, enabling customers to use one data bundle for SuperFast broadband and SuperClear voice services. Smile has transitioned from A spectrum rich start-up to the most reliable data gigabyte factory in sub-Sahara Africa.

The need to avoid more controversies

In order to completely overcome the controversies that have been rocking the sale of 9mobile since June last year, as well as put an end to more unforeseen controversies, industry operators have called on NCC and the CBN to expedite action in the final approval of the preferred bidder. They advised NCC to avoid a situation where the past controversies would rear its ugly head again to destabilise the efforts of all parties involved in what they described as the transparent sale of 9mobile.

Citing some of the controversies like the protest letter that was jointly signed by NCC and CBN against Barclays for an alleged improper handling of the sale of 9mobile at a point in time, and the court injunction obtained by Spectrum Wireless Limited to stop the sale of 9mobile, they are of the view that if the matters were not handled swiftly with high sense of understanding, they would derail the entire process of getting a new investor for 9mobile which is on the verge of completion.

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