16 May 2018

Nigeria: 9Mobile - Smile Faces Disqualification As Reserve Bidder

Smile Communications Nigeria Limited's failure to disclose that it's Nigerian shareholders have ongoing and challenging debt to a consortium of banks is threatening it's position as the reserve bidder for the sale of 9mobile. The telco data company has been accused of not only presenting false information in the bidding round but that is now attempting to derail the ongoing sale of the telecoms company by Barclays Africa having lost its attempt to become the preferred bidder.

Unsatisfied with the ongoing bid process, Smile Communications had on May 9, 2018, written the Board of Directors of Emerging Markets Telecommunication Services Limited and Guaranty Trust Bank Plc, representing the 13 local banks, the lenders of the $1.2 billion loan to Etisalat, now known as 9mobile,"raising issues after the fact as it desperately seeks to derail the ongoing bid process for the sale of 9mobile to Teleology", said a source conversant with the transactions.

Smile has alleged that Teleology, the preferred bidder for the sale of 9mobile does not have the financial capacity to buy 9mobile, and that it has all it takes to reposition 9mobile and make it attractive and competitive again, within 90 days, if given the opportunity to acquire 9mobile. Smile Communications assured that the company would inject fresh millions of dollars from foreign financing outside Nigeria into 9mobile to pay off its indebtedness to the banks and any other group the company is indebted to, and we will still have enough to invest in 9mobile and make it competitive.

Despite its promises and threats, it was discovered that Smile Communication Nigerian partners and shareholders are indebted to banks to the tune of $125 million - a material fact they ought to have disclosed at the beginning.

According to reliable sources, Smile Communications got the loan through a consortium of banks including, Afrexim Bank, and in turn routed the loan through a domestic bank, Diamond Bank resulting in the lenders huge non performing loans.

The banks are saying that if shareholders of Smile Communications have the money to buy 9mobile, it should have long paid the banks the money it is owing, "asking why they would replace a bad loan with another bad loan".

Disturbed about the letter written by Smile Communications to the Board of Directors of Emerging Markets Telecommunication Services Limited and Guaranty Trust Bank Plc, the telecoms lawyer, Olaniwun Ajayi wrote Smile Communications on May 14, 2018, warning it to desist from presenting false information about 9mobile sale.

Part of the letter read:... "We would like to refer you to the process letter for phase 111 of the transaction, particularly the second paragraph is Appendix B therefore, which stipulates that the company, the lenders and Barclays Africa reserve the right at the sole discretion and without liability to change, suspend or terminate the procedures set out in the process letter at any time and in any respect, to reject any and all proposals and to terminate negotiations and discussions at any time and for any reason, without being obliged to give prior notice or reasons therefore, with any or all potential purchasers and to negotiate with any party in a manner and to a timetable other than that outlined in the process letter... .As you understand, by your continued participation in the process, Smile confirmed its acceptance of the foregoing terms, amongst others, agreeing to be bound thereby, in the circumstance, the basis for the complaints and threats of legal action in your letter is unclear, as are your intentions in this regard.

Please note that the Company and lenders hereby reserve their rights to pursue all remedies available under all applicable laws," the lawyer said and advised Smile Communication not to contact the company or the lenders any further on this matter any more.

Nigeria

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