9mobile in the eye of the storm

A Lagos court ruling sacking the interim board of 9mobile may have plunged the telco deeper into crisis. LUCAS AJANAKU writes on the implications of the latest twist on ongoing efforts to sell the telco by Barclays Africa.

BUT for the court judgment obtained last week Friday, the curtain would have been drawn today for the submission of bids by the five suitors of 9mobile. Barclays Africa, the firm superintending over the sale of the telco, which fixed December 31 last year as the closing day, applied for an extension of time to the Nigerian Communications Commission (NCC). The regulator granted the extension, thus pushing the goal post till today.

With the judicial nullification of appointment of 9Mobile’s interim board, the suitors will have to wait for more times for the coast to clear before the realisation of their dreams to acquire the assets and liabilities of the telephone firm, adjudged by the NCC as the most innovative telecom firm in the country with a youth-centric DNA.

 

How it all started

About five years ago, Etisalat Nigeria secured a loan of $1.2 billion medium-term seven-year facility from local lenders to expand its network and make it more resilient to accommodate more customers.

The funding of the repayment of the facility was not in the public space until an economic downturn of 2015 triggered sharp devaluations of the naira which negatively impacted the value of the dollar-denominated loan. The situation was further compounded by a Central Bank of Nigeria (CBN) policy that restricted access to foreign exchange/dollars on raw materials that could be sourced locally.

According to the telco, the outstanding loan to the consortium stands at $227 million and N113 billion, a total of about $574 million if the naira portion is converted to the United States (U.S.) dollars. Going by available calculation, almost half of the $1.2 billion loan has been repaid.

 

Repayment debacle

Etisalat was servicing the loan until sometime in February last year, when discussions with the banks, regarding the repayment restructuring commenced. The $1.2 billion loan was serviced up until earlier this year when discussions with the banks commenced, the telco added.

Etisalat’s engagements to renegotiate the terms of the loan have gone on for a while and are yet to be finalised though at an advanced stage.

Some of the options on the card include the restructuring of the shareholding/change in ownership. Final arrangements regarding ownership and board structure are still in development stage.

Sequel to this negotiation, Etisalat Group announced to the Abu Dhabi Stock Exchange that it was transferring its shares in the company to an appointed security trustee of the banks.

The trustee is the vehicle employed by the banks to hold the shares on behalf of the consortium.

What has effectively happened is a ‘change in ownership’ not a receivership, bankruptcy or winding up. So, operations will continue to run and subscribers can continue to access services on the network as usual, the firm had assured.

 

Lenders seek investigation

A new dimension was introduced to the deal when the banks urged the Federal Government to investigate the telco over the loan.

The telco, however, denied being under any investigation by the Economic and Financial Crimes Commission (EFCC), over an alleged petition to “the Federal Government asking that Etisalat be investigated” on how the funds from the syndicated loans were utilised.

Its former Vice President (Regulatory & Corporate Affairs), Ibrahim Dikko, said in a statement: “Etisalat wishes to categorically affirm for the avoidance of doubt that the reports are patently false and most unfortunate considering the damage such misleading information can have not only on our business, but indeed on the telecommunications industry and the country as a whole.

“A simple interrogation of the rigorous process for securing a syndicated loan from a consortium of reputable banks would have exposed the truth to the original writer of this story and other media channels who have subsequently re-circulated the falsehood without interrogation or verification.

“Concerned parties have access to our books and do not require an investigation into how the loan was utilised. All of the infrastructure investment and services for which the loan was secured,

“Contrary to the widely reported misrepresentations about Etisalat Nigeria’s debt obligation to the consortium of 13 banks, it has become pertinent to set the records straight. Prior to this time, Etisalat had consistently and conscientiously met up with its payment obligations. As at today, we can categorically state that the outstanding loan to the consortium stands at $227 million and N113 billion, a total of about $574 million if the naira portion is converted to US dollars.

“This in essence means almost half of the original loan of $1.2 billion, has been repaid. Etisalat continued to service the loan up until February 2017, when discussions with the banks regarding the repayment restructuring commenced.”

 

CBN, NCC wade in

The CBN and NCC waded in with a mission to bring the loan deal to a peaceful closure. The regulators’ intervention was to save the jobs of the over 4,000 workers on the payroll of Etisatat and prevent asset stripping.

Confirming the intervention of the two regulators, CBN spokesman Isaac Okorafor said: “Although it should ordinarily not be the role of a regulator to decide how individual bad loans are resolved, the CBN believes that Etisalat is a systemically important telecommunications company with over 20 million subscribers that if not well handled, may have negative implications for the banking system itself.”

He further explained that the CBN and NCC, sensing that the banks might go ahead in the usual way and downsize the company’s over 4,000 workers, reached an agreement to intervene and implore the consortium of banks to reassess its position in dealing with Etisalat.

Okorafor described some reports in the media insinuating the CBN handwriting on the issue as “the height of mischief and insensitivity”, explaining that the collaborative move by the regulators was aimed at preventing job losses and asset stripping and to ensure that Etisalat remains in business and be in a position to liquidate the loans.

According to him, the CBN and the NCC plan to meet with the syndicate of banks and the IHS Towers, the tower managers and the equipment suppliers, in order to achieve what he termed “a win-win outcome” for all stakeholders.

 

Regulatory caveat

The NCC said its attention was drawn to a planned takeover of Etisalat by a consortium of banks.   Its spokesman Tony Ojobo said in a statement: “As a result of this planned action, the commission stated that it is aware of the indebtedness of Etisalat to the consortium of banks; in conjunction with the CBN, it had mediated by holding several meetings with the banks, Etisalat and other stakeholders with a view to finding a resolution. It lamented that these meetings did not yield the desired results.

“The NCC wishes to reassure the over 21 million Etisalat subscribers that it will do all within its regulatory power to ensure that Etisalat

“The Commission has taken proactive steps to cushion the impact of any takeover, this is without prejudice to the ongoing effort between Etisalat and the banks toward negotiated settlement.”

 

Emergence of 9mobile

Emerging Markets Telecommunication             Services Ltd. (EMTS), trading as Etisalat Nigeria later gave notice of the withdrawal of the brand name in the country, leading to the stepping aside of the Hakeem Bello and Mathieu Wilshere-led board and management.

The development culminated in a rebrand to 9mobile and subsequent appointment of Barclays Africa as advisors to the telco. Its Chief Executive Officer Boye Olusanya said the brand name change will not affect the quality of services to customers, adding that all its commitment to CSR will remain. He also said the telco had its windows opened for new investors.

Reacting to the development, the Association of Telecoms Companies of Nigeria (ATCON) said the development further puts more pressure on the new management to find an immediate buyer for the company, as EMTS is effectively left without a recognisable brand name known in the industry.

Its President, Olusola Teniola, said this so especially when it is considered that the Etisalat brand was associated with the youth segment of the market, it appears that there is urgent need to ensure that the services and products that EMTS delivers can replicate that unique experience!

“The Etisalat brand name holds significant intangible assets to EMTS and this allowed the current subscriber base to hold faith with the international experience and good will that the Emirates brought to Nigeria. It would be best for the new management to learn from lessons already learnt from the various name changes that Econet went through to get to Airtel and ATCON seeks minimum impact on the subscribers if those lessons come to bear during this difficult period of transition for the company EMTS and the stakeholders in the industry, most especially the consumers.

“Proactive effective messaging from EMTS is key to the success of any brand name change and to remove the uncertainty that surrounds any identify change. From Customer Care right through to technical support, it is important that infrastructure that supports the company is reliably run and in place to cope with the deluge of calls requesting information on ‘what next’ for the subscribers. Remember the ‘Customer is King’ in this situation,” Teniola said in email note to The Nation yesterday.

 

The five suitors

The NCC Executive Vice Chairman, Prof Umar Garba Danbatta listed the five bidders for 9mobile as Globacom, Airtel, Smile Communications, Helios and Teleology Holdings Limited. They were shortlisted from the 16 firms that expressed interest and filed bids with Barclays, 9mobile’s financial advisor.

They include: MTN, ntel, Virgin Mobile from the United Kingdom and Vodacom of South Africa. Others are BUA Group, Morning Side Capital Partners, Obot Etiebet & Co, Blackstone Private Equity, and Hamilton and George International Limited.

Dambatta said: “Five bidders have emerged for 9mobile. They have been allowed to access the data room of 9mobile in order to enable them access the financial situation of the company and subsequently make bids for the takeover of the company. But the takeover must be in a regulated manner.”

 

Court wades in

The Federal High Court in Lagos at the weekend nullified the appointment of an interim board for 9mobile.

Justice Ibrahim Buba made the order based on an application by Spectrum Wireless Communication Ltd, which invested $35 million in 2009 in EMTS/Etisalat.

According to the certified copies of the judgment endorsed by Alokpesi CN, registrar, the judge ruled: “An order is hereby granted discharging the ex-parte order made by this court in this suit in favour of the respondent on the 3rd day of July 2017.

“The order made pursuant to motion ex-parte dated 3rd day of July 2017 was a nullity, made without jurisdiction and obtained by misrepresentation of facts. Same be and is hereby discharged and vacated as prayed.

“The motion for stay is struck out, having set aside the order. The respondent shall reverse all steps taken by it since the order was a nullity.”

The order nullifies the appointment of Dr. Joseph Nnana of the CBN as chairman, Mr. Boye Olusanya as Managing Director, Mrs. Funke Ighodaro as Chief Financial Officer, Mr Seyi Bickersthet and Mr. Ken Igbokwe on the EMTS board.

The nullification followed Justice Buba’s dismissal of a preliminary objection filed by United Capital Trustees Ltd in response to the application by Spectrum Wireless, a shareholder of EMTS.

United Capital comprises a consortium of local banks that provided funding for Etisalat.

Spectrum Wireless claimed that the order was obtained through the misrepresentation of facts that alienated its interests in the company.

The interim board of EMTS, which has the support of the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC), received bids from five bidders in its intended sale of the company, which was to be concluded by last December 31, but was moved to January 16 (today).

 

Spanner in the works

Spectrum Wireless Communication’s lawyers have warned that any institution or company who transacts business for the purpose of sale or acquisition of EMTS or 9mobile does so at his or her own risk.

Following the exit of Etisalat and its directors in June last year from EMTS, United Capital obtained the ex-parte order of July 3, 2017 to appoint a transitional board to superintend over the company’s affairs.

The board rebranded the company 9mobile and announced a bid for its sale to interested investors. Concerned that United Capital’s action did not consider their stake in EMTS, other non-bank investors in EMTS, led by Spectrum Wireless, challenged last December the ex-parte order granted United Capital.

Justice Buba nullified the order, approved for the board’s appointment on the grounds that it was granted based on misrepresentation of facts.

Spectrum Wireless is accusing the NCC of not taking the interest of non-bank investors in the telco into consideration before deciding to put it on sale.

The firm which owns 17.5 per cent shares in the firm, said its interest and that of two others were not taken care of in the process leading to offering the telco for sale.

Specifically, solicitors to Spectrum Wireless, J.A. Achimugu & Co and Dr R. O. Atabo & Co, all Kaduna based, lamented that its client invested $35 million in Etisalat since 2009, adding that no profit was declared

Dr Reuben Atabo of Dr R O Atabo & Co, who spoke in a telephone interview, said several letters were written to the regulator with a view to notifying it of the need for all shareholders in the telco to be carried along, lamenting however that nothing was done.

According to Atabo, his clients and about two others invested $100 million in Etisalat for building of infrastructure, lamenting however that when the telco went to raise loan from a consortium of local lenders, they (shareholders) were not informed.

But, the NCC dismissed allegations that the interest of other shareholders in the telco was not taken care of, stressing that all entreaties to get at least, two of such members into the interim board were rebuffed.

A source in the commission said all efforts made to enlarge the membership of the interim board were frustrated by insiders in the telco who said such an action could trigger legal backlash from Mubadala.

The source recalled that the issue between the 9mobile and its consortium of lenders was purely a business deal, stressing that it was not a regulatory matter.

The source said its ‘tangential’ intervention alongside the CBN was pursuant to one of its core mandates, which is to protect telecom consumers in the country. The source added that had the commission not moved in when it did, the fate of the over 20 million customers of the telco would have hung in the balance just as about 4000 workers would have been sacked. The source added that protecting the telco from going under receivership also saved the industry from going through needless stress which would have threatened the sector which is the second highest contributor the nation’s GDP.

 

ALTON, ATCON react

The association of Licensed Telecoms Companies of Nigeria (ALTON), the umbrella body of all the telcos in the country, expressed concern over the development and hoped the matter would be settled soon in the interest of the all the stakeholders.

Its Chairman Gbenga Adebayo, in an emailed report said: “The development is quite of concern. We hope all stakeholders will resolve the issues within a short time. Effort must be made by all concerned to keep the network alive.

“There will only be continuous basis for negotiation and ownership shares if it remains a live network. Therefore, the first line of concern for all is to ensure that while these discussions are going on nothing will impact on the state of health of the network and degrade and quality of service 9mobile offers.”

 

Way forward

Adebayo urged parties to resolve all their differences to give new live to the network. “There is a good future for all investors once there is new lifeline for 9mobile which is a very important member of our association. We appeal to all concerned to please resolve the issues in the best interest of the network, the best interest of our national network, the best interest of the subscribers and the overall interest of our industry. We are offering all the needed support and we are confident that the issues will be resolved and the future will be brighter for 9mobile and our industry.

Teniola shared the same sentiment with Adebayo.

He said:  “What we hope for is that this issue is resolved in a timely manner and that there is certainty restored to the business. Telecom is a major driver of our economy and any impact on the sector will affect other sectors of our economy. We all must join hands to ensure we have a thriving industry.

“The contributions of 9mobile to our economy and the Telecom sector cannot be ignored and we are calling on all the stakeholders to join hands and agree on the way forward. Time is of essence and we are hopeful that the next few weeks will bring more lights to a brighter and better future for 9Mobile and the entire telecom sector.”

The National Association of Telecoms Subscribers of Nigeria (NATCOMS) said the lingering litigation cannot be death sentence on the telco.

Its President, Deolu Ogunbanjo, said there was nothing unusual for parties in business to seek judicial redress, adding that what is important is early resolution of the crisis so that the telco can heave a new sigh of relief and serve the customers better.

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