From about 16 firms that initially submitted expression of interest (EoI) to Barclays Africa to acquire Nigeria’s fourth largest carrier, 9mobile, the list has been sifted, with five left to slug it out on the turf of financial and technical capabilities. LUCAS AJANAKU looks at the contenders ahead of the December 31 date for the emergence of a winner after the submission of financial bids and due diligence.
ABOUT five years ago, Etisalat Nigeria secured a loan of $1.2 billion medium-term seven-year facility from local lenders. It was to expand the operator’s 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 the economic downturn of 2015 led to a sharp devaluation of the naira which negatively impacted the value of the dollar-denominated loan.
According to the telco, the outstanding loan to the consortium stands at $227 million and N113 billion (about $574 million, if the naira portion is converted to dollar). By implication, almost half of the original $1.2 billion loan has been repaid.
Etisalat continued to service the loan until sometime in February, when discussions with the banks on the repayment restructuring began. The loan was efficiently serviced up until early this year when discussions with the banks began, 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.
Some of the options being considered include a restructuring of the shareholding/change in ownership. Final arrangements, regarding ownership and board structure, are still at the development stage.
Sequel to the negotiation, Etisalat Group notified 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 happened is a ‘change in ownership’ not a receivership, bankruptcy or winding up so that operations will continue to run and subscribers can continue to access services on the network as usual, the firm had assured.
The lenders said they rejected a $58.9 million offer by the telco as full and final payment for the outstanding $588.6 million.
The loan comprises N114 billion ($361.6 million) in local currency and $227 million in foreign currency, putting the total obligation to the banks at $588.6 million. The source said Etisalat Nigeria also has some unsettled obligations to its other business partners.
They hinged their rejection of the offer because it will hurt the interest of shareholders, deplete their capital base and derail the stability in the banking sector.
According to the lenders, the repayment plan was a product of an emergency meeting convened in London by the parties.
Sources said the banks had cut the interest charged on the loan by six per cent below market rate and agreed to absorb between 20 and 30 per cent of the debt burden and allow the telco to pay-down the loan within eight years.
Speaking through anonymous sources, the lenders said they are also going through challenges, insisting that Etisalat has the capacity to repay the loans because of the strength of its parent company.
According to the source, the loan to the company was restructured, with the borrower given additional time to ensure it liquidates the loan. But, as the final document for the loan restructuring was being reviewed by the legal counsel, the company asked for a ‘Stand Still’.
Etisalat claimed that its management and the banks are in full agreement over the unhindered operations of the business and that efforts are on to ensure the day-to-day operations are not affected and subscribers’ customer experience remains top notch.
The plan was for Etisalat Nigeria to undergo a transition period and work with the banks to secure new investors. With new investors, there is a possibility of a change in brand but, this will become clear once the restructuring has been concluded. Discussions are still ongoing on the final details of the agreements.
The company’s strategic goals remain unchanged; to serve customers with excellence, continue to innovate and maintain quality network.
One of the sources said the banks had not taken over the company because they do not own shares in it. The directors have not been changed and the lenders do not have expertise in running telcos.
CBN, NCC to the rescue
The CBN and the Nigerian Communications Commission (NCC) had intervened to bring the loan to a peaceful closure.
The regulators’ intervention was to save jobs of the over 4,000 workers on Etisatat’s payroll and prevent asset stripping.
Confirming the intervention of the two regulators in the loan dispute, the 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 banks might go ahead in the usual way and downsize the company’s workforce, struck an agreement to intervene and implore the consortium of banks to review its position in dealing with Etisalat.
Okorafor described some media reports, insinuating the apex bank’s 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 able to pay back the loans.
According to him, the CBN and the NCC, in the coming days, will 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.
Etisalat said there are no plans to sack workers. The discussions with the banks have been on for a while and Etisalat has met its obligations to its workers during the period. So long as the business continues, and from all indication it will, the company will sustain its side of the bargain.
The NCC said its attention was drawn to a planned takeover of Etisalat by a consortium of banks. Its director in charge of public affairs, Tony Ojobo, said the commission, in conjunction with the CBN, held several meetings with the consortium of banks to avert the planned action. At the meetings were Etisalat and other stakeholders. The aim was to find amicable resolution to the dispute.
“The NCC wishes to reassure the over 21 million Etisalat subscribers that it will do all within its regulatory power to ensure that Etisalat,” Ojobo said in a statement.
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.
The NCC statement further reads: “In view of the recent development, NCC wishes to reassure all stakeholders in the telecommunications sector in particular the subscribers on the Etisalat Network that the Commission will ensure that the integrity of Etisalat Network is not compromised.
“Accordingly, the Commission has drawn the attention of the banks to provisions of the Nigerian Communications Act (NCA) 2003 Section 38:
“Sub-section 1 – The grant of a license shall be personal to the licensee and the license shall not be operated by, assigned, sub licensed or transferred to another party unless the prior written approval of the commission has been granted;
“Sub-section 2 – A licensee shall at all times, comply by the terms and condition of the license and the provision of this act and its subsidiary legislation.”
The regulator said that while the banks and Etisalat are working at resolving the issues, it is assuring subscribers that they will continue to enjoy the services provided by Etisalat.
Eclipse of Etisalat/
emergence of 9mobile
Emerging Markets Telecommunication Services Ltd. (EMTS), trading as Etisalat Nigeria later served a notice for the withdrawal of the brand name in the country.
The development led to the stepping aside of Etisalt’s board and management led by Hakeem Bello and Mathieu Wilshere.
This culminated to the rebranding of Etisalat to 9mobile and the 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 Community Social Responsibility (CSR) will remain. He also announced opening of the telco’s doors to new investors.
Reacting to the development, the Association of Telecoms Companies of Nigeria (ATCON) said the development has further put 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.
ATCON’s President Olusola Teniola, who noted that the Etisalat brand was associated with the youth segment of the market, explained the urgent need to ensure that the services and products that EMTS delivers can replicate that unique experience!
He said: “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.
Teniola, who is the former CEO, IS Internet Services and now Client Partner for Detecon International, a subsidiary of Deutsch Telekom Group, Germany, said that ATCON had predicted this development, adding that other carriers must learn one or two lessons.
His words: “We, in ATCON, predicted this outcome and the need to see the precedent that this sets for the rest of the industry, in particular in the way and manner funds are used to deploy capital intensive infrastructure.
“The relationship with the banks and our members need to reflect the current reality in this harsh business environment and it is best for all stakeholders to work together to find a permanent solution to the ‘funding gap’ that exists in the manner and way the industry attracts FDI or utilises debt to realise its ambition.”
Search for buyers
No fewer than 16 firms expressed interest and filed bids with Barclays, 9mobile’s financial advisor.
They include MTN, ntel, Virgin Mobile from the United Kingdom (UK) 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.
Only five of the willing investors scaled the blue litmus test according to NCC Executive Vice Chairman Prof Dambatta. The five, all telcos, are: Globacom, Airtel, Smile Communications, Helios, and Teleology Holdings Limited.
The NCC chief 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.
“The CBN and NCC are supervising what is going on through an interim board jointly appointed by the NCC and CBN. We are going to do due diligence on the financial capacity of any potential bidder as well as the technical capacity.
“In the final analysis, we will like to see a 9mobile taken over by a bidder who has the financial and technical capacity to improve on the operations of the telco and add value in the delivery of qualitative telecom services in the country.”
Who is who on the
Glo, which is in the race, is wholly a Nigerian telco, owned by business mogul, Dr. Mike Adenuga Jnr. Telco sector analysts say the firm appears to be better positioned to bring in the wireless broadband revolution faster and to a larger cross-section of the population because it already has the biggest 4G network covering the major cities in 700 megahertz (Mhz) band which no other carrier has.
As holder of the Second National Carrier licence, it can have fixed line, broadband, mobile telecoms platforms.
Glo’s operation is boosted by its submarine cable from Europe which is laid across the length and breadth of the country.
Globacom’s subscriber figure increased in October by 68,954 with 37,418,933 customers, as against 37,349,979 in September, according to a data obtained from the NCC. It prides itself as the only telco that owns cutting-edge infrastructure including towers, generators, mobile switch centre (MSC) and datacenter buildings and does not owe anyone for its assets on which the network is running.
Moreover, Glo is built on the bedrock of sound financial strength to guarantee the continuation of telecom services in Nigeria as an indigenous operator.
It has a robust fiber network with huge capacity, spread across the country, connecting all major towns to carry the traffic.
Glo is the only private operator in Nigeria that owns submarine cable connecting Nigeria to Europe and the Americas and from there to the rest of the world.
The project was implemented by Globacom and its partners Alcatel Lucent has given Nigeria lead in telemedicine, e-commerce and e-governance among other practices that transform economies.
The 9800km cable came from Bude in UK and connects Nigeria to the rest of West Africa and the UK. It has landing points in Nigeria, London and Lisbon in Portugal and deploys 16 branching units to connect countries in West Africa.
Globally, the tradition is for a consortium of firms to team up to set up a submarine cable network to enhance connectivity and bandwidth capacity.
It is the first single telco in the world to own its submarine cable. The high capacity Glo 1 optic fibre cable will bring direct connectivity between West Africa, the UK and the rest of the world.
The cable will provide huge capacity on its two-fibre pair system. The Glo 1 cable will also provide excess bandwidth to all the cities connected to the cable. This will translate into much faster and more robust connectivity for voice, data and video.
The cable will connect 14 West African countries through the branching units to the rest of the world. It will boost economic activities in the region, create job opportunities and serve companies in Europe and Africa.
It is of the 32 STM 64 type has virtual infinite capacity and therefore offers sufficient capacity for traffic for the Globacom mobile, fixed, and internet telecoms services.
Glo has the most experienced and competent workforce with years of experience in managing the complexities of rollout, integration and operation of a multivendor network with its own employee unlike others who rely on managed services.
A sector analyst said of the firm: “With this huge strength and capacity, Globacom has demonstrated that it is strategically positioned to acquire 9mobile and give its operation a facelift in terms of infrastructural investment, capacity and increase its reach to its customers in Nigeria.”
Smile Communications is another firm in the race. According to the information obtained from its website, Smile provides 4G LTE mobile broadband services, with data speeds of up to 21Mbps, in all its countries of operation.
The information reads: “Our objective is to become the broadband provider of choice for SuperFast mobile broadband and SuperClear voice services in all our markets (Nigeria, Uganda, Tanzania and soon in the DRC) that our customers are able to fully benefit from the internet world.
“Our intention is to ensure that each of our over 300 million potential customers have access to our fast, reliable broadband services and are able to use these to accelerate development and wealth creation.”
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 all its customers to use one data bundle for SuperFast broadband and SuperClear voice services.
According to online knowledge resort, Wikipedia, Helios Investment Partners is a private equity investing firm operating in Africa and based in London, UK, with additional offices in Nairobi, Kenya and Lagos.
Helios Investment Partners was established in 2004 by Babatunde Soyoye and Tope Lawani and it operates a range of funds valued at more than $3 billion in capital commitments. These investments include start ups, growth equity investments, listed companies and large scale leveraged acquisitions across the continent of Africa.
The key sectors in which the firm operates in include telecommunications, media, financial services, power, utilities, travel, leisure, distribution, fast-moving consumer goods, logistics and Agro–allied sectors.
Also in the race is Airtel. Determined to become a global carrier, its owner, billionaire Sunil Mittal, had on June 9 2010, spent $9 billion to buy Kuwait-based Zain Group’s telecom assets in Nigeria and 13 other countries in Africa, seen as the next big space for growth. It took on $8.5 billion in debt to fund its ambitions.
According to the October subscriber figures, released by the NCC, Airtel had 35,089,690 subscribers in the month under review, which showed an increase of 463,946 users, from the 34,625,744 recorded in September.
At the time of expanding into Africa, Bharti Airtel had big plans for the continent. It set a rather ambitious target of 100 million subscribers, up from 42 million at the time of the acquisition, $5 billion in revenue jump from $3.6 billion, and $2 billion of earnings before interest, taxes, depreciation and amortisation, (Ebitda), by March 2013, less than three years, after the acquisition.
Ebitda is a measure of a company’s profitability. Hoping that Nigeria will be the cash cow, Mittal deployed his long time ally, Manoj Kohli, to the country to drive the business.
A 2015 report said the telco never met these targets, adding that it looked as if Mittal had bitten more than it could chew.
Bharti had tried twice and failed in bids to buy MTN Group, a South African carrier with foot prints in 22 countries across Africa and the Middle-East. After the deal fell through for the second time, Mittal turned to Zain’s Africa.
Airtel had planned to replicate the minute factory model which recorded resounding success in India. The model allowed the telco to outsource its services retaining core functions such as billing and branding. This helped it to reduce costs to a minimum, transferring that to probably the lowest tariffs in the world.
The company’s plan was to leverage the now-famous minute factory model, where the telco outsourced almost all tasks, keeping with it only key functions such as branding and billing. This practice in India had.
But things seemed not to have worked out as planned, forcing Mittal to describe its foray into the continent “rushed” entry in 2010. He described the move as one of his biggest regrets in his professional life.
The Economic Times quoted Mittal to have described its decision to enter Africa at the time as a mistake, explaining challenges in the region and efforts to engineer a turnaround have impacted the group.
Mittal’s comments, which were made at the TiEcon event in New Delhi, India had followed speculation that the telco was set to exit three markets in Africa; Kenya, Rwanda and Tanzania, and would instead pursue other options in the region.
Airtel subsequently released a statement denying the rumours, although it did confirm it was open to consolidation with other players in some countries.
Speaking about Airtel’s entrance in 2010, Mittal lamented that the capital and energy put into Africa at the time “probably would have been better-placed today in our home market”, adding the decision to go into Africa was “a bit rushed” and took a lot of time “and a lot of resources and my personal time to fix that”.
In its most recent statement of account (covering the three months to end-September) the company reported improved customer numbers, Airtel Money service uptake and margins across its Africa business as a whole.
Mittal added that its operations in Africa are in “a much better place today”, after finally becoming cash flow positive.
In an emailed statement, the telco however said: “We remain positive on Africa, which is the last remaining growth frontier in the world, and will continue to invest in our operations.
“We believe we have acquired a promising asset and the long-term growth fundamentals of the market are intact. While a complete turnaround has taken longer than our initial expectations, we believe the overall business is moving in the right direction and we are satisfied with the performance.”