The Africa Report — July-August 2017

SUNDAY ALAMBA/AP/SIPA

As the landscape continued
to shift under technological and
operationalpressures,Etisalatap-
proached a consortium of banks
in 2013 to grant it the $1.2bn loan
to enable it refinance an existing
obligationworth$650millionand
fund an upgrade of its network.
The loan was granted and the
company carried on with its
business having believed to have
become profitable by then.
But as the high cost of opera-
tions continued to exert pressure
on their operations, Nigerian
telecoms operators moved to
cut costs and began selling their
towers, which accounted for a
high portion of their operating
costs. Etisalat sold 2,691 towers to
IHSTowers,amobiletelecommu-
nicationsinfrastructurecompany,
in 2015. Reuters estimated the
deal tohave been worth $400 mil-
lion, which is equivalent to what
Mubadala had paid the Nigerian
government for the licence.
Then came the economic
slowdown in Nigeria due to the

collapse of oil prices in late 2014.

The naira came under intense

pressure as the country’s supply

of foreign exchange declined

sharply; this put a squeeze on

the banking sector and led to a

rise in the rate of bad loans.

Inresponsetothispressureon

the currency, the Central Bank

of Nigeria devalued the naira by

around 50% in June 2016. This

hit Etisalat’s loan obligation as

it effectively meant a significant

increase in the naira value of the

loan. Despite attempted resolu-

tionswiththebank,ultimatelythe

pace of repayments outstripped

Etisalat Nigeria’s ability to pay

• and the banks have ended up
  holding the company.
  Herbert Wigwe, CEO of Access
  Bank plc, one of the 13 lenders,
  asserts that the banks have no
  intention of running the compa-
  ny, but simply want to get back
  the funds they had lent, which
  were sourced from depositors’
  funds. “We don’t want to be eq-
  uity holders; we would rather be
  paid out,” Wigwe says.

WHO WILL BUY?

Given that the banks have as-

sumed control of the company,

the logical conclusion that would

lead to the recovery of their funds

would be to sell it to a buyer who

would be interested in taking on

the debt-laden asset. Wigwe im-

plies that this is the likely course

to be pursued by the banks, as the

company remains an attractive

proposition with over 20 million

subscribers. “Would we be able

to find a buyer for that kind of

asset? The answer is absolutely

yes,”hesays.

Nevertheless, the Central Bank

of Nigeria has asked the banks to

maintain the status quo and seek

approval from it before taking

any further action on the matter.

This move is believed to stem

from the view of the telecom

regulator that the company is

systemically important to the

national economy.

FindinganewbuyerforEtisalat

Nigeria will take a while, believes

Obi-Chukwu, because whoever

now buys the asset will want ans-

wers to those questions about

how the company went under.

Some analysts believe Etisalat,

which was thought to have the

highest average revenue per user

(ARPU)intheindustry,shouldnot

havehadsuchproblems,implying

the possibility of more signficant

governance issues.

Hence the ball is now in the

court of the banks, the regulators

and prospective owners to over-

seetheriseofanewoperatorfrom

the ashes of the dead partnership.

AsforMubadalaandBelo-Osagie,

it seems their extraordinary jour-

ney has come to a sorry end.

Charles Idemin Lagos

Etisalat Nigeria revenue

2015 2016

$1.15bn

$928m$ 928 m

-14%

SOURCE: ETISALAT

$1.2bn

Total loan

facility

(worth

around

N541.8bn

at the time)

obtained

by Etisalat

Nigeria

in 2013

to finance

network

rehabilitation

and

expansion

of its

operational

base

SOURCE: ETISALAT

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