13 banks takeover Etisalat over N541bn debt default, amid fears of job losses

Uche Atuma

By Amechi Ogbonna and Olabisi Olaleye

Despite the concerted attempts by the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) to save Nigeria’s fourth largest telecommunications services provider, the consortium of banks, led by Access Bank PLC finally made real its threat to take over the management of the Etisalat Nigeria Limited. The takeover which was consummated on June 15, 2017, thus ended months of speculations about the company’s future after it failed to honour the terms of $1.72 syndicated loan facility arranged for it in 2015 by local and foreign financial institutions.
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The loan which was a foreign backed guaranteed  bond was meant to assist Etisalat Nigeria expand its network and refinance an existing $600million facility to help it compete in the nation’s rapidly growing telecoms industry.
Other local banks involved in loan arrangement included, Ecobank Nigeria, Fidelity Bank Plc, Guaranty Trust Bank, First Bank and Union Bank to mention a few.
The takeover of Etisalat followed the collapse of efforts by Emerging Markets Telecommunications Services, (EMTS), promoted by-one time Chairman, United Bank for Africa, UBA, Hakeem Bello-Osagie, to reach agreement with the banks for the restructuring of the its N541.8 billion debt owed the banks.
However, EMTS Holding BV, established in the Netherlands, has up to June 23 to complete the transfer of 100 percent of the company’s shares in Etisalat to the United Capital Trustees Limited, the legal representative of the consortium of banks.
Etisalat Group, the parent company of Etisalat Nigeria, announced the takeover on yesterday in a filing to the Abu Dhabi Securities Exchange in Abu Dhabi, United Arab Emirate.
The filing, with reference number Ho/GCFO/152/85, and dated June 20, 2017 signed by Etisalat Group Chief Financial Officer, Serkan Okandan, said efforts by EMTS to restructure the repayment of the syndicated loan by a consortium of banks to Etisalat Nigeria collapsed.
“Further to our announcement dated 12 February, 2017, Emirates Telecommunications Group Company PJSC, “Etisalat Group” would like to inform you that Emerging Markets Telecommunications Services Limited “EMTS” (“the company), established in Nigeria and an associate of Etisalat Group with effective ownership of 45 per cent and 25 per cent ordinary and preference shares respectively, defaulted on a facility agreement with a syndicate of Nigerian banks (“EMTS Lenders”).
“Subsequently, discussions between EMTS and the EMTS Lenders did not produce an agreement on a debt restructuring plan.
“Accordingly, the company received a default and security Enforcement Notice on June 9, 2017 requesting EMTS Holding BV (EMTS BV) established in the Netherlands, and through which Etisalat Group holds its interest in the company) requiring EMTS BV to transfer 100 per cent of its shares in the company to the United Capital Trustees Limited (the Security Trustee”) of the EMTS Lenders by June 15, 2017.
“Subsequently the EMTS Lenders extended the deadline for the share transfer to 5.00 pm Lagos time on 23 June 2017,” the filing said.
Unable to meet its debt servicing obligations agreed since 2016, the consortium, prodded by their foreign partners, threatened to take over the company and its assets across the country.
Recall that Nigerian Communications Commission, NCC, and the Central Bank of Nigeria (CBN), had earlier mediated on the impasse by urging the banks to give Etisalat a chance to renegotiate the loan’s repayment schedule.
Etisalat Nigeria Vice President Regulatory and Corporate Affairs, Ibrahim Dikko said the company was still in discussion with lenders to find a non disruptive solution.The core investors had said its financial exposure to Etisalat Nigeria was related to operational services worth 191million dirhams about $52billion and that discussions were on regarding the use of Etisalat brand. It is understood that Nigeria’s severe economic downturn has had a big impact on both subscriber numbers and average revenue per user (ARPU) rates across the telecoms industry in the country. Nigeria is currently in the middle of its first recession in a quarter of a century.
Already stakeholders in the telecommunications industry have been quite apprehensive about an impending job losses following the takeover. They have expressed fears that the takeover would trigger more job losses as the new management may want to prune existing workforce in an attempt to cut cost to recover their funds in the organisation faster.
Although activities at both the head office of the Etisalat and its other outlets have continued without disruption, most of the staff no doubt are already getting jittery they might be thrown into the labour market soon.
Another possible outcome of the takeover could be a loss of identity and further shrinkage of Etisalat subscriber base considering the competitive nature of the telecommunications industry.
A former, Executive Vice Chairman of the NCC, Engr Enest Ndukwe, told Daily Sun that since he didn’t have enough information on the issue yet he would not be able to comment. He however promised to respond after assessing the development later in the week..
But the President, Association of Telecommunications Companies of Nigeria (Atcon) president, Olusola Teniola, on his part lamented that it was a regrettable action.
“It is unfortunate that Etisalat found itself in this mess when we thought they would have an amicable outcome. It was more of a takeover led by Access Bank. We all know from history that banks running telecoms operations don’t end well but often collapse such operations.
“What ATCON is praying for is that the over 24 million subscribers are protected and the stakeholders including shareholders both new and old understand that customer is king. The impact on the country and industry can be underestimated. The regulator should step in and guide the banks in the best way to run the operations of the company so that there won’t be migration of subscribers. Courteous and customer service should be paramount. It should help to ensure that the subscribers are confident and that Etisalat continues as a growing concern. What we don’t want to happen is when consumers start expressing concern that all is not well and they start reducing in numbers or making announcement that may jeopardise recharge credits. This may have huge impact on the revenue of company and even on the GDP of the economy as telecoms currently contributes about nine per cent to the economy’s GDP.
If there is any impact on Etisalat, it would have ripple effect that may not only be astronomical not only to the supply chain, but all the industry and all those who depend on the network to run critical networks, banking systems,  and other online systems that we have in today’s economy”.
In a swift reaction on learning about the takeover,, the NCC assured consumers that all was well, adding, “We  reassure the over 21 million Etisalat subscribers that NCC will do all within its regulatory power to ensure that subscribers continue to enjoy the services provided by the operator.
“The Commission has taken proactive steps to cushion the impact of the takeover, this is without prejudice to the ongoing effort between Etisalat and the banks toward negotiated settlement”.
NCC was optimistic that one of the biggest firms in the country’s competitive mobile telecoms industry can continue operating on the same level as at present to prevent more crisis.
Earlier the Commission said in a statement that : “NCC was worried about the fate of the over 24million Etisalat subscribers and the wrong signals that takeover may send to potential investors in the telecom industry. The Director Public Affairs of the commission, Mr Tony Ojobo disclosed that the Commission was aware of the indebtedness of Etisalat to the consortium of banks. In conjunction with the Central Bank of Nigeria (CBN), the NCC had mediated by holding several meetings with the banks, Etisalat and other stakeholders with a view to finding an amicable resolution; But regrettably these meetings did not yield the desired results.
However, that 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.
“Whilst the banks and Etisalat are working at resolving the issues, the Commission wishes to assure subscribers that they will continue to enjoy the services provided by Etisalat”
Also reacting to the takeover, another stakeholder stated it would be will be interesting to see what effect the economic crisis has on the wider Nigerian telecoms industry over the next few months considering that the Nigerian naira lost a third of its value against the US dollar during the course of 2016.
From all indications, the takeover of Etisalat has become a test case for Nigerian government stakeholders who are all making efforts to pull the country out of recession. The case is a big test of Nigeria’s regulatory authorities. The CBN is concerned about the impact of the debt on the stability of the Nigerian banking sector and its ability to continue lending to locally registered private sector companies. A stakeholder said .