Despite NCC, CBN Intervention, Banks in Stand off with Etisalat over Dollar Debt

Despite last week’s intervention by the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN), banks in the country have opposed a proposal by Etisalat Nigeria to convert part of a $1.2 billion loan from dollars to naira and want the Abu Dhabi telecoms group, Etisalat and its other shareholders to recapitalise it instead, a source has said.

A banker conversant with the negotiations told Reuters that the seven-year syndicated loan, on which Etisalat Nigeria missed a payment, has a dollar portion of $235 million, which the telecoms operator wants to convert to naira to overcome hard currency shortages on Nigeria's interbank market.

“Etisalat is asking for us to convert the dollar component to naira but banks don’t want that option and have told them to talk to their parent to settle the loan,” the source said, adding that regulators favoured the conversion.

The UAE’s Etisalat own 45 per cent of Etisalat Nigeria, while Abu Dhabi’s Mubadala owns 40 per cent of the company, which was due to meet its lenders yesterday for debt talks mediated by the central bank and the telecoms regulator.

However, the 13 banks that syndicated the loan for Etisalat postponed yesterday’s meeting to address the $1.2 billion the telecoms company owes the banks.

The Executive Vice Chairman of NCC, Prof Umar Danbatta, who announced the postponement in Abuja, said the meeting would hold next week at a date yet to be fixed, but did not give reason for the postponement.

The meeting, which was at the instance of the NCC, was a follow up to last Friday’s meeting in Lagos by the same group of mediators.

This meeting came about after authorities agreed with local banks to prevent Etisalat Nigeria, which was not available for comment, from going into receivership.

Nigeria has been running short of dollars as a result of lower global prices for oil, its major export. Its economy entered a recession last year for the first time in 25-years.

Most of the 13 lenders involved in the Etisalat Nigeria loan had raised dollars abroad to participate, meaning that further naira weakness would see them receive fewer dollars.

The naira has lost half of its value since the loan, which matures in 2020, was made. Interest is due monthly and the next principal payment is due in May, the source said.

Etisalat, which generates 3.7 per cent of its revenues from the Nigerian business, has questioned the rationale of investing more in it and may sell its stake, sources say.

Etisalat had written down the value of Etisalat Nigeria last year to $50 million due to naira weakness, Moody’s said in a note, adding that the default at the affiliate company did not affect the parent’s credit profile.

Meanwhile, Fidelity Bank Plc’s investor relations team yesterday revealed that its exposure to Etisalat Nigeria was about N17.5 billion ($56 million).

Etisalat owes GTBank N42 billion and Access Bank N40 billion, while its exposure to other banks was yet to be disclosed.

Etisalat Nigeria has over 20 million subscribers, according to Nigeria's telecom regulator, making it the country’s number four mobile operator with a 14 per cent market share.

South Africa’s MTN has 47 per cent, Globacom 20 per cent and Airtel - a subsidiary of India's Bharti Airtel - 19 per cent.