All Eyes on 9mobile
The desire by prospective investors and industry stakeholders to see the end of the successful sale of 9mobile is one thing that Barclays Africa must strive to achieve, writes Emma Okonji
Since the inception of Global System for Mobile Communications (GSM) in 2001, telecommunications industry in Nigeria has witnessed unprecedented growth in subscriber number and network expansion. Based on the rapid growth, Nigeria was adjudged the fastest growing telecoms market in Africa and the rest of the world.
But contrary to the expectations of all Nigerians that the growth rate will continue to blossom, there was a reversal in the trend between 2015 and 2016, where telecoms operators experienced difficult times. They encountered challenges in growing their networks following the economic downturn, coupled with widespread vandalism of telecoms facilities, especially in the North-east part of the country, where insurgency was at its peak. The difficult situation at that period almost grounded telecoms operations as the operators suffered shrunk liquidity, a situation that frustrated the efforts of 9mobile to pay back the $1.2 million loan it took from 13 local banks in 2013 for network expansion.
Citing economic downturn of 2015 and 2016 and naira devaluation, which negatively impacted on the dollar-denominated component of the loan, 9mobile, which was then operating under the Etisalat brand name, wrote to its creditors, informing them of its inability to repay the loan as scheduled. The situation, however, degenerated for 9mobile, which led to plans to sell it and the appointment of Barclays Africa as the financial adviser to handle the sale.
Although the sale ought to have been concluded in December 31, 2017 and the new owners of 9mobile announced, but the sale was postponed to January 16, 2018. The postponement is, however, raising some concerns among investors and industry stakeholders who desire a successful and hitch-free sale of the ailing telecommunications company.
Stakeholders’ concerns Given the antecedent of the sale of the Nigeria Telecommunications Limited (NITEL) and its mobile arm MTel, which dragged for 15 years, with four failed attempts by the Bureau of Public Enterprises (BPE), which eventually sold it to NATCOM Consortium, trading as ntel in 2015, industry stakeholders are worried about the postponement of the sale of 9mobile from December 31, 2017 to January 16, 2018.
They have therefore warned that the 9mobile sale must not go the way of NITEL sale.
The stakeholders, who expressed their concerns and fears, warned that any delay in the sale of 9mobile will create a huge gap in the telecoms industry, which the existing telecoms operators will not be able to accommodate.
Chairman, Association of Telecoms Companies of Nigeria (ALTON), Gbenga Adebayo, who decried the weak financial state of existing telecommunications operators, called on the telecoms industry regulator, the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN), to ensure that 9mobile is sold to the right investor that will inject the much needed fund to resettle the ailing telecommunications company.
According to him, should there be delay or failure to sell 9mobile, it would put the telecoms sector in bad shape, since the existing telecoms operators do not have enough headroom to accommodate the over 21 million subscribers of 9mobile. However, in response to the concern of stakeholders, the Executive Commissioner, Stakeholders Management at NCC, Mr. Sunday Dare said there would be no further shift in date, insisting that the sale must be concluded January 16 and 9mobile handed over to its new owner on that same date.
Contending issues Having shortlisted the final five bidders for the sale of 9mobile by Barclays Africa, to include Teleology Holdings Limited, promoted by Adrian Wood, the pioneer Chief Executive Officer of MTN Nigeria; Smile Telecoms Holdings, with operations in Nigeria, Tanzania, Uganda, Congo DR and South Africa; Helios Investment Partners; Bharti Airtel and Globacom, the telecoms company owned and operated by a Nigerian, Mike Adenuga Jnr, four out of the five bidders have suggested an idea to form an alliance that will help them create a formidable single platform to win the bid and acquire 9mobile.
Should the plan to form alliance sail through, the entire bid process may see the sale ending up between two contenders.
The architects of the alliance bid intend to pool resources that brings to the table an unbeatable offer that will guarantee that they secure control of 9mobile. It is, however, not yet known if they will create a joint venture (JV) vehicle to advance their plan to gain ownership of 9mobile.
Market analysts have said that beyond just buying 9mobile, parties in favour of the alliance plan believe that it would radically change the fortune of the mobile network operator as the combined entity post sale will become the biggest mobile phone company in Nigeria.
But contrary to their view, some industry stakeholders are already kicking against the planned alliance, insisting that it will not allow for the injection of fresh funds into the Nigerian telecoms sector by foreign investors who are willing to invest in 9mobile.
The stakeholders are of the view that the planned alliance may not be the best option for the Nigerian economy. A growing consensus among informed segments in the telecom industry is that it is preferable to allow a fresh telecom player into the market to compete with those already in the market. In so doing, the new entrant would be encouraged to source for fresh capital with which to execute its strategy in a market that already has three major entrenched operators.
“Such fresh capital will in turn drive a multiplier reaction in the overall economy,” the stakeholders said.
They added that it would be to the telecom industry’s best advantage for sale of 9mobile to preferably go to a firm that is best-placed to source and inject foreign capital into the telecom sector, rather than go for a consolidated team of bidders. A senior management staff of PriceWaterhouseCoopers (PwC), who declined to give his name on account of the sensitivity of the sale, told THISDAY that the telecom industry is currently shrinking fast and may indeed be suffering a “systemic structural failure on account of many factors.”
For instance, going by the third quarter reports of the National Bureau of Statistics (NBS), the contribution of the telecoms and ICT sectors to country GDP was only 7.4 per cent in 2017 whereas in 2016 at a time when Nigeria was in recession, it was 9.3 per cent.
“What this means is that the telecom industry is fast contracting even while the economy which used to be in recession is gradually recovering.”
He added that “this calls for concern and regulatory intervention if the telecom sector is to be prevented from sliding into recession in the near future.”
This is one of the reasons, he added, that the 9-Mobile sale is particularly critical to the growth and recovery of the telecom sector. “What the sector urgently needs now is a sustained injection of foreign capital. The sale of 9mobile should help to accomplish this. We earnestly hope that the CBN, NCC and other regulatory bodies, bear this in mind and help to ensure that the sale ultimately addresses this fundamental need of the telecom sector,” the stakeholders said.
“It is therefore important that in the ongoing bid for 9mobile, these factors remain the guiding principles such that rather than the prospect of the number of operators reducing on account of consolidation of bids for 9mobile, the numbers remain the same, with each operator empowered to compete and deliver good service to its subscribers while delivering returns to its shareholders and growing the economy,” the stakeholders added. But in weighing the options of the bidders and that of interested stakeholders, NCC said consolidation would be in the best interest of the industry.
According to Dare, consolidation would play a key role in determining who finally gets to buy the nation’s fourth largest operator.
“Nigeria can learn a lot from the Indian telecom experience of consolidation and market competition in the development of the telecom market. The consumer in India now enjoys lots of benefits and cheap data,” he said. The 9mobile issue In a bid to deepen its investments and expand its network, 9mobile, under the brand name Etisalat Nigeria, sought and goy $1.2 million loan from 13 local banks.
However, citing the economic downturn and naira devaluation, which negatively impacted on the dollar-denominated component of the loan, the former Etisalat Nigeria wrote its creditors informing them of its intention to halt the repayment of the loan in installments, until such a time that it was able to raise more money.
Unsatisfied with the excuse from the telecoms company, the banks threatened to take over its operations, should it fail to meet its payment obligations. The situation forced the telecoms company to enter into series of negotiations with the banks, which eventually collapsed, following disagreement from the banks.
Banks involved in the loan deal include: Zenith Bank, GTBank, FirstBank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank, among others.
A breakdown of the amounts owed the banks showed that Zenith Bank has the highest exposure to Etisalat amounting to $262 million and N80 billion, GTBank has the second highest exposure of $138 million and N42 billion, Access Bank follows with $131 million and N40 billion.
Etisalat also owed UBA $125 million and N38 billion; FirstBank – $79 million and N24 billion; Fidelity Bank – $56 million and N17 billion; Stanbic IBTC – $25 million and N7.5 billion; FCMB – $15 million and N4.5 billion; and Ecobank – $10 million and N3.1 billion.
NCC, CBN intervention At the peak of the threat from the banks to take over the telecoms company for its inability to repay its loan, the NCC and CBN quickly intervene to douse tension.
The Executive Vice Chairman of NCC. Prof. Umar Garba Danbatta, in a letter to the banks, had warned them of what could befall the former Etisalat Nigeria, if the banks were allowed to make do their threats.
The letter from NCC, was a follow up of series of meetings held in the past between the NCC, CBN, and the the banks, at the instance of the NCC, designed to address the financial crisis.
The NCC’s letter, which was addressed to the Managing Director of Access Bank, and dated June 21, 2017, was also sent to the Governor of Central Bank of Nigeria (CBN), and the managing directors of GTBank and Zenith Bank, who are part of the consortium of the bank creditors.
Part of the letter read: The Commission, as a responsible regulator, is concerned about the likely implications of the takeover for subscribers on the Etisalat network in particular and the telecoms industry at large.”