By Yemi Ogunsola
Etisalat says it is still in talks with the banks and its foreign investor, despite a report by an online newspaper that its foreign investor, Mubadala, has pulled out of the company. The report also claimed that the 13 banks owed by Etisalat had concluded plans to takeover the bank last Friday.
As at press time no takeover had been announced. The report prompted the company’s rebuttal in a statement dated Friday June 16 and titled “Bank Loans: Etisalat Reaffirms Continuation of Negotiation…Foresees Early Resolution.”In the statement signed by Ibrahim Dikko, Vice President, Regulatory Affairs, Etisalat Nigeria, the telecoms company said it “considers it pertinent to state that parties to the negotiation are considering a number of options and discussions are at an advanced stage regarding the syndicated loan agreement with the banks. It will therefore be presumptive and in bad faith to begin to predict the outcome.
Discussions have so far been quite collaborative and we expect to reach a final resolution next week, by which time we will be in the position to make a definitive announcement.” He added that the negotiations “have reached and advanced stage,” adding that reports that Mubadala has exited Nigeria is speculative. Reuters, quoting a Mubadala spokesman Friday, also said that the online channel’s report is untrue. The latest statements represent hope for Etisalat, which has tried to stave off the 13 banks to which it owes money.
It is also important for the federal government, which has been trying to stabilise the economy and show that investors have confidence in the economy. In fact, the red flags the takeover of Etisalat would raise for investment in Nigeria may have prompted the CBN and NCC intervention to keep the parties talking, rather a swift takeover as the banks had earlier tried to effect. If Etisalat is allowed to go under statements such as those credited to the Finance Minister and the CBN Governor that Nigeria was exiting the recession would therefore turn out to be hollow.
One of the major problems with economic turbulence is the instability of macroeconomic indices, a reason many corporations fall victims to financial problems during a recession. It is particularly harsh for big businesses and for governments because of their huge workforce and economic linkages. This is the case of Etisalat, one of Nigeria’s most innovative telecommunications companies. Etisalat Nigeria ran into troubled waters when an ambitious network expansion project led the 9 year-old company to seek a medium-term loan facility totaling $1.2 billion from a consortium of 13 local banks in 2013 to modernize and expand its network. The relationship with the consortium of banks turned sour when the telecommunications company missed payment schedules in 2015 on account of the foreign exchange crisis resulting from the free float of the naira. Following a sharp drop in foreign currency receipts as result of the fall in oil export prices, the value of the naira dropped by as much as 150 percent. Following that, Etisalat faced a high currency risk and failed in some repayments. There are fears that the telecoms company may be taken over by the banks and liquidated.
In May, the banks stepped up action to take over the management of the company over claims that the company offered them 5% equity when they were expecting a tranche of payment close to $500million. In a statement the company refuted the claim saying that talks on the debt repayment were still on. “As you are aware, discussions with the banks have gone on for a while and all parties are eager to conclude. The visit from some shareholders from the UAE confirms a willingness on our part to reach a mutually agreeable resolution however there are a number of exigencies, which we need to consider ensuring whatever is agreed is feasible.”Our proposal has been made and we are expecting the banks to come back with their position or counter offer as the case may be. This is a major issue which is in the interest of all parties to resolve so as long as the opportunity exists, we will continue to explore available options.
A source in the company said several options are being considered as part of the resolution: “These include bringing in new equity partners or going into a merger with other industry players. The norm in other jurisdictions is to have between one to three major operators in the telecom sector. Most markets tend to support consolidation, and this has been done in India and in the USA so this of course is being considered as one of the options.”
Etisalat’s good position is that despite the discussions with the bankers, which have been ongoing for a while, the company has not dropped in terms of its quality and staff, which is about 2, 000 across Nigeria. Its investment in equipment has made it a reliable GSM operator in the industry.
•Ogunsola is a Lagos based public affairs analyst