The Case of Etisalat and the "Nigerian factor"

The recent debacle that hit foremost telecom operator, Etisalat Nigeria leaves a lot of lessons in its trail.For some it is a story of dashed hopes while for some it is another vintage talking point.

Down Memory Lane

When Etisalat was birthed in 2008, it came with a lot of verve and Nigerianness. The striking 0809ja theme took everyone by storm and young people were not left out. The fun thing was the fact that you could book your own number and it was going to be reserved for you.The joy that came with Etisalat only continued, a consortium between the Mubadala group and Nigerian businessman Hakeem Bello-Osagie. Bello-Osagie to a certain school of thought has anything but the midas touch but to another, has always made things bloom like he said at the Cambridge University African summit in 2013 when he talked about the dynamics of the Nigerian business market citing the UBA story.The marriage begat EMTS (Emerging Market Telecoms Services).

From the start it was clear Etisalat wanted to make an impact and they did this by investing in every facet of the Market. Their strides very palpable, amongst which, is the highly coverted Etisalat price for literature and some other laudable initiatives. Many circumstances worked in their favor to gain the over 20 million subscriber base or was it happenstance (the portability provision comes to mind.)

Growing in the rough

As we know,the growth of every business is dependent on money and there was a need for capital which they sourced from a consortium of banks in Nigeria; the sum was 1.2 billion dollars and terms were agreed. In 2015, the twists and turns of the oil market coupled with the uncertainty of the elections left Nigeria in an economic limbo and the first to be affected were the exchange and inflation rates which soared to over 18% as at December 2016. This further hampered the repayment protocol and led to the hoopla around Etisalat. Apparently the loan had doubled and repayment was stressful.

The intervention of Nigerian telecom and banking regulators, the Nigerian Communications Commission (NCC), and the Central Bank of Nigeria (CBN), saved Etisalat Nigeria from being taken over by a consortium of Nigerian and foreign banks after talks to renegotiate a $1.2 billion loan failed. The loan facility totalling $1.72 billion (about N541.8 billion) involving a foreign-backed guaranty bond, which Etisalat secured in 2013, was for the telecom company to turn around its network and expand its operations in Nigeria. However, the banks claimed that Etisalat had failed to service the debt as agreed since 2016. The consortium, comprising Nigerian and foreign banks, said it got the approval to take over the management of Etisalat Nigeria, effective June 15, but decided to extend enforcement of the order to June 23, 2017 after which Emerging Markets Telecommunications Services, EMTS, may have completed transfer of the 100 percent of the company’s shares in Etisalat to the United Capital Trustees Limited, the legal representative of the consortium of banks. The takeover followed the collapse of the efforts by EMTS to reach agreement with the banks on restructuring plan for the $1.72 billion (about N541.8 billion) debt.

The Exodus before the Genesis

Etisalat has been under pressure since 2016, following the demand notice for the recovery of loan facility it obtained from the consortium. The telco said it was not able to meet its debt servicing obligations due to a stringent forex policy and recession in Nigeria but appealed for a restructuring plan. However, the Nigerian banks, prodded by their foreign partners, threatened to take over the company and its assets across the country. But the intervention of the telecom sector regulator, NCC, and its financial sector counterpart, CBN, persuaded the banks to rethink their threat and give Etisalat a chance to renegotiate the loan’s repayment schedule. However, Etisalat of the UAE, which currently holds 45 per cent of Etisalat Nigeria, announced at the Abu Dhabi Stock Exchange, penultimate week that attempts to stave off the company’s takeover have proved abortive and so pulled out its investment in the company. Its technical partners, Mubadala, also followed suit, leading to a massive resignation of top executives of Etisalat Nigeria and the chairman of the board. As this continued, an ultimatum was given to EMTS to drop the brand name Etisalat among many other actions that have since followed. This has also raised concerns by subscribers about continued operations and I have to state that the operations would not be affected. It should be stated that a new board has been put in place to ensure the running of the business and prepare the business for investors. In fact, a lot of consortiums are bidding for the company as we speak.

Furthermore the NCC has put measures in place to ensure that subscribers are properly taken care of. It has to be stated that Airtel that has gone through 4 ownership changes and the subscribers have not been affected in the process of transition. In Etisalat’s case, the board has swung to action and the name change has been implemented, previously reported as 9mobile. This would pave the way for more investment and subscribers would be out of the imbroglio soon.

The lesson to be learnt here is that adequate buffering should be made by all businesses to cushion unforeseen shocks in various industries. As we watch the telecoms sector, there is a lot to be learnt.