Etisalat: A future hanging in the balance

The country’s telecoms sector regulator says there is no cause for alarm over the takeover of Etisalat, but events after the change of ownership are proving otherwise.

Though the company has yet to officially confirm it as at Thursday that Etisalat Nigeria may have adopted 9mobile as a new brand name after the agreement on usage of the brand was terminated on Monday by the United Arab Emirates (UAE)-based Etisalat Group.

In June, the UAE company, which had 45 per cent shares, pulled out of Etisalat Nigeria after it was taken over by a consortium of banks over a N541billion debt.

On Thursday, the new owners of Etisalat tentatively adopted the new brand name at a meeting in Lagos, but official announcement will be made later, Daily Trust learnt.

In a regulatory statement to Abu Dhabi Securities Exchange Monday, the Etisalat Group said the termination of the agreements governing the use of Etisalat’s brand, including its trademarks, had been deferred to July 21.

“Etisalat Group has engaged with the company and is currently in the process of negotiating new agreements for technical services, strategic procurement support and the use of Etisalat brand,” the statement said, adding that these agreements are still under discussion between the parties.

“It is for this reason that Etisalat Group has deferred the termination of the existing trademark agreement at this time to allow the parties an opportunity to enter into a new interim trademark agreement without adversely impacting the company’s ability to operate in the normal course,” the statement said.

Etisalat Group entered the Nigerian market in 2008 through EMTS. At that time, Nigeria was widely regarded as one of the most strategically important telecom growth markets in Africa with the largest population in the region, yet a low mobile penetration of just 20 per cent.

“Etisalat Group follows prudent investment decisions and acts responsibly to protect its shareholder’s interests,” Hatem Dowidar, Chief Executive Officer-International Etisalat Group, said.

There was no official statement from Etisalat Nigeria. Its spokesperson Oluseyi Osunsedo, didn’t answer calls placed to her mobile. She also didn’t respond to a text message sent to her.

But the Nigerian Communications Commission (NCC) said it wasn’t aware of change of name by Etisalat. NCC’s Director of Public Affairs, Tony Ojobo said Etisalat hasn’t written to the regulatory body, and Nigeria should therefore disregard rumour about change of name.

“We have not received any official communication from Etisalat on change of name. We take as rumour for now until we are informed,”Ojobo told Daily Trust.

Although a new board which was appointed at Etisalat Nigeria on July 4, 2017 to handle the smooth transition of the telecommunications company after a reallocation of shares has begun work, experts said some of the 2000 staff would have to go.

The issue

The telecoms sector had been the second most vibrant sector before recession in 2016, and is now said to be the most vibrant after the sharp fall in oil prices.

Although it overtook the oil sector, the effects of fall in oil prices which had impacted negatively on the dollar/naira rate and the scarce foreign exchange soon affected the sector very hard.

And because the telecom business depended largely on foreign infrastructure and expertise inputs, the operators needed foreign exchange for survival.

They require huge foreign currency to settle liabilities at all times.  This, according to analysts, forced Etisalat to take the $1.2billion loan to modernize and expand its network in 2013 and was scheduled to pay back in dollars.

When it took the loan, macroeconomic indices looked stable, with the dollar exchanging for about N197. But three years after, with an economy in recession, coupled with the free float of the naira, the firm defaulted.

The new owners

Now, the lenders – Zenith Bank, Guaranty Trust Bank, First Bank, United Bank for African, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank- have taken over the company, after many negotiations failed.

The company, which is the fourth GSM mobile company in terms of size with a customer base of about 20million subscribers and a workforce of about 2,000, now has its fate hang in the balance.

Through the interventions from both the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) it has helped to reduce the effects of the takeover on the firm, its staff, shareholders and customers.

First, the UAE-based Etisalat which owned 40 per cent of the Nigeria aspect was forced to forfeit it stake due to the loan issue. It was required to transfer its holding in the company to a consortium of lenders to the Nigerian operation.

The UAE investment fund, Mubadala was also reported to have pulled-out <>, leaving Etisalat Nigeria in the hands of lenders.

Also, its chairman, Hakeem Bello-Osagie resigned following the approval of the restructuring plan for the telecoms. Bello-Osagie was the promoter of Emerging MarketsTelecommunications Services (EMTS) which controlled about 15 per cent of the equity holding of the company.

A statement announcing the resignation of the chairman said: “The timing of the resignation was strategically delayed till now when stakeholders have agreed a plan and comes more than a week after Mubadala Development Company directors tendered their resignation. The development also reflects Bello-Osagie’s deep commitment to protecting the interest of all stakeholders.”

According to the statement, “It is now expected that Etisalat Nigeria under its new shareholding structure will navigate through its current loan repayment challenge with minimum impact.

“Over the last several months, the chairman has worked extensively with critical stakeholders to prepare clearly articulated strategies and robust road maps that will mitigate the impact of the new shareholding restructuring and realignment on the operations and management of the 4th largest telecoms player in Nigeria.

“With this development, the new board will assume control of Etisalat. This is coming following interventions, which have been roundly applauded, from regulatory agencies, including the Nigeria Communications commission (NCC) and Central Bank of Nigeria (CBN) and other stakeholders to ensure that the best decisions are taken in the interest of the subscribers, employees and the Nigerian economy.”

The eyeing of buyers

According to reports, “no fewer than five” companies have expressed interest in Etisalat Nigeria, although two international telco giants have shown “concrete interest.” The potential hurdle, the report said, was the restructuring of the debt which caused the current uncertainty for the business.

The report also said the negotiators for Etisalat Nigeria – including representatives of its bankers and Nigerian regulators – are working to “mitigate any collateral damage and brand erosion” which could impact the new owners. Either way, a rebranding is likely to be an early priority for Orange or Vodafone if they become the successful owner, to shift away from the Etisalat name.

After the Nigerian business defaulted on its loan repayments, Etisalat was required to transfer its holding in the company to a consortium of lenders to the Nigerian operation.

Regulator’s assurance

The Nigerian Communications Commission (NCC) has assured Etisalat Nigeria’s subscribers of quick resolution of the Etisalat issue even after the takeover.

The NCC Executive Vice Chairman, Professor Umar Danbatta said the Etisalat loan wouldn’t destabilise the telecom industry. He said discussions would still be held in coming days for final resolution of the issue.

He said, “Let me assure millions of Etisalat subscribers that there is no cause alarm; nothing is going to happen to their lines. The issue is being resolved and it would soon be finally put to rest. The issue wouldn’t be allowed to destabilise the telecoms industry. We are handling it and you will be briefed adequately as events unfold on the issue.”

A top NCC official also told Daily Trust, “We are the regulator of the industry. As part of our duties and mandates, we liaise with other regulators and other government agencies on behalf of our industry on the issue affecting any of the players in our industry.”

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