Nigeria: Etisalat debt crisis deepens

Abu Dhabi-headquartered telecoms company Etisalat may be forced to sell its subsidiary Etisalat Nigeria after the company defaulted on a N377bn ($1.2bn) loan.

Etisalat Nigeria has opened up talks with the Central Bank of Nigeria (CBN) and the country’s telecoms regulator, the Nigerian Communications Commission (NCC), in an attempt to restructure the telecoms company’s debts.

NCC chairman Umar Danbatta approached CBN governor Godwin Emefiele last week to intervene in the talks. The medium-term loan was taken out with a consortium of 13 Nigerian banks in 2013, in one of the country’s biggest ever corporate loans entirely handled within the country.

It helped to finance network improvements and cover an existing loan. The creditors include some of Nigeria’s best known banks, including Access Bank, Ecobank, Fidelity Bank, First Bank, Guaranty Trust Bank and Union Bank.

It had been suggested that some of the creditor banks were keen to take over the telecoms operator. However, in a statement, the NCC revealed: “Friday’s [10 February] meeting succeeded in halting the attempt by Etisalat’s creditors at bringing it under any form of takeover.

“The banks and the mobile network operator agreed to concrete actions that will bring all parties closest to a resolution. Receivership was completely taken off the table in a meeting that was very productive and constructive.”

Ibrahim Dikko, Etisalat Nigeria’s vice president for regulatory affairs, said: “We do not have any presence of our creditors to take over our telecoms business because we are indebted to them. Yes, we are indebted, but we have commenced payment, and we only stopped the flow of repayment a few months ago as a result of the devaluation of the naira and scarcity of dollars.”

Dikko added: “In refinancing the loan, Etisalat was meant to pay a certain percentage of the loan with interest on a quarterly basis, and it has been meeting that obligation until recently when it started defaulting due to devaluation of the naira, dollar scarcity and the economic recession.”

The banks want Abu Dhabi-based Etisalat to come to the rescue, injecting additional capital into the company and converting loans to Etisalat Nigeria into equity. It converted one loan in the company to equity in February. On 13 March, Reuters quoted two sources as saying that Etisalat may sell its stake in Etisalat Nigeria, but the company is yet to comment.

The role of Abu Dhabi is crucial. Apart from Etisalat, Abu Dhabi state investment fund Mubadala holds a further 40% stake in the company. Etisalat Nigeria says that it is providing services to its customers as normal. According to the NCC, Etisalat is the fourth biggest mobile service provider in Nigeria, with a market share of 13.3%, behind MTN (47%), Globacom (20%) and Airtel (19%). It has operated in the country since 2008.

Nigeria’s downturn

It is understood that Nigeria’s severe economic downturn has had a big impact on both subscriber numbers and average revenue per user (ARPU) rates across the telecoms industry in the country. Nigeria is currently in the middle of its first recession in a quarter of a century.

It will be interesting to see what effect the economic crisis has on the wider Nigerian telecoms industry over the next few months. At the official rate, the Nigerian naira lost a third of its value against the US dollar during the course of 2016.

The case is a big test of Nigeria’s regulatory authorities. The CBN is concerned about the impact of the debt on the stability of the Nigerian banking sector and its ability to continue lending to locally registered private sector companies.

For its part, the NCC hopes that one of the biggest firms in the country’s competitive mobile telecoms industry can continue operating on the same level as at present. It also hopes to prevent the firm being taken over by creditors. In a statement, it said: “NCC was worried about the fate of the over 20m Etisalat subscribers and the wrong signals this may send to potential investors in the telecom industry.”

Neil Ford