Obinna Chima with agency report

Following the seeming collapse of talks between Etisalat Nigeria and a consortium of banks -Guaranty Trust Bank Plc (GTBank), Access Bank Plc and Zenith Bank Plc, there are indications that the financial institutions are making move to take over the telecom firm.

Premium Times reported that despite the intervention of the Nigerian Communication Commission (NCC), to broker a peaceful resolution of the matter, it appeared that the effort may not have yielded a truce.

The consortium of banks have been having a running battle with the mobile telephone operator over a loan facility totalling $1.2 billion Etisalat obtained in 2013. Etisalat Nigeria had signed a $1.2 billion medium-term facility with 13 Nigerian banks in 2013, which it used to refinance an existing $650 million loan and fund a modernisation of its network. The loan, which involved a foreign-backed guaranty bond, was for Etisalat to finance a major network rehabilitation and expansion of its operational base in Nigeria.

However, following the failure of the company to meet its debt servicing schedule agreed since 2016, the three Nigerian banks, prodded by their foreign partners, reported Etisalat to banking sector regulator, the Central Bank of Nigeria (CBN) and the NCC.

Although Etisalat blamed its inability to fulfil its obligation to the banks on the current economic recession in Nigeria as well as the depreciation of the naira, the banks said their attempt to recover the loan by all means was fuelled by the need to cut down on the rate of their non-performing loans.

A senior official of one of the banks who spoke with PREMIUM TIMES said one of the options they have proposed to Etisalat management as a middle way out of the crisis was for it to request for a bankruptcy status.

The official, who requested that his name should not be revealed, since he was not authorised to speak on behalf of the consortium, said the bankruptcy option would require having receivership management appointed by the banks to oversee its operations.

But, the NCC appears not to be favourably disposed to the takeover proposal, the source said, as it believes Etisalat was not only a viable going concern, but also willing and able to negotiate its loan servicing.

However, a top source at the NCC said late Tuesday that the commission had approved the takeover, which is expected to occur today.

Nonetheless, the vice president for regulatory affairs at Etisalat Nigeria, Ibrahim Dikko, has said that the subsidiary of the Abu Dhabi-listed telecoms group is in talks with local banks to renegotiate the terms of the loan.

Dikko told Reuters that Etisalat missed payments due to an economic downturn in Nigeria, currency devaluation and dollar shortages on the country’s interbank market.

“We are in discussions with our bankers and have been for quite a while. They have not taken over the business and we are hoping that we can resolve the issue and find a way to renegotiate terms,” Dikko told Reuters.

Emirates Telecommunications Group (Etisalat) owns a 40 percent stake in its Nigerian affiliate, which accounted for around 3.7 percent of the group’s revenue in 2013.
Dikko said the business performed well last year and it was still in profit at the level of earnings before interest, tax, depreciation and amortisation, while loan repayments had been up to date “until recently”.

He said that the company was now looking at “all the options”, which could include converting the loan into naira, but did not want to anticipate the outcome of talks with the lenders.
Several other firms took out dollar loans in 2013 to expand at a time Nigeria was seen as an attractive investment prospect. Its economy was growing at 7 percent with a stable currency and oil prices were rising.

But now the country has been running short of dollars as oil revenues have fallen along with the price of crude, pushing the economy into its first recession in a quarter of a century. That had weakened the naira which trades at a lower level on the black market than the official interbank rate versus the dollar.

The dollar shortages had made it difficult for local companies to get access to foreign currency and as a result some had struggled to repay dollar-denominated debts with several lenders having restructured loans to oil firms.

But a senior banking source said the banks have asked the Abu Dhabi-listed telecom group, Etisalat, to inject fresh equity into Etisalat Nigeria. The banking source with knowledge of the matter said Etisalat Nigeria had given notice to Nigerian lenders that it would miss a February payment, which triggered a debt discussion, adding that they were yet to agree on terms.

The source said lenders have asked Etisalat Nigeria to convert shareholder loans on their books into equity and inject fresh capital to free up its cash flows, in addition to asking that its parent firm to increase its 40 percent stake in the affiliate. Last month, Nigeria’s biggest airline, Arik Air was placed in receivership by the Asset Management Corporation of Nigeria for unpaid debts of around N147 billion.