Conflicting Signals Over Etisalat’s Indebtedness to Banks


Since Etisalat commenced negotiation with its creditors on how to repay the $1.2 billon loan it took from 13 local banks in 2013, there have been conflicting signals over the true state of the negotiations. Emma Okonji writes

Etisalat Nigeria is currently battling to repay the loan it took from a consortium of 13 local banks in 2013. This follows threats by the banks to take over the operations of the telecommunications company should it fail to pay back the loan based on the terms of agreement reached when the credit was issued. Etisalat has since opened fresh negotiation with its creditors. But there have been conflicting signals as to the true position of the talks, even as the company struggles to stave off takeover attempts by the consortium of Nigerian banks.



Etisalat had taken the loan of $1.2 billion for network upgrade and expansion, and the money was sourced in both dollar and naira denominations. The company commenced payment of the loan based on the scheduled arrangement. But it later wrote to the creditors, informing them that it would not be able to continue payment for some time owing to high cost of foreign exchange.

The banks were angered and threatened to take over the business of Etisalat, should the telecoms company default on the payment plan. However, both the Central Bank of Nigeria and Nigerian Communications Commission have intervened to try to stave off a takeover.


Conflicting signals 

Last week, there were reports that Mubadala Development Company, the majority shareholder in Etisalat Nigeria, was exiting the business following the telecoms company’s indebtedness to the banks.

But Etisalat quickly refuted the report and reaffirmed that its discussion with the banks was on-going. It said the negotiation would soon be concluded.

Vice President, Regulatory and Corporate Affairs, Etisalat Nigeria, Mr. Ibrahim Dikko, who gave the assurance in a statement, said, “Whilst it is premature at this stage of the on-going discussions to affirm that this is the conclusive option, Etisalat Nigeria 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.”

The company added, “Etisalat Nigeria can confirm that negotiations with the consortium of banks regarding the syndicated loan agreement signed in 2013 have reached an advanced stage. As noted in an earlier statement, we are considering a number of options and are not taking anything off the table at this time.

Etisalat remains a viable business, having recorded its best financial year in 2016. Parties are keen to ensure that the on-going discussions and eventual outcome do not affect the day to day operations of the business, whether now or after the announcement of our agreement. All parties have continually demonstrated an interest in the continued operations of Etisalat as a business, as it remains the backbone of millions of small business owners; multinationals, government and, indeed, Nigerian subscribers in general.”

However, an earlier conflicting signal had emerged few weeks after a delegation from Mubadala, which owns 40 per cent investment in Etisalat Group, visited Nigeria and met with officials of the CBN and the 13 banks over the $1.2 billion debt. Reports had it that the negotiation had run into a brick wall and the banks had rejected an offer from Etisalat to pay the loan in naira denomination.

Again, Etisalat Nigeria refuted the report, saying the negation was continuing. In a statement, the company said it had not received any formal communication from the lenders regarding the proposal.

“Whilst we are aware of recent news reports stating that the offer has been rejected by the banks, we cannot confirm this as true as no formal communication has been received from the banks regarding the proposal,” the Etisalat management said concerning the alleged rejection of its offer.

It was gathered that Etisalat had proposed to repay the $1.2 billion loan in naira denomination but the banks were insisting on dollar denomination. There was also a report that the banks had rejected an offer of equity in Etisalat and talks had broken down. But that was dispelled by the company and the NCC, which maintained that the talks were still on.

According to the statement by the telecommunications firm, “Etisalat has so far held robust discussions with lenders in good faith, and we hope that all areas of discord will be resolved in due course. Indeed, the current economic challenges have occasioned untold hardship on the telecom industry as a whole, thus, requiring a major shift in position by all affected parties.” 


Having accepted its indebtedness to the banks, Etisalat said it was still negotiating with its creditors on new modalities to refinance the $1.2 billion loan. Dikko assured Etisalat’s subscribers that the issue would be resolved, despite pressure from the creditors to take over the operations of the telecoms company. According to him, “Yes, we are indebted, but we have commenced payment, and we only stopped the flow of repayment few months ago as a result of devaluation of the naira and scarcity of dollar.”

Dikko said Etisalat had invested over $2 billion in the telecoms business, which it obtained from its parent company, Mubadala, and its shareholders in the United Arab Emirates and Nigeria. He said the company needed additional money to expand its business and provide value added services to its growing customers; hence it approached a consortium of 13 local banks to raise additional $1.2 billon as loan.

In refinancing the loan, Etisalat was meant to pay a certain percentage of the loan with interest on a quarterly basis, and it had been meeting that obligation until last year, when it started defaulting due to the devaluation of naira, dollar scarcity, and the economic recession, Dikko said.

Some of the banks involved in the loan are GT Bank, Zenith Bank, First Bank, UBA, Fidelity Bank, Access Bank, EcoBank, FCMB, Stanbic IBTC Bank, and Union Bank.



 Worried about the implications of a possible takeover of Etisalat by the banks for the telecoms industry and the Nigerian economy at large, NCC, the telecoms industry regulator, and CBN had held several meetings with Etisalat and its creditors to try to stop the banks from taking over the telecoms company.

First, the NCC brokered a meeting in Abuja between it and the CBN to find a lasting solution to the situation. The meeting was attended by the Executive Vice Chairman of NCC, Professor Umar Danbatta, the CBN Governor, Mr. Godwin Emefiele, and his team. At that meeting, a decision was reached to intervene in the loan issue between Etisalat Nigeria and the consortium of commercial banks.

The meeting, which held at the CBN headquarters in Abuja, was convened by the financial regulator at the instance of NCC, to further deliberate on how best to stave off the attempt by the banks to take over Etisalat. At the end of the meeting, CBN invited Etisalat’s management and the banks to another meeting, where the banks’ planned takeover move was stopped.

Since then, there have been other meeting between Etisalat and the banks, but no conclusion has been reached so far.

While Etisalat bothers about its business, the banks, too, are concerned about the size of the facility on their books. Many of them are worried that the facility could put them in a difficult position with regard to the Asset Management Corporation of Nigeria, which manages bad debts and so would want to write it off to AMCON to manage. That effectively would see AMCON taking over Etisalat. It is a prospect the company wants to avoid and so is talking with the banks and the regulators.



Etisalat is Nigeria’s youngest GSM service provider, having commenced operations in 2008, after the licensing of MTN, Airtel and Glo earlier on. It deployed technology and money in a huge attempt to catch up and maintain a comfortable presence in the industry, at a time margins had dropped and competition had become stiff. That effort paid off, as it became the third largest network in no time. But to facilitate that effort and success, it depended heavily on credit from banks at a time monetary and fiscal policies were relatively stable.

However, a combination of foreign exchange difficulties and economic recession has hit the industry hard, affecting Etisalat really hard, especially with regard to its capacity to repay its loan.

The telecoms industry is still generally seen as profitable and a growth sector, especially with value-added services and the use of data growing steadily. However, Etisalat’s stay in business will depend on how fast and how well it can restructure the $1.2 billion debt.

Many believe the Etisalat issue requires a more focused and proactive response at the level of political leadership. The company has a staff strength of about 2,000 and engages many more people as contractors. Were the banks to take over the business and hand it over to AMCON, the prospects of the business and even recovering their loans in full would be slight because of the nature of receiverships in Nigeria.

Perhaps, the clearest lesson from the Etisalat debt crisis is the danger of over-expansion in an unstable economy, especially with foreign currency loans. Yet holding back expansion, too, is not an option to canvass for a country that needs to grow economically.

What seems clear is that if Etisalat goes into receivership it will be a bad taste in the mouth for foreign investors, aside the job losses and other economic fallouts.

The Etisalat problem also points to a wider problem for big businesses with huge dollar component and foreign input and expertise. The telecom industry is highly dependent on foreign expertise and equipment, a reason many fear that more telecom firms may be in trouble and thus need a special intervention to protect them against crisis.