As Race for 9mobile Acquisition Hots up…

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Incentives like the directive by the Central Bank of Nigeria to the 13 local banks involved in a 9mobile loan facility to take a five per cent provision as part of their third-quarter results, the Senate’s determination to address the firm’s crisis, and the choice of Barclays as the institution to find new investors for it, have raised the interest of investors, with many queuing up to acquire the telecoms company. Emma Okonji writes

Before the end of the third quarter of 2017, the Central Bank of Nigeria gave a directive to the 13 local banks involved in a 2013 $1.2 billion loan facility to Etisalat, which had since rebranded to 9mobile. The CBN asked the lenders to take a five per cent provision as part of their third-quarter results. The directive, which has since been complied with, coupled with the Senate’s resolve to launch an investigation into the default of Etisalat Nigeria and how its loans were used, as well as the choice of Barclays to find new investors for 9mobile have, no doubt, raised the confidence of intending buyers of the company. The number of intending buyers has increased from the initial five to 16, at the last count.

Although no investor will want to invest in a telecoms company that is saddled with debts, one thing that seems to raise investors’ confidence is the government’s interest in creating an enabling business environment and protecting businesses within the country. The CBN, Nigerian Communications Commission, and the Senate have demonstrated this determination in the issue of 9mobile.

Analysts believe it is such confidence that has triggered the interest of intending buyers of 9mobile.

 

Earlier Jostle 

At the peak of Etisalat’s crisis, its former board collapsed, following the withdrawal of Emirates Telecoms Group, and the resignation of every member of the former board, including its former chairman, Hakeem Bello-Osagie, and the former management staff. But this was quickly managed, with the setting up of a new board and management staff, a situation that also raised the confidence of intending investors. Apparently, due to the quick management of the crisis, the new 9mobile became attractive to BUA, Virgin, Vodacom, and a few others.

As at July this year, BUA Group, Virgin Mobile from the United Kingdom, Vodacom of South Africa, and other investors had expressed interest in acquiring 9mobile.

The new management of 9mobile, led by its Chief Executive, Mr. Boye Olusanya, had said that the telecoms company was open to new investors that were willing to invest heavily in it to enable the company raise funds to offset its $1.2 billion bank loan.

THISDAY authoritatively gathered that BUA Group, Virgin Mobile, and Vodacom, among other investors, indicated their interests to invest in 9mobile and fully acquire the company. BUA Group was trying to put together a bid with its technical partners, following the initial appointment of advisers, which included Standard Bank of South Africa and Citibank of New York, to receive and evaluate bids, before the present choice of Barclays for specific reasons.

BUA Group is a fully-fledged, diversified business with a stake in a wide range of business sectors.

Virgin Mobile is part of the Virgin Group, founded by the maverick and successful UK entrepreneur, Richard Branson. THISDAY gathered that Virgin Mobile’s bid is being promoted by a star-studded team of executives with many years of experience in the telecoms sector in Africa and other parts of the world. Several former top executives of MTN Nigeria are said to be behind this bid, which has offered to buy over Emerging Markets Telecommunications Services (EMTS), trading as 9mobile, and absorb the balance of the $1.2 billion debt, which it owes the 13 financial institutions. It is also said to have outlined a repayment plan for the debt.

According to THISDAY sources, Virgin Mobile’s plan is not just about repaying the debt owed by 9Mobile. It has also carefully outlined a financing strategy and an ambitious network development strategy in which every cell-site will either be a third generation (3G) or a fourth generation (4G/LTE) cell site. Currently, majority of cell sites in Nigeria operated by the country’s pre-existing mobile networks are second generation (2G) with a sprinkling of 3G sites.

THISDAY also gathered that South Africa’s Vodacom was backed by some Nigerians that had at one time operated telecoms businesses in Nigeria at smaller levels.

 

Recent Jostle 

As at last month, the list of intending buyers of 9mobile had increased. This has been attributed to the renewed efforts of the federal government to protect investments in the telecoms sector, which the government is already positioning as its biggest source of revenue, after the global fall in oil prices.

The renewed scramble to acquire 9mobile, Nigeria’s fourth largest network operator, promises to be very competitive, as 16 firms have submitted expressions of interest to Barclays to bid for the firm. The new companies that have expressed interest in the company include Africa’s biggest telecoms operator, MTN; India’s Bharti Airtel, operating as Airtel in Nigeria; and ntel, which in 2015 acquired the assets of the defunct NITEL and MTel through the federal government’s privatisation programme.

Also in the race are Bua Group, a privately held conglomerate promoted by Alhaji Abdulsamad Rabiu; Morning Side Capital Partners, promoted by former Managing Director of Diamond Bank Plc, Mr. Alex Otti; and Africell, a subsidiary of the Lebanon-based Lintel Group of Companies, with cellular communications operations in the Democratic Republic of Congo, The Gambia, Sierra Leone and Uganda.          

Other firms that submitted EoIs are Obot Etiebet & Co, belonging to a former petroleum minister, Mr. Don Etiebet; Blackstone Private Equity; Tel-ology Holdings Limited, a special purpose vehicle led by a former chief executive of MTN Nigeria, Mr. Adian Wood, and Ericsson; De-elim Services Limited; Veittel, a firm owned by the investment arm of the Vietnamese military, which has telecoms assets in Africa; AB-Bro Limited, a Nigerian venture company; Hamilton and George International Limited; and two other firms.

Industry sources confirmed to THISDAY that the 16 companies had complied with the deadline for the submission of EoIs at Barclays’ office in Ikoyi, Lagos, and were preparing to access the data room to conduct their due diligence on 9mobile, preparatory to the bid submission stage.

 

Crisis 

Etisalat had in 2013 approached a consortium of 13 local banks for a loan of $1.2 billion for network upgrade and expansion. The money was sourced in dollar and naira denominations. However, citing the economic downturn of 2015-2016 and naira devaluation, which negatively affected on the dollar-denominated component of the loan, Etisalat wrote its creditors, informing them of its intention to halt the repayment of the loan in instalments, until such a time when it was able to raise more money.

Unsatisfied with the excuse from Etisalat, the banks threatened to take over the operations of the telecoms company should it fail to meet its payment obligations. The situation forced Etisalat to enter into negotiations with the banks to seek write-offs, which the banks rejected.

The banks involved in the loan deal include Zenith Bank, GTBank, FirstBank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank, and Union Bank.

A breakdown of the amounts owed the banks shows that Zenith Bank has the highest exposure to Etisalat amounting to $262 million and N80 billion, GTBank has the second highest exposure of $138 million and N42 billion, Access Bank follows with $131 million and N40 billion.

Etisalat also owes UBA $125 million and N38 billion; FirstBank – $79 million and N24 billion; Fidelity Bank – $56 million and N17 billion; Stanbic IBTC – $25 million and N7.5 billion; FCMB – $15 million and N4.5 billion; and Ecobank – $10 million and N3.1 billion.

At the peak of the debt crisis, one of its three core investors, Emirates Telecoms Group Company (Etisalat Group), pulled out of the shareholding structure and announced on the Abu Dhabi Stock Exchange in the United Arab Emirates the transfer of 45 per cent of its stake and 25 per cent of its preference shares in Etisalat Nigeria to United Capital Trustees Limited, the legal representative of the lending banks.

Shortly after the pull-out of Emirates Telecoms Group Company, all the former board members of Etisalat resigned their appointments, beginning with the resignation of the six Mubadala and Etisalat Group-appointed non-executive directors, all nationals of the United Arab Emirates, and the resignation of its former chairman, Mr. Hakeem Bello-Osagie, a Nigerian.

Few days after its former chairman resigned, its ex-Managing Director/Chief Executive, Mr. Matthew Willsher, and its former Chief Financial Officer, Mr. Olawole Obasunloye, also resigned.

Since then 9mobile has been managing the situation and at the same time looking for credible investors that will take the once vibrant telecoms company out of the woods.

 

Attractions

 Although 9mobile has been faced with serious financial crisis since 2013, which forced it to obtain the $1.2 billion loan from 13 local banks, despite its travails, investors still have confidence in the telecoms company. Several reasons are responsible for this. They include the prompt steps taken by the Nigerian government, especially the CBN, NCC and the Senate, to address the financial crisis.

Industry stakeholders have commended the efforts of government in this regard.

President, National Association of Telecoms Subscribers, Chief Deolu Ogunbanjo, hailed the way the crisis was resolved, but tasked the 9mobile board to do everything possible to return Etisalat to profitability. “Etisalat was once vibrant, especially in the area of data service offerings. So the new board has a task to return Etisalat to its vibrancy in order to maintain existing subscribers and attract new subscribers,” Ogunbanjo said.

Ogunbanjo, who was particularly interested in the data service offering of Etisalat, described it as the best service offering in the telecoms industry. But the NATCOMS president advised the new board members to look into the pricing, which he said, is slightly higher than the data pricing of other telecoms operators.

Chairman of the Association of Licensed Telecoms Operators of Nigeria, Mr. Gbenga Adebayo, told THISDAY in Lagos that he was happy that the financial crisis in Etisalat had been resolved amicably.

Adebayo said, “Our interest as an association is in the issue that has been resolved amicably in the interest of all stakeholders involved and we will continue to support the management of Etisalat and its new board members.”

 

Prospects

 

Looking at the prospects of 9mobile, the president of the Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, welcomed the choice of Olusanya as the new CEO, as well as the constitution of the board of 9mobile. Teniola said this would further bring credibility to the telecoms company, despite its challenges.

According to him, “Boye Olusanya is experienced in the telecoms industry, being the former Deputy Managing Director of Celtel and Managing Director of Dancom, a subsidiary of Dangote Group. He has knowledge of the fiber transmission and mobile services segment of the industry and I strongly believe that he brings much transformative experience, having spent the last few years in this area.”

The role of NCC during the crisis also added credibility to the 9mobile situation. NCC had brokered peace talks between the creditors and the CBN, a situation that raised the prospects of the telecoms company, despite its financial crisis, which is gradually being resolved.

Director, Public Affairs at NCC, Mr. Tony Ojobo, said: “The commission is confident that the amicable resolutions reached by the parties will further strengthen 9mobile’s capacity to continue to provide services to its over 20 million customers and to fulfil its obligations to its other stakeholders.”