The recent court injunction obtained by Spectrum Wireless Communication to stop the sale of 9mobile will, no doubt, pose fresh challenges for the telecoms company, whose sale was at the verge of completion. Emma Okonji writes
Industry stakeholders, 9mobile and United Capital Trustees Limited, were thrown into confusion last week, when it was reported that Spectrum Wireless Communication had gone ahead of them to obtain a court injunction to stop the sale of 9mobile. United Capital Trustees Limited is the receiver-manager appointed by the consortium of 13 banks, which lent $1.2 billion to the former Etisalat Nigeria, which currently trades as 9mobile.
It became a big and devastating issue to the concerned parties because the court injunction came at a time when they were almost getting a sigh of relief that the challenges of 9mobile would soon be over, since the planned sale, which had lingered since last year, was nearing completion.
But to their surprise, the unexpected happened, when Spectrum Wireless Communication obtained a court injunction, restraining the sale of 9mobile.
Spectrum Wireless Communication has alleged that its interest in 9mobile as an investor, who invested over $35 million in the telecoms company, was not factored into the planned sale of 9mobile. It therefore prayed the court to stop the sale to enable those involved to rewrite the template for the payment of its investments in 9mobile before it could be sold to a new investor, and the court granted its request and placed an injunction to stop the sale of 9mobile. Although United Capital Trustees Limited has appealed the case, and has vowed to continue with the planned sale, it is uncertain how far it can go, since its action may be legally interpreted as contempt of court.
Position of Spectrum Wireless
Spectrum Wireless, which claimed to be one of the investors in Etisalat Nigeria, now trading as 9mobile, said it had 17.5 per cent shares in the former Etisalat Nigeria. And it is demanding a return of its investment worth over $35 million, before the telecoms company can be sold. The management of Spectrum Wireless claimed that since it invested over $35 million in Etisalat Nigeria in 2009, no returns had been made to it.
Having secured a Federal High Court injunction in Lagos on January 12, which nullified the Central Bank of Nigeria-led Interim Board of 9mobile, Spectrum Wireless Communication said the planned sale of 9mobile must stop until every kobo of its investment was paid.
Solicitors to Spectrum Wireless Communication Limited warned that by virtue of the said judgement, the positions of Dr. Joseph Nnanna, Oluseyi Bickersteth, Ken Igbokwe, Funke Ighodaro and Boye Olusanya, as security trustee nominee of the board of Emerging Markets Telecommunications Service had been nullified and the order appointing them vacated. The Solicitors, J.A. Achimogu and Co and Dr. Reuben Atabo and Co, warned that any institution or company who transacts business for the purpose of sale or acquisition of EMTS or 9mobile, did so at his or her own risk.
Justice Ibrahim Buba of the Federal High Court, Lagos, had in his judgement said the motion was struck out having set aside the order adding, “the respondent shall reverse all steps taken by it since the order was nullity.”
The stakeholders, led by Spectrum Wireless, approached the court in December 2017 to challenge the Ex Parte Order granted in favour of United Capital on July 3, 2017. This culminated in the court ruling of January 12, 2018 which discharged (sets aside or nullifies) the prior court order of July 3, 2017 on the grounds, among others, that it was granted based on a misrepresentation of facts made available to the court at the time.
Telecoms industry players who have been following the processes of the planned sale of 9mobile and were initially optimistic that 9mobile would bounce back to the telecoms space stronger, after it must have been sold to a credible investor. They are now worried and confused about the recent development.
President of the Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, said Spectrum Wireless Communication might have its reasons for seeking a court injunction, but the best way to resolve the issue was for all the parties involved to come together and reach an amicable resolution.
Citing the case of Airtel Nigeria, which had a similar issue with Mr. Strive Masiyiwa of Econet Wireless, Teniola said Airtel Nigeria was able to survive the situation, which almost crumbled its operations before it was eventually sold to Bharti Airtel of India. Masiyiwa, a London-based Zimbabwean businessman and founder of Econet Wireless, had severally obtained court injunctions to stop the sale of the former Econet Wireless Nigeria (EWN) to numerous interested investors, before Bharti Airtel Limited, an Indian global telecommunications service company based in New Delhi, India, finally bought it over and added it to its several operations across the globe as Airtel Nigeria.
Teniola blamed the Etisalat Group and Mubadala Development Company of the United Arab Emirates, the core investors in the former Etisalat Nigeria, for not handling the issue properly when it was at its early stage. Although he said he was happy that United Capital Trustees was ready to continue with the sale of 9mobile.
A telecoms lawyer who preferred anonymity because of the sensitive nature of the matter spoke to THISDAY on the statement by United Capital Trustees that it would go ahead with the sale of 9mobile, despite the court injunction. According to the lawyer, once a plaintiff gets a court injunction, be it an Interim Court Order, Ex Parte Order, or Interlocutory Order on notice, and has signed undertaking to bear the loss that may accrue from the judgement of the court, if it later happens that the judgement was given in error, then it becomes binding for the defendant to accept the court injunction, even though the defendant still decides to appeal the case. The defendant has the right to appeal the case, he said, but the same defendant is also bound by law to obey the court injunction. Any attempt to go against what the court order has restrained, will amount to disregard to the rule of law. The defendant has to abide to the orders of the court injunction, pending when the order is lifted, the telecoms lawyer said, adding that the defendant has the right to appeal a case, but does not have the right to disobey court orders on injunction.
Industry stakeholders say the court injunction obtained by Spectrum Wireless Limited is a big threat to the activities of 9mobile, given the judicial interpretation. They are of the view that the initial intervention by the Nigerian Communications Commission and the Central Bank of Nigeria may become wasted efforts if the case lingers on and eventually turns the other way round.
NCC, the telecoms industry regulator, while initially giving clarifications on the true position of 9mobile sales by Barclays Africa, in relation to the January 16 date earlier announced, had said that contrary to speculations that a “winner” will be announced on the same day (i.e. 16th of January 2018), “We wish to clarify that Barclays is expected to review the bids received by the deadline and to make recommendations to the 9mobile interim board thereafter. The NCC and CBN will be duly notified once the 9mobile interim board accepts Barclays’ recommendations and a winning bid is determined in accordance with the terms of the exercise. The winner will now apply to NCC in order to commence the processes for securing the regulatory approvals from the board of the NCC necessary to give full effect to the transfer.”
NCC also made it clear that its intention to intervene in the 9mobile indebtedness issue to the 13 local banks was purely in the interest of the telecoms sector to save the over 2,000 employees of 9mobile from losing their jobs, protect the over 20 million subscribers of 9mobile, and protect telecoms investment. It said it also wanted to assist the 13 banks recover the $1.2 billion loan given to 9mobile in 2013, which it was unable to repay, citing economic downturn of 2015-2016 and naira devaluation, which negatively impacted on the dollar-denominated component of the loan.
The action of Spectrum Wireless is currently a threat to the intervention of NCC and CBN to save the telecoms company from collapse, the stakeholders said.
9Mobile, formerly known as Etisalat Nigeria, became the fourth entrant into the GSM space in Nigeria, when it rolled out its commercial service on October 23, 2008. One of its first television commercials, called the 080-9ja4life, was a great hit for the telecoms company, a situation that earned the telecoms company great respect among Nigerian youths, coupled with its innovativeness in product deliveries, especially on data services.
But trying to expand its network, the telecoms company 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 the dollar-denominated component of the loan, the former Etisalat Nigeria wrote its creditors informing them of its intention to halt the repayment of the loan in instalments, until such a time that it was able to raise more money.
Unsatisfied with the excuse from the telecoms company, the banks threatened to take over its operations, should it fail to meet its payment obligations. The situation forced the telecoms company to enter into series of negotiations with the banks, which eventually collapsed, and that was the beginning of the many challenges of 9mobile.
After all negotiations between the telecoms company and its lending banks failed, 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.
The other two core investors, Mubadala Development Company, which has 40 per cent stake, and Emerging Markets Telecommunications Services (EMTS), representing the Nigerian shareholders, which has 15 per cent stake, remained committed to Etisalat Nigeria, despite its debt crisis.
Few days after it pulled out of the shareholding structure, six Mubadala and Etisalat Group-appointed Non-executive Directors (NEDs), all nationals of the United Arab Emirates, resigned their appointments, an action that was shortly followed by the resignation of the former board chairman, Mr. Hakeem Bello-Osagie, who is a Nigerian. This was again followed by the resignation of the then CEO, Mr. Mathew Willsher, and several management staff of the telecoms company.
Banks involved in the loan deal are Zenith Bank, GTBank, FirstBank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank, and Union Bank, among others.
NCC/ CBN Intervention
In order to save the situation, several meetings were called at the instance of NCC, and the meetings were held between NCC, CBN, 9mobile and the management of the 13 banks. It was agreed that 9mobile should be sold to an interested investor that is financially capable and willing to invest in the telecoms company and to release the much needed funds to settle its loan debt.
It was based on the intervention that Barclays Africa was appointed to handle the sale of 9mobile. Barclays Africa had last year threatened to pull out of the sale agreement following a letter jointly written by NCC and CBN, accusing Barclays Africa of poor handling of the auction process. But the issue has since been resolved and Barclays Africa has handled the sale process, until the recent development from Spectrum Wireless.