We Are in Doubt if the Preferred Bidder for 9mobile Sale Met All Conditions 


Executive  Director, Operations, Smile Communications, Mr. Ahmad Farroukh, spoke with Emma Okonji about the sale of 9mobile, expressing doubt whether the preferred bidder actually met all conditions for the sale of the telecoms company. Excerpts:

Smile Telecoms Holdings Limited seems to have strong passion for 9mobile. What is your vision and interest to bid for the acquisition of 9mobile?
Smile Communications, which is a branch of Smile Telecoms Holdings Limited, is competing strongly in the voice and data space of the telecoms sector and we intend to acquire 9mobile because of the huge potential that the telecoms company has. Although 9mobile is the fourth entrant into the Nigerian GSM space, but the company rolled out strong and became the best among the four GSM companies in terms of the quality of voice and data offering and it was able to maintain that lead position from 2013 to 2017, before it had its financial crisis and it lost that lead position, to become the number two in data and voice quality.
So Smile sees that great potential in 9mobile and we want to acquire 9mobile and help its customers to continue to experience the best service quality in voice and data.
What we are bringing to the transaction is very simple. Our DNA is in data and we want to combine our DNA, which is in data, with that of the DNA of 9mobile, which is in voice and data, into a single platform from where we will offer customers with rich telecoms experience in terms of quality service delivery.
Smile is strong and efficient in data service delivery and we want to bring our strength and put it in 9mobile, in order to reposition the telecoms company to regain its earlier lead position in voice and data services.

Your intention to acquire 9mobile could be seen as a collaborative effort. How do you perceive collaboration in the telecoms sector?
Collaboration is a global phenomenon and it is key in the telecoms sector. Telecoms operators in other regions are deeply involved in collaboration and consolidation. In Senegal and Ghana for instance, we can see mergers and consolidation among telecoms operators, thereby reducing the number of telecoms operators to about three in each country, and there is need for telecoms operators in Nigeria to also consolidate. NCC should begin to preach consolidation in the Nigerian telecoms industry because it will help operators to become financially stable and innovative.  Consolidation is even more important in Nigeria because of the scarcity of spectrum licences that are currently being managed by the NCC. So when there is consolidation, operators can get the best out of the scarce resource in spectrum licences for speedy rollout of telecoms services.

Smile Telecoms Holdings Limited recently emerged as the reserve bidder for 9mobile, from among the 16 operators that initially indicated interest to acquire it, but you seem not to be satisfied with the position of reserve bidder, and you have written a protest letter to challenge the entire bid process. What are the issues?
Yes,  we wrote the financial adviser handling the sale of 9mobile to express our dissatisfaction in the manner in which the entire bid process was handled, but that is not to say we are objecting to the bid process. But the truth is that we were shocked to receive a letter on February 21, from Barclays Africa the financial adviser handling the sale of 9mobile, congratulating us that we emerged as reserve bidder in the entire bid process. We were shocked because Barclays had earlier told Teleology Holdings and Smile Telecoms Holdings who were the preferred and reserve bidders respectively, to submit final binding bids on February 26, stating clearly that the preferred bidder should be prepared to make non-refundable cash deposit of $50 million on that same February 26.
So we were shocked by the letter dated February 21 that was sent to us by Barclays Africa, congratulating us as the reserve bidder and thanking us for our interest in 9mobile. So we quickly raised a question, asking why Barclays did not wait till February 26 when both the preferred bidder and the reserve bidder must have submitted their final binding bids as preferred and reserve bidders and when the preferred bidder must have paid the non-refundable deposit on that February 26, before sending official letters to the preferred and reserve bidders to announce their positions in the entire bid process. We were also shocked that in the letter sent to the preferred bidder on that same February 21 that we received our letter, Barclays Africa gave the preferred bidder 21-day window from the day the letter was written, to make the $50 million non-refundable deposit, contrary to the initial arrangement that the preferred bidder must show evidence of payment of the non-refundable deposit, that same day of submitting the final binding bid, which was supposed to be February 26. So we are in doubt whether the preferred bidder met all the conditions before declaring it the preferred bidder, because the conditions as stated by Barclays, were very clear.

So what requirements as contained in the document guiding the bid process that the preferred bidder defaulted that makes them ineligible to be awarded the licence for 9mobile?
The preferred bidder was supposed to sign the Sales Purchase Agreement (SPA) form after making the non-refundable deposit of $50 million on February 26, but to our greatest surprise, the preferred bidder was announced through a letter dated February 21, even before making the non-refundable deposit and even before the stipulated date of February 26, a situation that gave us room to doubt the transparency surrounding the entire bid process, because for us, the goalpost has been shifted.
Again no timeframe was given by Barclays stating the waiting period for paying of the bid money before inviting the reserve bidder to take over the position of the preferred bidder, should the preferred bidder fail to meet up with the stipulated timeframe for payment.

What value will Smile Telecoms Holdings bring to 9mobile if it eventually acquires it?
We will bring three dimensional values to 9mobile if given the opportunity to acquire it. The first value is that we are a Nigerian company that is already existing in the Nigerian telecoms space. So we will come with our exiting assets to boost the 9mobile operations. We will seek the permission of NCC to flip our existing 800MHz frequency to 9mobile to enhance its operations. What we are bringing to 9mobile is huge. The 800MHz frequency, which Smile Communications currently operates on, will be added to that of 9mobile to achieve the best  frequency ever that will serve the customers better and help 9mobile to come out of its current challenges. Without exaggerating, we are sure to add additional 600 Base Transceiver Stations (BTS) of Long Term Evolution (LTE) technology, into the operations of 9mobile within a space of 90 days, if given the opportunity to acquire it. We will from day one, integrate our existing facilities with that of 9mobile to get the company back to its old good days, when it was the best voice and data telecoms company in Nigeria. 9mobile currently has 500 BTS across the country, and by the time we add our 400 existing BTS and combine it with the 600 BTS that we can provide within 90 days, 9mobile will be having approximately 1,500 BTS, which will match the number of BTS that the largest telecoms operator in the country currently has. So should we acquire 9mobile, we will make it competitive from day one with unprecedented speed of service delivery.
The second value that we will bring to 9mobile is the monetary value. We will bring in fresh millions of dollars from foreign financing outside Nigeria, into 9mobile to pay off its indebtedness to the banks and also pay off any other group that the company is indebted to, and we will still have enough to invest in 9mobile and make it competitive. Let me tell you that several countries around the world still believe in the Nigeria story and we will reach out to them to get fresh funds to invest in 9mobile.
The third dimensional value that we will bring to 9mobile, is about out long standing experience as telecoms experts. I have handled telecoms business in Nigeria, including being the CEO of MTN Nigeria from 2006 to 2011, before I was appointed as Director to oversee the MTN West African operations, before joining Smile Communications. Nigeria has made me what I am today and I am grateful to God and to Nigeria. In Smile Communications and Smile Telecoms Holdings, we have seasoned telecoms experts and we are bringing that expertise to 9mobile if given the opportunity to acquire it.
We are convinced that our three dimensional values will make 9mobile a successful company if we are allowed to manage it.

The indebtedness of 9mobile is huge. How do you intend to pay the debts and still have money to invest in the telecoms company?
Yes we are very much aware of the debt profile of 9mobile and we are capable of handling it. What we intend doing if given the opportunity to manage the telecoms company, is to split the debts and give timeframe to offset them. As for the banks who are the biggest creditors to 9mobile, we will ensure that they do not lose any money. We will enter into agreement with them on the modalities of payment and we will surely pay them. We will come up with debt restructuring for both the banks and the vendors and they will get back their money. With 9mobile, we want to be the best data centric operator in Nigeria and we are sure we can achieve it.

It has been observed that when new operators come on board, they come with a lot of promises, but over time their services drop because they will relent in the expansion of their network capacities. What is the assurance that you will maintain a stable network after acquiring 9mobile?
We have assuring Nigerians and Nigerian subscribers of a steady growth in the quality of our service delivery at all times. This is true because technology is evolving and we have Radio Access Network (RAN) that allows us to innovate and expand our network. Our 800MHz frequency will also help in adding more capacities to our network to make our service delivery efficient and stable at all times.

How many states and cities has Smile Communications covered in its operations currently?
We currently have coverage in eight cities and we just reviewed our plans to add additional cities with plans to cover all states and cities in Nigeria in no distant time.

There were discrepancies about the actual bid money of $500 million and $300 million that the preferred bidder and the reserve bidder respectively, offered to acquire 9mobile. Could you share what the exact figures are?
Honestly I can not share what the preferred bidder offered to acquire 9mobile, but I can speak about what the reserve bidder offered because that is information about the company where I work. But what was published in newspapers about the bid amount from both the preferred and reserve bidders is not correct. I cannot substantiate the figures but none of the bidders offered up to the amount quoted by most newspapers. If peradventure they offered to pay as much as $500 million and $300 million and after two years they run out of cash to fund the business, what will happen to the business. So, such figures as quoted in the newspapers were unrealistic, because operating a telecoms business in itself is capital intensive, coupled with the huge debt profile that is hanging on 9mobile.

Was there a reserve bid price for the auction of 9mobile, as it was with past auctions in the telecoms sector?
There was no reserve bid price. Every bidder was given the opportunity to make its offer, based on the prospects and liabilities of 9mobile that were disclosed to all bidders during the bid exercise.

You spoke about consolidation among telecoms operators. Would Smile Telecoms Holdings be willing to merge with Teleology in the spirit of consolidation, if Teleology is unable to pay the necessary fees to acquire 9mobile?
In terms of market consolidation, I cannot speak for the other party if they will want to consolidate. Again I do not know what their business plan is, so I cannot even speak on whether we will be willing to consolidate with them.
In terms of consolidation, it depends on their business model and the value they will bring, because we are not considering money put on the table before accepting or rejecting consolidation. Money is not everything about the telecommunications business.

NCC did financial health checks on all telecoms operators in the country and discovered that 90 per cent of telecoms operators in the country are not financially stable. Is this applicable to Smile Communications?
NCC’s finding on the weak financial strength of telecommunications operators in Nigeria is absolutely correct, but the challenge can be traced to what befell the country in 2016, when the country slipped into recession. The effect did not only show on telecoms companies, but on all businesses across all sectors of the Nigerian economy because it was a national issue. After Nigeria came out of recession in 2017, businesses are trying to recover, including telecoms business. I understand the Nigerian market very well and I can speak authoritatively about the market as it relates to telecoms business. NCC should be applauded for carrying out the financial health check, which clearly shows the financial status of every telecoms business operating in the country.

NCC recently came up with the idea to license the 60GHz spectrum band. Is Smile prepared to bid for this spectrum, and what value will the spectrum bring to telecoms business?
We may not be interested in the 60GHz spectrum, but licensing of spectrum is good for the telecoms industry because it will help to address the scarce resources in spectrum administration. Yes spectrum auction is good, but the NCC must ensure that the spectrum is not skewed to a particular operator especially the bigger operators who may see it as an opportunity to push the smaller operators out of business. Small operators are key, no matter their sizes. If NCC allows the smaller operators to be wiped out, then the entire telecoms industry will be in big trouble in the future. Subscribers should be given the opportunity to make their choice of networks and it is therefore important to allow several operators of different sizes and capacities to operate in the telecoms market space.

How is Smile Communications getting on with its VOLTE service offerings?
We still play big in the Voice over LTE segment of the telecoms business. We have the capacity to offer full Voice over LTE which is the VOLTE service, and as the device ecosystem expands, we also intend to expand our VOLTE services and we are discussing with various original equipment manufacturers to expand the device ecosystem. So we have the capability to offer Voice over LTE. The only limitation is the device ecosystem and we are building on our data and device ecosystem in order to connect more subscribers to our network.