Etisalat’s debt restructuring meeting with banks fixed for March 16

…Business model may be responsible for financial difficulties.

The Nigerian Communications Commission (NCC), which interceded to get reprieve for Etisalat, following its inability to pay back the $1.2billion loan taken from a consortium of  13 banks in 2013, has scheduled a meeting between the telecommunications operator and the creditor banks on Thursday, March 16, 2017.

In a statement made available to BusinessDay, Tony Ojobo, Director, Public Affairs, NCC, said that at a previous meeting, which held at the CBN office in Lagos on Friday, March 10, the consortium of banks and the mobile network operator agreed to concrete actions that will bring all parties closest to a resolution.

Ojobo said; “In a renewed effort to ensure that Etisalat remains in business while the consortium of banks meets their obligations to their customers, a meeting will hold on March 16, 2017 to agree on a payment restructuring path going forward.

“The NCC will lead the CBN in a possible crucial meeting with Etisalat’s shareholders anytime soon,” he added.
BusinessDay learnt that lack of consensus among shareholders might have stalled plans to recapitalise the Nigerian unit with the local shareholders fearing a significant dilution at the close of any such capital injection.

Etisalat’s response to the disposition of the Nigerian partners could be to pull out completely, as soon as the bank debt is refinanced.

But telecommunications industry experts say Etisalat’s size as the smallest GSM operator; its late entrance and business model of targeting the Nigerian youth, may have contributed to its current difficulties.

BusinessDay findings reveal that when Etisalat entered Nigeria in 2008, the telecommunications market was already taken by early GSM entrants including; ECONET (now Airtel) and MTN, which came into Nigeria in 2001. By 2008, MTN already had 23 million subscribers across the country on its network, more than the total amount of 21 million subscribers currently on the Etisalat Network, and so, Etisalat devised a business model to appeal to the younger generation who were not already GSM subscribers.

“Etisalat came into Nigeria at a time when the telecoms industry was growing rapidly and they had big operators such as MTN, Airtel and Nigerian owned Globacom to compete with, so they had no choice but to appeal to the younger generation who did not already have mobile phones. They grabbed that market and continued to portray themselves as a youthful and innovative company.

“However the dynamics have now changed because there has been drastic drop in voice call revenues and telcos have now shifted focus to data services. Bigger players like MTN and Globacom who have landed their own submarine cables are advantaged and can afford to reduce data rates for customers, so that leaves Etisalat struggling,” Subomi  Sodipo, Chief Executive Officer, CFmobile told BusinessDay.

Reuters Africa reported that Etisalat is considering a sale of its stake in Etisalat Nigeria after the local unit defaulted on a $1.2 billion loan payment but wants the unit’s debt restructured before it starts the sale process.

Agreeing to the fact that Etisalat might be more badly affected than other operators in Nigeria, Segun Oruame, Founder, QITECH Technologies Limited, told BusinessDay that; “Although voice revenues have dropped across board, bigger operators can afford to mitigate for longer. The smaller you are, the bigger the impact on you.

“Etisalat could not make payment because of the foreign exchange policies currently in place in Nigeria. All telecom service providers are facing this problem because operations are based on foreign exchange availability for imports and other things. Etisalat considering selling its Nigerian stake is not necessarily because they are not making money, but because they have realised that they cannot compete in the long run. Whatever they are losing should not be big enough to impact their loan,” Oruame said.

 

Jumoke Akiyode