Banking shares suffer as Etisalat gets new board and management

 

The shares of major lenders to Etisalat declined yesterday on the Nigerian Stock Exchange (NSE) as the telecom company announced a new management and board.

The consortium of 13 Nigerian banks, the Central Bank of Nigeria (CBN) and Etisalat shareholders, appointed the new board of directors to continue the operations of the telecommunications company as part of the takeover agreement. This follows the failure of Etisalat to fulfil its debt conditions after taking a $1.2 billion loan for expansion in 2013.

But initial panic that the CBN may force the banks to take a hair cut on the debts owed to them by Etisalat, resulting in a sharp drop in their shares.

United Bank for Africa (UBA) topped the decliners with a fall of -5.75 percent. Pan-African lender Ecobank shed -4.94 percent, Diamond Bank and FCMB both lost -4.72 percent,  Guaranty Trust lost-1.3 percent,  Stanbic  lost -3.0 percent, FBNH  lost -3.4 percent and Access -2.3 percent each, helping to a 1.1 percent drop in the All Share Index yesterday.

Olamipo Ogunsanya, Sub-Saharan Africa banking analyst at Renaissance Capital, said The CBN and the banks have no interest in running Etisalat. They simply want to avoid an NPL crisis.

“I do not think the CBN will take over Etisalat. New board members were appointed today and I think the aim is that they manage the company until it is sold off to new investors”.

However, sources in the banking industry told BusinessDay that the CBN is not to force banks to take a hair cut, neither is it planning to pump money into Etisalat.

“What has happened is just putting in place an interim management until the companies shares are sold. There is already a significant level of interest from different buyers who have always been interested in having a foothold in the Nigerian telecoms market. We are confident that the enterprise value of Etisalat is higher than its debts and so the banks would not have to incur any write down in selling their equity stake that is now available”

Renaissance Capital had valued Etisalat at US$1.2 billion. Etisalat Nigeria had repaid $500 million of the loan before it defaulted in February due to currency devaluation.

The new appointees to the Etisalat board are Joseph Nnanna, an economist and Central Banker, as the new Chairman; Oluseyi Bickersteth, a national senior partner of KPMG as non- executive director; Boye Olusanya, former Deputy Chief Executive Officer of Econet Wireless and Celtel Nigeria, as Chief Executive Officer; Funke Ighodaro, a chartered accountant and former Chief Financial Officer of Tiger Brands Limited and Ken Igbokwe, who is also an accountant and the Country Business Executive Leader of Price Waterhouse Coopers (PwC) Nigeria and West Africa.

The management will be in place and stabilise the operations of the telecom firm until a final resolution is reached on the current debt situation. Sources have told BusinessDay that negotiations are still on going with existing shareholders and the banks will only consider selling to new investors if those negotiations fail.

Telecoms industry analysts have hailed the new management, saying that the selection of executive and non-executive board members was strategic, considering the company’s current financial distress.

“From what you can see, the new board consists of people with a wealth of knowledge from the financial and telecoms sector. This is because it has become paramount for the debt to be settled and operations to continue smoothly,” Subomi Sodipo, CEO, CFmobile said.

Sodipo added that ,“the selection of professional accountants and financial experts to run the company, shows that the major cause of crisis was mismanagement of funds, and so the company desperately needs capable hands to adequately manage funds.”

According to BusinessDay sources at the Nigerian Communications Commission (NCC), “the agreement between the banks and Etisalat, during the settlement talks, which included the CBN and NCC, was that there would be a six member board as part of the restructuring process.

“These members were selected by the 13 lenders, CBN and Etisalat shareholders. The NCC could not be involved in the selection process because, as the telecommunications regulator, it should not be in anyway involved in the running of any mobile network.” Our source said.

Going by information from the NCC, Etisalat is yet to announce the appointment of one more board member to complete its agreed six-member board to run operations.

“It is also expected that there will be moves to convert a percentage of the debt to shares. But there is still doubt as to whether all of the funds were used for the stated purpose of expansion in the first place,” a mainstream telecom source, told BusinessDay.

In a statement made available to BusinessDay, the NCC said the appointment of new board members is an amicable resolution of key issues pertaining to Etisalat’s indebtedness, and the new board of directors will allow for a smooth transitional process.

The statement, which was signed by Tony Ojobo, Director, Public Affairs, NCC, revealed, “the CBN played a pivotal role in resolving the matter in a manner that protects the interests of all stakeholders – especially the creditor banks and Etisalat’s over 20million customers.”

Banks involved in the loan deal include: Zenith Bank, GT Bank, First Bank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank.

Etisalat Nigeria said it had serviced its debt obligation up until February 2017. The outstanding loan sum to the lenders stands at $227m and N113bn, a total of about $574 million if the naira portion is converted to US Dollars.

Profile of board members

Joseph Nnanna, who was appointed as the new Chairman of Etisalat has three decades of post qualification professional experience in the financial sector. Nnanna was appointed Deputy Governor (Financial System Stability) Central Bank of Nigeria on February 3, 2015. From 1982-1989, he worked as a staff economist in the international trade and exchange rate section of the Research Department of the Central Bank of Nigeria.

Nnanna also served as full time consultant to the government of Nigeria, as a technical assistant to the National Economic Management Team and the Presidential Steering Committee on Global economic crisis. He was also a part-time consultant to the United Nations Conference on Trade and Development (UNCTAD).

In 2012-2014, Nnanna served as the Alternate Executive Director, representing Nigeria and 21 other sub-sahara African countries, on the Board of the International Monetary Fund (IMF) Washington D.C.

Funke Ighodaro, the new CFO of Etisalat has held positions as CFO of Tiger Brands Limited and Primedia (Pty) Ltd. She also was the Managing Director of a private equity firm, Kagiso Ventures Limited and Executive Director of its parent company, Kagiso Trust Investment Company.

Ighodaro worked in the corporate finance division of Standard Corporate and Merchant Bank. She trained and qualified as a Chartered Accountant with PricewaterhouseCoopers in London, where she spent a total of ten years in audit and tax. She is a Fellow of the Institute of Chartered Accountants in England and Wales.

Seyi Bickersteth, appointed as a Non Executive Director in Etisalat Nigeria, is the National Senior Partner of KPMG Professional Services, Nigeria; he oversees KPMG West Africa Region and is a member of the Global Board. Seyi has provided advisory services to major companies in varied industries, including oil and gas, financial services, telecommunications, manufacturing, commercial, public sector and not for profit organisations.

Etisalat confirms that Bickersteth has been extensively involved in privatisation activities and has provided tax and business advice to several local and international companies on privatisation, business organisation, entity restructuring and business regulatory issues.

Boye Olusanya, the new CEO of Etisalat Nigeria, will bring on board, his wealth of experience from the Nigerian telecoms sector, having worked at Econet Wireless and Celtel Nigeria Limited, where he managed the affairs of the company after disengagement of the former operators. At Celtel Nigeria Ltd, Boye assumed the role of Deputy Chief Executive Officer and led the business strategy initiative for data services, as well as key strategic operational changes in the business.

Ken Igbokwe, a Non- Executive Director, came from Price Waterhouse coopers ,where he was the Country Business Executive Leader of PwC Nigeria and West Africa and was a member of the PwC Africa Executive Committee.

With over 36 years’ experience in the provision of assurance, taxation, business advisory, and consulting services. Igbokwe specialises in strategy, enterprise transformation, process reengineering, taxation advisory and business reconstruction.

 

Jumoke Akiyode