Nigerian minority shareholders closing-in on transferred Etisalat shares

Nigerian minority shareholders in Etisalat Nigeria are said to be weighing up a move to snap-up the telco’s transferred shares.

Ownership holes have emerged in Etisalat Nigeria, as its biggest shareholders took a walk after failed attempts to agree on debt restructuring with a consortium of 13 creditor banks, over the remainder of a $1.2 billion trade facility granted in 2013.
Failure to seal a deal meant Abu Dhabi-based Etisalat Group was forced to transfer its 45 percent stake in the Nigeria unit to a loan trustee- United Capital- as ordered by the banks.
Saudi-based investment fund Mudabala, which has 40 percent stake, has since followed in the steps of Etisalat Group and also pulled out.
Etisalat Nigeria had repaid $500 million of the loan before it defaulted in February due to currency devaluation. The only remaining investors are its Nigerian partners, with Etisalat Group and Mudabala pulling out. The telco’s Nigerian partners, led by company chairman Hakeem Belo-Osagie, own the remaining 15 percent stake, according to sources familiar with the ownership structure of the company.
“The Nigerian minority shareholders are talking with the banks to swoop in on the transferred shares and up their stake, now that the major investors have bailed out,” a source told BusinessDay, on condition of anonymity.
“The banks are open to the discussions and are willing to agree a debt restructuring,” the source said. Belo-Osagie, 62, did not respond to an e-mail for comment. Osagie is a Nigerian businessman and was listed by Forbes Magazine as the forty-first richest man in Africa in the most recent ranking.
Already, the six Mubadala and Etisalat Group-appointed non-executive directors, all nationals of the United Arab Emirates, have since walked out on the troubled telco, leaving only its Nigerian shareholders, whom many believe would likely have the right of first refusal ( a contractual right of an entity to be given the opportunity to enter into a business transaction with a person or company before anyone else can.)
Etisalat Group announced on June 20 that following a default in facility agreement with a consortium of Nigerian banks and inability to reach a restructuring agreement, it received on July 9 an enforcement notice which requires it to transfer 100 percent of its shares to United Capital Trustees by June 15 which was later extended to June 23.
Etisalat had been in talks with Nigerian banks to restructure a $1.2 billion trade facility after missing repayments, but those discussions failed to produce an agreement on restructuring the debt.
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.
IHS Netherlands, which leases tower space to Etisalat Nigeria, is also owed outstanding payments, and has taken a hit from the latter’s recent struggles.
Its $800 million bonds maturing in 2021 have consistently sunk, after the announcement that debt talks had failed. About $8.5 million was more than 120 days overdue from Etisalat as of end 2016.
A number of firms invested aggressively in Nigeria in the era of high oil prices but are struggling to repay loans or keep operating, as the oil producer suffers from a slump in global crude prices that has hammered its revenues, its currency and dollar reserves.
Etisalat Nigeria is the second corporate failure this year, after the country’s biggest airline, Arik-air, was taken over by a government-owned fund in February, after struggling with large debts and operational difficulties.
Etisalat Nigeria has 20 million subscribers, according to regulator, the Nigerian Communications Commission (NCC) making it the number four mobile operator with a 14 percent market share.
Renaissance Capital values Etisalat Nigeria at $1.2 billion, based on an enterprise value to operating cash flow multiple, compared with South Africa’s MTN and other African peers.
BusinessDay had exclusively reported that the options open to Etisalat Nigeria for acquisition or mergers with telecom rivals operating in the country are slim.
Regulatory barriers stand in the way of MTN Nigeria, while financial drawbacks would make Airtel and Globacom balk at a buy.
MTN Nigeria has 47 percent market share, and Globacom, owned by Africa’s third richest man, Mike Adenuga, accounts for 20 percent, according to regulator Nigerian Communications Commission (NCC). Airtel – a subsidiary of India’s Bharti Airtel – lays claim to 19 percent of the total market.
Nigeria’s mobile-phone subscriber numbers stood at 152 million at the end of March 2017 from about 154 million the previous quarter, according to the NCC.