• Friday, March 29, 2024
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BusinessDay

With Teleology fiasco, Nigeria fails yet another investor test

9mobile

The damage done to foreign investor confidence with MTN’s row with Nigerian regulators had barely cooled before another sucker punch was dealt, as a brewing fiasco involving Teleology Holdings and its Nigerian shareholders threatens to taint Abuja’s investment climate.

Teleology Holdings acquired 9mobile, formerly Etisalat, last November, after paying some $500 million for the struggling telco that was dumped by previous investors, Etisalat Group, over a fall-out with a consortium of 13 local creditor banks. Etisalat was said to have defaulted in servicing a $1.2 billion loan taken from the banks.

What began with an outburst of optimism for the 9mobile project has since turned sour after some infighting in the Teleology consortium between the foreign partner led by former MTN CEO, Adrian Wood, and the Nigerian unit, over the business strategy of 9mobile, with the foreign partners now threatening to pull out.

“9mobile is an exciting opportunity to build a revolutionary mobile network that could be the pride of Nigeria. Unfortunately, it appears that we will not be able to participate,” Wood told BusinessDay exclusively.

Sources close to 9mobile disclosed that Teleology Holdings and Wood had become increasingly uncomfortable with their local partners who were allegedly taking actions outside of the agreed business plan.

Teleology Holdings, the sources said, has been blocked from concluding a management services contract with the local joint venture. The management services contract would have enabled Teleology Holdings and its team of experts to oversee the implementation of the organisation’s elaborate business plans including funding proposals.

Wood is understood to be displeased with how events are shaping up and has since resigned from the board of Teleology Nigeria Limited. Wood almost suggests that the time and resources invested in pushing the 9mobile project this far may have gone to waste.

“Fifteen Teleology experts have worked since June 2017 on a detailed 9mobile turnaround plan, development strategies and financial restructuring, which included lining up more than US$500 million fresh direct foreign investment from international institutions,” Wood said.

“However, we now must stand down from further work on the 9mobile project,” he said.

Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), told BusinessDay that Teleology’s exit would be damaging for the telco which would be left with no technical partners.

Without a technical partner, the entire project could be reversed by the Nigerian Communications Commission (NCC), as having one was part of the prerequisites for the acquisition of the troubled telco.

“The involvement of Teleology Holdings Limited is very instrumental in the success of 9mobile and it is unfortunate that the holding company has not been able to resolve its differences with the Nigerian company,” Teniola said. “If they leave as purported, 9mobile will need to establish another technical partner in order to successfully manage and run the telco, because it was on the basis that Teleology Holdings will provide technical expertise that the deal was sealed.”

Foreign investor confidence took a severe hit after the CBN alleged late last year that the Certificates of Capital Importation (CCIs) with which MTN exported some $8.1 billion between 2007 and 2015 were illegally issued and the banks involved in the deal were fined some N5.6 billion.

The CBN ordered MTN Group, which had a market capitalisation of $10 billion at the time, to repatriate the $8.1 billion. Investors panicked at what seemed a severe punishment for MTN, which sparked a sell-off in the shares of the Johannesburg-listed telco, wiping out a third of its market capitalisation.

The matter has, however, been resolved as government officials, from the CBN governor to the acting finance minister, took turns in admitting that the situation was a mistake and one that threatened to mar the country’s reputation before global investors.

MTN agreed to pay a fine $53 million in December 2018.

The amicable resolution between MTN and the Nigerian government provided a momentary relief that may be snuffed out as the Teleology fiasco continues.

This time, it is the Nigerian shareholders of Teleology who are deviating from the initial plan for the company that are to blame, analysts say.

“When you are struggling to raise foreign capital, these are not the type of events you want to be linked to,” a money manager who sits in South Africa told BusinessDay.

While the CBN said Foreign Direct Investment (FDI) to Nigeria declined by 29 percent to N379.84 billion ($1 billion) in the first half of 2018, from N532.63 billion (approx. $1.5 billion) in the same period a year earlier, state-funded data agency, the National Bureau of Statistics (NBS) reported a 4.5 percent increase to $507.96 million in the first half, from $485.75 million the same period a year ago.

FDI inflow to Nigeria is way below requirements for a country tipped to be the third most populous nation by 2050 with a population exceeding that of the United States. Nigeria’s FDI per capita was barely $5.6 in 2017, compared to $107 in Ghana, $78 in Egypt and $58 in South Africa, according to data from UNCTAD.

In the third quarter, the NBS reported FDI of $530 million, the highest in three years, without detailing the drivers.

In a pre-disconnection notice advertised by the NCC in the media on December 18, IHS, the infrastructure services provider which hosts majority of 9mobile’s base stations, was granted permission to disconnect 9mobile and other debtor telecom operators within a 10-day ultimatum, ostensibly on account of 9mobile’s indebtedness. Should this disconnection take place, subscribers on 9mobile’s network would have been effectively shut out completely from the telecommunications network and would be unable to make or receive calls.

“I feel sorry for Nigeria’s telecom sector and the country’s general outlook to foreign investors with all the hiccups in the sector,” Subomi Sodipo, CEO, CF mobile, told BusinessDay.

 

JUMOKE AKIYODE-LAWANSON & LOLADE AKINMURELE