Parent company of Nigeria’s fourth largest GSM service provider Etisalat UAE shareholding in Etisalat Nigerian has been warehoused in a trustee that will find a buyer for the shares to pay off the $1.3 billion Etisalat is owing 13 Nigerian banks. This is coming on the heels of Etisalat Abu Dhabi decision to divest from Etisalat Nigeria. There been weeks of negotiations between Etisalat and a consortium of 13 Nigerian banks led by Access Bank, GTB and Zenith Bank that lent Etisalat $1.3 billion, to help refinance its existing loans and also use same to finance working capital. The sum of $650 million was for refinancing and the balance for network expansion.
Etisalat Abu Dhabi announced at the Abu Dhabi Stock Exchange that it had transferred 70 per cent of its holding in Emerging Market Telecommunications Services Ltd (EMTS), made up of 40 per cent of its ordinary shares and 25 per cent in preference shares respectively. EMTS is the vehicle used to invest into Nigeria. It is now holding the shares in trust for the banks.
A release signed by Ibrahim Dikko Vice President, Regulatory & Corporate Affairs Etisalat Nigeria said “as it had earlier stated in a release, the negotiations with the consortium of Lenders are considering a number of possible options.
“Etisalat Nigeria can now confirm the first stage of this has begun with a change in shareholding which was announced to the Abu Dhabi Stock Exchange this morning. Etisalat Nigeria can confirm discussions are on-going regarding other issues such as the trading name during this transition phase.
“Operations and services to our subscribers remain normal and will in no way be affected as we continue to deliver quality services to our subscribers. We will continue to tap into the rich, creative and innovative resources within our workforce to build a stronger business upon the stable foundation we have laid in our nine years of operations.
Etisalat Nigeria wishes to express its profound gratitude to the Government, the Nigerian Communications Commission, (NCC) and the Central Bank of Nigeria for their patriotic zeal and tireless efforts at ensuring collaborative and productive engagement. We are also appreciative of the tremendous support we have received from the media since inception and we count on their continued support as we transition to a stronger business. We will update our stakeholders and the public on further developments shortly. “
The telecoms firm has been in talks with Nigerian banks to restructure its loan after missing repayments but those discussions failed to produce an agreement, Abu Dhabi listed Etisalat said.
Etisalat is the biggest foreign-owned victim of dollar shortages plaguing Nigeria’s financial system because of lower oil prices and economic recession, leaving it struggling to make the loan repayments.
The loan that has proved so troubling for Etisalat Nigeria is a seven-year facility agreed with 13 local banks in 2013 to refinance a $650 million loan and fund expansion of its network.
It will be recalled that in 2014, the global economy witnessed a gradual decline in the price of oil, leading to a recession in Nigeria. This led to a decline in government revenues culminating in the eventual devaluation of the Naira. The Central Bank then imposed capital controls affecting multinationals like Etisalat from meeting their foreign denominated obligations. The economic down turn further meant that the purchasing power of Nigerians was battered severely leading to lower revenues for most consumer driven businesses in the country. As a result in 2016, Etisalat defaulted in its loan repayment obligations leading to a few bailouts from its parent company in Abu Dhabi. However early this year, the consortium of 13 banks that lent money to Etisalat threatened to takeover the company in other for them to recover their money.
Regulatory authorities, Central Bank of Nigeria and the Nigerian Communications Commission intervened in a bid to Nigerian banks not willing to make huge provisions for non performance of the loan requested that Etisalat UAE, main investor, Mubadala step in with bailout funds.
Mubadala declined the request insisting that its refusal to invest more in Etisalat Nigeria was part of its global strategy to reduce its several overseas interests. Following the impasse Etisalat Nigeria then offered the Nigerian banks shares in the entity via a debt to equity swap deal. The consortium of Nigerian banks declined the offer insisting on a bailout. After several passed deadlines, the consortium of Nigerian banks put forward a deadline of June 23rd for Etisalat Group to find a solution or transfer its shares to a trust to be managed by an independent trustee. It is the trustee that is now to manage the shares that were offered to the banks in Etisalat Nigeria. Former Chairman of UBA, Hakeem Bello Osagie is said to hold the remaining portion of the share. Apart from divesting from Etisalat Nigeria, Etisalat UAE may also withdraw its brand name from the Nigerian entity meaning that the network could change its name anytime soon. The shares have now been transferred to a trust named United Capital Trust, a subsidiary of United Capital Plc and will be warehoused there till a buyer is found. Etisalat is said to be talking to a group group of private equity investors to buy out the shares. Funds raised from any potential sale will be used in part to repay the $1.3 billion loans.
