Etisalat Nigeria Faces Hunt for New Owner After Talks Fail

LAGOS (Capital Markets in Africa) Etisalat Nigeria faces a search for a buyer and operator after a consortium of banks seized control of a 45 percent stake from Emirates Telecommunications Corp. following the failure of talks about a $1.2 billion loan.

A group of 13 Nigerian lenders ordered the Abu Dhabi-based company to transfer the shareholding to United Capital Trustees Ltd. by June 23, the operator of Nigeria’s fourth-biggest wireless carrier said in a statement Tuesday. Etisalat Nigeria is in the process of changing its shareholder structure and customer service won’t be affected, according to its vice president of regulatory and corporate affairs, Ibrahim Dikko.

United Capital Trustees’ ownership “can’t be permanent” and any new owner of the stake has the potential to reshape the industry, Olusola Teniola, president of the Association of Telecommunications Companies of Nigeria, said by phone from Lagos on Wednesday. “I don’t believe that any single operator can accommodate the migration of about 20 million subscribers with all the quality issues networks already face.”

The banking consortium will embark on a search for a buyer as companies in Africa’s most-populous nation battle an economic downturn sparked by falling oil prices, a lack of access to dollars and high inflation. The country’s mobile-phone subscriber numbers fell to 152 million at the end of March from about 154 million the previous quarter, according to the Nigerian Communications Commission. Corporate failures this year include Arik Air, which was taken over by a government-owned fund in February after struggling with large debts and operational difficulties.

Regulatory Scrutiny
Any new owner would need regulatory approval to take over the operating license, said Nigerian Communications Commission spokesman Tony Ojobo. In March, the regulator urged the central bank to intervene in the Etisalat debt talks for fear that an asset seizure would send the “wrong signals” to potential investors in telecommunications.

Etisalat trails its three main mobile-phone rivals in terms of subscriber numbers, with about a third of market leader MTN Group Ltd.’s 60 million customers. Bharti Airtel Ltd.’s local unit and Lagos-based Globacom Ltd. make up the quartet. Etisalat had 19.6 million subscribers at the end of March, down from 20.8 million at the year end.

“My bias is that an international player should buy the shares, as opposed to a local player,” Teniola said. “I would have thought that there is still appetite for risk.” 

Etisalat Nigeria’s outstanding loan stands at about $574 million, the company said in a statement Thursday. Access Bank was owed 40 billion naira ($123 million), Chief Executive Officer Herbert Wigwe said March 9. Guaranty Trust Bank, Zenith Bank and United Bank for Africa, the three biggest lenders on the Nigerian Stock Exchange Banking 10 Index, are also exposed amid pressure from the Central Bank of Nigeria to bring rising levels of non-performing loans under control.

‘Modest Impact’
The debt represents 1.9 percent of aggregate Nigerian bank loans, Exotix Capital analysts wrote in a note on Thursday. A potential writeoff will have a “modest impact” on the banks, which should be able to absorb the shock, the analysts said.
Phone calls to the headquarters of United Capital Trustees were unanswered.

“When Etisalat came in 2009, it was entering late into a competitive market,” Oluwole Babatope, telecommunications analyst at International Data Corporation, said by phone from Lagos. “MTN, Airtel and Globacom were already well established, and so Etisalat had to come in in a big way. To do that it needed to invest. It had to borrow money to compete.”

IHS Netherlands, which leases tower space to Etisalat Nigeria, is owed outstanding payments. Its $800 million bonds maturing in 2021 sunk Tuesday after the announcement that debt talks had failed. About $8.5 million was more than 120 days overdue from Etisalat as of end 2016.

Etisalat’s parent company also has units in 11 other African countries, including Egypt and the Ivory Coast.