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$1.2bn loan: CBN, NCC, Move to Save Etisalat

Convene second stakeholders meeting this week

THE Central Bank of Nigeria, CBN, and Nigeria Communications Commission, NCC, as part of their intervention after telecommunications firm Etisalat Nigeria defaulted on a $1.2 billion loan from 13 Nigerian banks, would hold discussions with lenders and IHS Towers, the mobile phone tower managers, as well as “equipment suppliers.”

It would be recalled that until last week Friday talks between Etisalat Nigeria and 13 banks to restructure the $1.2 billion loan agreed in 2013 failed to produce a deal, forcing the banks to step in this month.

Commenting on the discussions to CBN Acting Director Corporate Communication Isaac Okoroafor, described Etisalat as a systemically important telecommunications company with over 20 million subscribers that if not well handled, may have negative implications for the banking system.

The loan which was agreed in 2013 is a seven-year facility to refinance a $650 million loan and fund expansion of its network. But the GSM operator missed payments in February after sharp falls in the value of the Nigeria’s currency tripled the loan’s value, making repayments problematic.

Its parent company, which is holding 45 percent stake in the Nigerian arm at nil value, said it had been ordered to transfer its shares to a loan trustee by June 23, following the failure of negotiations.

The CBN described its intervention along with the NCC, as one that would save Etisalat’s more than 4,000 staff from job losses.

Etisalat Nigeria has 20 million subscribers, according to Nigeria’s telecom regulator, making it the country’s number four mobile operator with a 14 percent market share. MTN has 47 percent, Globacom 20 percent and Airtel – a subsidiary of India’s Bharti Airtel – 19 percent.

According to Okoroafor “The apex bank and the Nigeria Communications Commission decided to intervene in the crisis in order to prevent job losses and asset stripping.”

The UAE group, which generates 3.7 percent of its revenue from Nigeria, had reportedly questioned the rationale of investing more in the local unit, when asked by lenders to recapitalise its affiliate as an option.

The company had struggled with several years of losses due to low revenue, tough competition and more recently currency losses, adding its second-biggest shareholder Abu Dhabi state investment fund Mubadala has been trying to divest its stake for some time.

Analysts are of the view that Etisalat Nigeria could struggle to find new investors, putting lenders in a weak negotiating position, although the company could be viable if acquired by one of its rivals. But, another option could be to restructure the loan, pending any new investors in its operations.

Renaissance Capital analyst was reported as saying that Etisalat could be worth $1.2 billion based on an enterprise value to operating cashflow multiple, compared with South Africa’s MTN and other African peers.

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