…as competition and declining profitability pose fresh dangers
Rescued from imminent death on account of questionable loans and poor management by government intervention through the Central Bank of Nigeria (CBN) and Nigeria Communication Commission (NCC), Nigeria’s 4th largest telecom company, 9mobile – formally Etisalat – fortnight ago, got another boost to its chequered survival journey in the form of a $230 million (N82 billion) loan from African Finance Corporation (AFC). But the question remains: Will it be enough to keep it afloat?
AFC, a pan-African Multilateral Development Financial Institution – promoted principally by Nigeria – which announced the approval of the loan facility for Emerging Markets Telecommunication Services (EMTS) – promoters of 9mobile – to help the troubled company attain its long-term growth plans, said it was convinced by the initiatives so far taken by the Alhaji Nasiru Ado Bayero-led EMTS Board and the management team led by Stephane Beuvelet to return 9mobile to the path of growth and profitability through cost efficiency and innovative product development.
The AFC, in a letter addressed to Messrs. Bayero and Beuvelet said it was “pleased to inform Emerging Markets Telecommunication Services that it has received full Board approval to support the turnaround strategy of EMTS through a $230 million super senior debt investment.”
The facility which was divided into two tranches would in part be used to repay historic vendor obligations, finance costs and an interest reserve account and payment towards quick win capital expenditure initiatives will be yet another one of the company’s many loans.
9mobile’s predecessor, Etisalat Nigeria, had run into troubled waters after defaulting on a $1.2 billion loan obtained from a consortium of 13 banks, including GTB, Zenith, Access, UBA, among others, in a deal that reeked of lack of due diligence.
Etisalat Nigeria – which was the country’s arm of the Emirati Company, EMTS, brought in by Petroleum Economist and corporate lawyer, Mr. Hakeem Bello-Osagie, had obtained the $1.2bn loan in 2013, a seven-year facility, for the purpose of refinancing an existing $650 million loan, and expanding its network.
But ultimately due to several factors, including alleged ethical issues on the part of its management, the economic downturn of 2015 and sharp devaluations of the naira, which negatively impacted on the dollar value of the loan, Etisalat could not meet its obligations.
This led the company to request the consortium of lenders to consider a restructuring of the loan, while seeking a conversion of part of the foreign currency obligation into naira, a request the lenders rejected.
The banks demanded instead for the parent Emirati Company to recapitalise its Nigerian subsidiary, in which it had a 45 percent stake. The Dubai based firm refused, choosing to divest instead by transferring its shares to a loan trustee.
After unsuccessful negotiations, concerned industry regulators, CBN and NCC, intervened in 2017, in an agreement that saw the affected banks become the new owners of the network, taking over potential liabilities of the company’s other creditors in a deal analysts say was yet poorly negotiated.
Subsequently, in 2018, another company, Teleology Holdings, founded by Adrian Wood, pioneer CEO of MTN Nigeria, through its Nigerian subsidiary, Teleology Nigeria Limited, in supposed partnership with the power-that-be in the country which allegedly saw it as an opportunity to own a network company of their own, took the company over after making an initial deposit of $50m and a further payment of $251m as a settlement to the consortium of banks.
The telecoms company announced a new board on November 12, 2018, with Alhaji Bayero emerging as its chairman. Wood, would, however, pull out of the company in January 2019, alleging being frustrated out. The new AFC loan, observers say, is yet another effort to repay the loan owed to the said group of banks in order to further reduce their stake.
“The loan was given to act as a senior debt facility. That means it is meant to pay down some current debts that 9Mobile has. It’s a form of restructuring,” said Mr. Olusola Teniola, President, Association of Telecommunications Companies of Nigeria (ATCON).
“It is being used as an instrument and a tool to enable them to restructure their operation in a manner that was expected after the new owners took over and we had anticipated that this restructuring exercise will take anything from 18 months to two years after the purchase of the company.
“This is in line, and I believe that there may be several other investments, both equity and debt that may be injected into the organisation to allow it to remain a viable and competitive player in the ever dynamic market that we have.”
EMTS Executive Director, Regulatory and Corporate Affairs, Abdulrahman Ado, said few days ago that the loan was to reposition the company, adding that such efforts have started yielding positive results.
“We can only express gratitude to the AFC for approving this loan facility that would not only help our business sustainability, but also grow it to serve our teeming and loyal customers in Nigeria better. We have completely reviewed our operational, regulatory, financial and technical architecture to ensure we deliver quality services and this facility would go a long way in giving best in class services to Nigerians,” he said.
Ado assured of the company’s resolve to continue its aggressive enhancement of network capacity and innovative features to guarantee optimum value to customers, adding that “our turnaround efforts are well and truly underway. We had promised when we took over that we would justify the confidence in our brand by making significant investments that will improve the value Nigerians get for using 9mobile. This is part of fulfilling our promise.”
But a late entrant into a highly competitive telecom industry in Africa’s biggest economy, 9mobile has its job cut out for it. It remains 4th in the pecking order behind the industry leader, MTN Nigeria, Airtel and Globacom Nigeria and recent numbers don’t look particularly encouraging as it appears to be losing the data war in a time when data rather than voice is becoming the real deal.
Recent NCC figures showed that in the month of June, 9Mobile lost a whopping 310,924 data subscribers, dropping from 9,350,477 in May to 9, 039,553. Globacom on the other hand, gained 196,816, moving from 28,825,533 data subscribers in May to 29,022,349 in June. Airtel also gained a total of 42,510 new subscribers, while MTN recorded a loss of 178,103 subscribers, dropping from 52,433,020 in May to 52,254,917 in June.
But it’s not all bad news for the network, and analysts say the field remains wide open. In terms of new subscribers, NCC figures show that 9mobile recorded 16,838,403 customers in March, having an increase of 107,822 subscribers, against 16,730,581 in February.
Globacom’s figure increased in March by 199,186 to 46,203,703 customers, as against 46,004,517 in February, while Airtel had 45,238,335 subscribers, an increase of 262,803 users, from the 44,975,532. Like in data, the giant, MTN still slipped, recording 65,034,615 users in March, a decrease of 531,283 from the 66,565,878 it recorded in February 2019.
Mr. Teniola argued that the market is not saturated and 9Mobile has a strong chance of emerging as a formidable player going forward.
“In Nigeria, most users have more than one SIM card. However, there is empirical evidence to suggest that 20 to 30 million Nigerians have never used a phone. So, the market is not saturated,” he said.
“If you look at Lagos, Abuja, Port Harcourt, you may have an argument to suggest that we are reaching almost saturation. But I can argue, and we have evidence, that we have 192 market gaps in this country. In the rural areas there is no saturation.
“If you look at NCC data, the number of subscribers is increasing because there is a focus on moving to 4G, which requires you to have a new SIM card. There is also Fintech, like MTN is going into mobile money and there are other devices now using SIM cards like CCTV.
“So, in fact, there are more opportunities now than there were in the past for operators to increase their revenue through innovative services and solutions. 9Mobile, if they are able to restructure their operations, they have every chance of being a formidable player going forward.”