Etisalat Gets Reprieve from Banks' Receivership Threat, Faces New Threats From External Debtors, Majorly IHS Over Payments Default

Etisalat Nigeria has finally reached a deal with a consortium of Nigerian Banks. The deal was brokered by the Central Bank of Nigeria and the Nigerian Communications Commission (NCC) during the week as banks threatened to takeover the company over a combined loan of N542 billion, which the telecoms company had defaulted in.

Here is what we know so far about the deal;

• A meeting was held in the Lagos office of the Central Bank of Nigeria and had officials of Etisalat, the Commercial Banks and NCC in attendance.
• CBN Governor, Mr Godwin Emefiele chaired the meeting and set the tone for discussions by declaring for a quick resolution.
• Also in attendance was Mr Tony Ojobo, the Director of Public Affairs of NCC
• The NCC and CBN explained that they had decided to wade into the matter because of the 23 million subscribers connected to the telecoms network
• The meeting succeeded in taking receivership off the table, meaning that the Etisalat will not be taken over by banks, at least for now.
• According to officials of the NCC, the Etisalat has been given the “necessary oxygen” to enable it meet urgent operational expenses.
• A meeting where restructuring plans for the new deal will be discussed was fixed for March 16.

Threat from External Debtors, Majorly IHS

 Despite the temporary reprieve from what was an imminent commencement of receivership activities by a consortium of Nigerian Banks, the journey to financial freedom for Etisalat Nigeria seems quite far.

Reports indicates the communications firm also owes IHS Plc $8.5 million dollars  in past lease rentals for use of communication masts. Etisalat in 2015, sold 555 of its telecoms mast to IHS towers for an amount speculated to be in the region of $400 million dollars and in exchange will lease back the assets. The debt has led to a downgrade of IHS bonds by Fitch, has it is believed that Etisalat will default in repaying that debt.

Amidst intense competition and high operating costs, telecommunication firms in the country entered a sale and lease back deal, which involved selling off their communication masts and associated infrastructure to firms like IHS Towers. This move was expected to save them from a combination of high maintenance costs, fueling, taxes, right of way etc.

With leasing, they need not dole out huge capital outlay required for network expansion and will leverage on the synergy brought by collocation of assets. In this new deal, most Telco’s could share the same mast thus sharing fixed cost and reducing overheads. Leasing it seems was a much cheaper option for them. No one envisaged paying back will be a challenge until oil price crashed.

A more worrying implication about this debt, is that should IHS decide to shut down the masts, Etisalat operations could be hampered and the 23 or so million Nigerians customers the NCC and CBN believe it could save from possible inconveniences could be jeopardized.

This makes us wonder, who else is Etisalat owing? Does the firm, have other foreign currency denominated debts we need to know about? What about its trade creditors, are they being owed too? Have they also paid their taxes or will the government restructure that too? And why aren’t the majority shareholders, Emirates Telecommunications Corporation stumping up the cash? Have they left their Nigerian subsidiary to fend for itself?

Emirates Telecommunications Group (owns a 40% stake in Etisalat Nigeria. The Nigerian affiliate, accounted for around 3.7% of the group’s revenue in 2013