CBN, NCC intervene in Etisalat’s $1.2b loan impasse

By Kokumo Goodie, Lagos, Nigeria

Regulator of the telecoms sector, the Nigerian Communications Commission (NCC) and its regulatory counterpart in the financial services sector, the Central Bank of Nigeria (CBN) have initiated moves to settle the rift between Etisalat Nigeria and its consortium of local lenders.

The lenders had threatened to assume management of the telco over its inability to meet its repayment obligations of the facility it raised to expand its capacity in the country few years ago.

Director, Public Affairs, Tony Ojobo at the NCC explained that the decision to intervene was taken after a meeting Thursday afternoon in Abuja between the Executive Vice Chairman of the Nigerian Communications Commission (NCC), Prof. Umar Danbatta and the CBN Governor, Godwin Emefiele and members of his team from the apex bank.

He said the meeting which held at the CBN Headquarters in Abuja was called by the apex bank at the instance of NCC, to further deliberate on how best to stave off the attempt by the banks to take over Etisalat. At the end of the meeting, the CBN agreed to invite Etisalat management and the banks to a meeting today, towards finding an amicable resolution.

“The NCC as a regulator of the telecom industry had moved quickly to intervene earlier in the week by reaching out to the CBN convinced of the negative impact such a bank take over will have on the industry. NCC was worried about the fate of the over 20 million Etisalat subscribers and the wrong signals this may send to potential investors in the telecom industry,” Ojobo explained in a statement.

Emirates Telecommunications Group (Etisalat) owns a 40 per cent stake in its Nigerian affiliate, which accounted for around 3.7 per cent of the group's revenue in 2013.

The telco signed a $1.2 billion medium-term facility with 13 local lenders in 2013, which it used to refinance an existing $650 million loan and fund a modernisation of its network.

Banks involved in the loan deal include Zenith Bank, GTBank, First Bank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank.

Access Bank's Chief Executive Herbert Wigwe told an analysts' call that Etisalat had converted a shareholder loan to the Nigerian arm to equity to free up cashflows and that it may need to inject fresh equity. He said the loan was however a performing loan.

As well as the loan from banks, Etisalat had also entered into a sale and lease-back of its phone towers with tower firm IHS Nigeria to free up cash.

IHS said a payment of $8.5 million was more than 120 days overdue from Etisalat as at December 31 last year. "We will continue to pursue our contractual rights in collecting the outstanding amounts," IHS said in a filing to the Irish stock exchange.

JP Morgan analyst Zafar Nazim said in a note yesterday that it had downgraded IHS bonds due 2021 because of Etisalat Nigeria as it was uncertain whether the company could keep up with lease commitments.

Nazim also said it was unclear whether Etisalat's parent firm would recapitalise its operation in the West African country given its small market share in the country, but added a quick resolution to the loan issue would boost IHS bonds.

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