Etisalat: How regulatory intervention forestalled an economic crisis

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By Babajide Komolafe

But for the intervention of the Central Bank of Nigeria, CBN, in collaboration with the Nigeria Communications Commission, NCC, in the face-off between Etisalat Nigeria and the consortium of 13 banks over $1.2 billion debt payment, the nation would have been engulfed in another major crisis capable of  disrupting  the  telecommunications and  the banking sectors, due to  massive loss of jobs it was capable of bringing with it.

•NCC Executive V.C, Umar Danbatta and CBN Governor, Godwin Emefiele

The fruit of the timely intervention came to the fore this week with the appointment of a new board of directors and management for Etisalat, led by Dr. Joseph Nnanna as Chairman and Mr. Boye Olusanya as the Chief Executive Officer. Other members of the board are Mr. Ken Igbokwe and Mrs. Funke Ighodaro, who is the new Chief Financial Officer.

Etisalat’s entry and growth

Etisalat entered nation’s burgeoning mobile telecommunications market in 2008 after paying $400 million to acquire the Unified Access License (UAL), which offers it a mobile license and spectrum in the GSM 1800 and 900 Mega Hertz (MHz).

Established as Emerging Markets Telecommunications Services but operating as Etisalat Nigeria, the company is the product of a strategic partnership between the United Arab Emirate’s  Etisalat and Mubadala Development Company, an investment vehicle owned by the Government of the Emirate of Abu Dhabi.  Together, the two companies owned 70 per cent of the shareholding while   Nigerian investors owned the remaining 30 per cent.

Despite its late entry into near   saturated market, Etisalat emerged the fourth largest telecoms operator with 21 million subscribers. Its rapid growth was due to  innovative and quality services confirmed by various industry awards including two awards from NCC as Best Network based on quality service and for excellent customer service. Other awards include brand of the year, fastest growing GSM Company of the year, best marketing company, most innovative corporate social responsibility company, friendliest tariff mobile operator, best telecoms customer service and most innovative mobile operator, among others.

Prompted by the need to upgrade its network so as to expand its services and improve quality, Etisalat in 2013 obtained $1.72 billion (N541 billion) loan from a consortium of local and foreign based banks led by Access Bank. However due to the challenges of  economic recession, dollar scarcity and the stringent foreign exchange  policy the company could not service the loan as agreed with the bank.

The failure to agree on a favourable repayment plan prompted the banks to set  June 15th 2017 deadline for the company to pay back the loan or risk take-over of its board and management. In response to this development, Mubadala and UAE’s Etisalat on June 14th    pulled out their 70 per cent shareholding from the ownership of the company.

Regulatory intervention

Sensing that debt saga could lead to  loss of jobs, poor network maintenance, loss of foreign investor confidence and the corresponding domino effect on the other operators, subscribers and the sector itself, the CBN and NCC decided to intervene, preventing  the banks from taking over the company.

Explaining the rationale for the intervention of the two regulatory bodies, Acting Director, Corporate Communications Department, CBN, Mr. Isaac Okoroafor said: “Although it should ordinarily not be the role of a regulator to decide how individual bad loans are resolved, the CBN believes that Etisalat is a systemically important telecommunications company with over 20 million subscribers that if not well handled, may have domino effects on the banking system itself.

He further explained that the CBN and NCC, sensing that banks may go ahead in the usual way and downsize the company’s over 4,000 staff, reached an agreement to intervene and implore the consortium of banks to  reassess its position in dealing with Etisalat.

Okorafor explained that the collaborative move by the regulators was aimed at foreclosing the outcome of job loss and asset stripping and to ensure that Etisalat remains in business and is able to pay back the loans.

According to him, the CBN and the NCC, in the coming days, will meet with the syndicate of banks and the IHS, the tower managers and the equipment suppliers, in order to achieve what he termed “a win-win outcome” for all stakeholders.

The Restructuring plan

The efforts of the two regulators paved off producing a restructuring plan to restructure the company towards a path of long term success of its business and repayment of the outstanding debt to the banks.  The plan led to the resignation of the Hakeem Bello-Osagie led board and management on June 30th, and the appointment of the new board this week.

The appointment of the new board, according to Etisalat in a statement issued represents the commitment of CBN, NCC and the banks to the long term success of the company.

It stated: “The consortium of Lenders, working with the regulators NCC and the Central Bank of Nigeria are committed to the on-going efforts to restructure the company towards a path of long term success of the business and the appointment of a seasoned board of directors and top management is a testament to this. The decisions reached so far reflect the high confidence all the stakeholders have in the continued viability and sustainability of the business. The smooth transition is also proof of management’s commitment to ensure that the operations of the company run seamlessly, and customers continue to enjoy superior network quality and positive customer experience.  Etisalat Nigeria remains committed to continuously serving our subscribers, through the provision of innovative products and services with its committed staff, partners and vendors to empower the needs of our customers and improve their experience on the network.”

The chairman of the new board of Etisalat Dr. Joseph Nnanna is an economist and presently Deputy Governor, Financial Sector Surveillance, CBN.  He has three decades of post qualification professional experience. His work experience includes: a brief period of teaching at the University of Houston at Clear Lake City campus (USA) and at the federal government Polytechnic, Akure (Nigeria) in 1980-82. And from 1982-1989, he worked as a staff economist in the international trade and exchange rate section of the Research Department of the Central Bank of Nigeria. Dr. Nnanna also served as full time consultant to the government of Nigeria as a technical assistant to the National Economic Management Team and the Presidential Steering Committee on Global economic crisis. He was also a part-time consultant to the United Nations Conference on Trade and Development (UNCTAD). In 2012-2014, Dr. Nnanna , served as the Alternate Executive Director, representing Nigeria and 21 other sub-sahara African countries on the Board of the International Monetary Fund (IMF), Washington D.C.

The new Managing Director/CEO, Mr.  Boye Olusanya, is bringing on board an impeccable wealth of experience from the Nigerian telecoms sector. At ECONET Wireless, he was Deputy Chief Executive Officer and subsequently the Acting Chief Executive Officer where he successfully managed the affairs of the Company after the disengagement of the former operators. At Celtel Nigeria Limited, Boye assumed the role of Deputy Chief Executive Officer and led the business strategy initiative for data services as well as key strategic operational changes in the business.

Boye has handled high level responsibilities at Dangote Industries Limited where he served as Chief Business Transformation Officer responsible for management of all enterprise-wide projects in the Group. He was also MD at Dancom Technologies Limited with responsibility for managing all the telecom assets and the IT Infrastructure. He oversaw the sale of the 3G subsidiary as well as managed the rollout of the fibre backbone network covering 4400km across the country.


The post Etisalat: How regulatory intervention forestalled an economic crisis appeared first on Vanguard News.

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