Three banks take over Etisalat over unpaid USD1.72 billion debt

Making good their warnings to Etisalat, consortium of three banks took over the management of Etisalat.

Etisalat is fourth largest and the smallest mobile carrier in Nigeria, Africa’s largest economy by GDP.

The company had reneged on the payment of two Dollar (USD) denominated loans it took from Access Bank, Zenith Bank, GTBank and 10 other banks in 2013.

The initial loan granted to Etisalat was USD650 million. To refinance the loan, the company was reported to have taken another USD1.2 billion loan to refinance the existing toxic debt. Affected banks complained that since then, the loan has been restructured twice and the company is not meeting up with its obligations.

Registered as Emerging Markets Telecommunications Services, EMTS, 40% of Etisalat is owned by Mubadala Company of UAE. The group which disclosed that it earns just about 3.4% of its revenue from Etisalat Nigeria, signed a bond to guarantee the release of the loans, why it backed out of rescuing its Nigerian unit is still a mystery.

While it does not own a controlling stake in the business, it is baffling while controlling shareholders in the company have not reached a resolution before now. Etisalat is not quoted on the Nigerian Stock Exchange, NSE, it will be hard to fathom how the company was run.

As a hint, Ibrahim Dikko, Vice President for Regulatory Affairs at Etisalat Nigeria disclosed that the company was on a positive earnings territory before EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), this further buttress analysts estimates that the company has never made profit since it started operations in 2008.

The three banks who took over the reigns of the company have not jointly issued a statement on the matter. All efforts of the NCC, the telecommunications industry regulator to wade into the matter was not successful given the high non-performing loan bouquet of affected banks.

A source not quoted by Reuters News Agency said affected banks ‘have asked Etisalat Nigeria to convert shareholder loans on their books into equity and inject fresh capital to free up its cash flows, in addition to asking that its parent firm to increase its 40 percent stake in the affiliate’.

There are no indication that this proposal was given a consideration given the takeover which has taken effect as at yesterday.

While GTBank, Access Bank and Zenith Bank all posted full year profit in 2016, their NPL levels were near the Central Bank of Nigeria’s redline.

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