The transition at Etisalat
The worst seems to be over for Etisalat, the troubled Nigerian telecom firm, as it agreed on a win-win restructuring plan with its lenders, which involves constituting an interim management team comprising the representatives of the consortium of 13 banks, stakeholders, the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC). A release by the company on Tuesday confirmed Boye Olusanya, a former deputy managing director of Celtel Nigeria, as the new chief executive officer, replacing Matthew Willsher, while Funke Ighodaro was named to take over from Olawole Obasunloye as chief finance officer. Also, a deputy governor of the central bank, Joseph Nnana, was named Chairman of the board, taking over from Hakeem Belo-Osagie, who resigned as part of the agreement reached for a seamless transition.
It was reported that Belo-Osagie had earlier planned to leave immediately the banks made the take-over move, but was prevailed upon to tarry a while until a road map for the company was finalised. This much was confirmed by an official statement announcing the pull out of the erstwhile chairman: “The timing of the resignation was strategically delayed till now when stakeholders have agreed a plan and comes more than a week after Mubadala Development Company directors tendered their resignation. The development also reflects Belo-Osagie’s deep commitment to protecting the interest of all stakeholders.”
Etisalat, Nigeria’s fourth largest telecom service provider with a customer base of over 20 million subscribers and 13.3 percent market share in Nigeria’s highly competitive telecom market, ran into trouble with the Consortium of 13 Banks that staked $1.2billion to fund its expansion project in 2013. The company was said to be servicing the loan until the slum in oil prices and the eventual weakening of the naira in 2015. After two restructures in 2015, the banks attempted a takeover in 2017, which was only prevented by the intervention of the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC), which got the parties to fresh rounds of discussions to find amicable ways of settling the debt imbroglio.
Thanks to the effort of the two regulators – the CBN and the NCC – a settlement point has been reached. There’ll be a seamless transition; the firm will remain stable and continue operations; thousands of jobs have been saved, and there’s renewed prospects the banks will get their monies eventually.
The authorities did everything right in ensuring the firm was not liquidated like others before it. Perhaps, it is the strategic nature of the company to the economy. Perhaps, it is the desire to stave off the consequences to the economy and the country as the country is being deemed an unpopular investment destination. Whatever the reason, the authorities did the right thing by saving the company and must be commended.
The intervention of regulatory bodies is not unique to Etisalat. In 2008, faced with the prospects of banks going under, the CBN intervened, via AMCON, to prevent a collapse of the financial system. Faced with a similar problem in 2008 financial crisis, the United States of America, the bastion of free market capitalism, choose to bailout big banks and the auto manufacturing companies to prevent the unsavoury effects of the collapse of such big companies on jobs and the economy. Today, those banks and auto firms are back in profitability and creating jobs signposting America’s recovery from the financial crisis.
But lessons from this crisis must be learnt. We must not shy away from the reality that the root cause of the crisis was the shambolic, antiquated and needless attempts at control of the capital market by the Nigerian government, which led to forex scarcity. Etisalat took the loan when the naira exchanged at N197 to the dollar. Besides, it needed to expand its operations to enable it catch up faster with the older telecom companies in an increasingly fiercely competitive Nigerian telecommunications market. Three years later however, everything has changed. Scarcity of forex and more importantly, the command and control policy of the government in the capital market caused the naira to weaken to a low of N520 at the parallel market at a time. With a devaluated naira and dropping revenues, it is clear to see why Etisalat defaulted in its obligations to the banks.
Perhaps, that realisation pushed the authorities to work extra hard to stave off a full takeover. But prevention would have been best. The government must realise the impacts its policy choices are likely to have on the economy and economic players.
Christopher Akor