9mobile sale: Clouds hang over Teleology’s capacity to raise balance of payment

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There is some uncertainty around the final takeover of 9mobile by Teleology Holdings which was named the preferred bidder, as the company is likely facing challenges in raising the balance of its $500 million dollar bid, as local financiers are said not be keen on extending further credit to the telecom sector, especially a struggling player.
Sources in the banking industry say that banks having been forced to take a significant to make significant provisions for loans extended to Etisalat, the legacy company of 9mobile, are now more cautious about further lending to the sector. Sources in the private equity community are also told BusinessDay that there is a general feeling that the best days of telecom are behind it.
“The voice business is no longer lucrative as it used to be. Data is the future but most telcos are selling data below their cost of generating it due to the intense competition in the sector” a major telco player told BusinessDay.
Although Teleology succeeded in raising the $50 million non-refundable deposit before the March 22, 2018 deadline set for it to pay up and show commitment of interest to take over Nigeria’s fourth largest telecommunications operator, industry analysts say that other recent developments have complicated the sales process further.
These include the addition of new sale criteria by the Nigerian Communications Commission (NCC) chairman, the senate interruption and court order to stop the process as a result of complaints by minority shareholders of the former Etisalat (now 9mobile).
“There are clouds surrounding this process and there has been too many back and forth over the sale process which will affect investor confidence,” a source told BusinessDay.
“Teleology might be talking to financial lenders and private equity firms to raise the necessary funds, but they will find it very difficult to get such amount of money. Especially because different issues keep arising and the company is losing subscribers and operating at a loss.”
This is regardless of the fact that Teleology only needs to raise $251 million, the balance of its $301 million financial bid.

This was revealed during the House of Representatives’ investigative hearing on the collapse of Etisalat (now 9mobile) in Abuja last week, refuting initial reports that suggested that the company had to balance the sum of $450 million.

During the hearing, the Nigerian Communications Commission (NCC), through its Deputy Director, Legal and Regulatory services confirmed that Teleology submitted a financial bid of $301 million cash.

Teleology, the preferred bidder and Smile Communications, the reserve bidder submitted financial bids, as well as bids for technical and infrastructure investments to sustain 9mobile which was said to have brought the total value of Teleology’s bid to $500 million and Smile Communication’s bid to $300million.

“Smile’s financial bid was about $150 million while Teleology’s was $301 million for actual cash. Other investments apart from the financial bid will be made to keep the telco running successfully when it is finally acquired by the preferred bidder. Considering that Teleology’s outstanding payment for its financial bid is $251 million, having already paid the $50 million deposit, it is possible that they are able to raise the funds on or before the stipulated deadline,” Olusola Teniola, President, Association of Telecommunications Companies of Nigeria told BusinessDay in a telephone interview.

Teniola however, acknowledged that Teleology is most likely struggling to raise the funds as “the risk profile of companies in Sub Saharan Africa is much higher than any other environment.”

On the issues raised by the Nigerian Senate, Chairman of the NCC and the multiple court orders which have in some way disrupted the sale, Teniola said that “stakeholders hope that the sale will be concluded in the interest of Nigeria’s telecommunications industry and for the greater good of the economy.”

Although Teleology, headed by Adrian Wood, former CEO of MTN Nigeria had initially mentioned African Export -Import Bank (Afrimex) as its financial support for the bidding process and said it was also talking to UBS, a global firm that provides financial services, equities and equity linked products, Wood was unable to answer questions on how successful Teleology has been in trying to raise the funds so far, as his mobile phone was switched off and text messages sent by BusinessDay where not responded to.

BusinessDay was also not able to get a response from Micheal Ipoki, Wood’s partner in Teleology who is also a former CEO of MTN Nigeria, who was contacted via email and text message.

In an exclusive interview with BusinessDay, Ernest Akinola, CEO of Ntel (that previously expressed interest in acquiring 9 mobile) confirmed that 9mobile was recording losses in revenue and subscribers as a result of the uncertainty around its sale.

“At the time that we went in to pitch for 9mobile because we were also interested in buying the company, the figures in their data room show that the company had only 13 million subscribers in December 2017 due to the crisis. This is a big drop from the about 21 million subscribers that the telco recorded in past years,” Akinola said.

Teleology was given 90 days from March 22, 2018 when it paid the $50 million non-refundable deposit to balance up its financial bid payment.

Spectrum Wireless, spearheading other non bank investors in EMTS also known as Etisalat, now 9mobile, with about 17.5 percent stake in the company, had taken United Capital Trustees Limited, representatives of the bank debtors to court, challenging the earlier granted ex-parte order, which led to the nullification of the Interim Board set up for 9mobile.

A letter signed by Olabiyi Durojaiye, chairman of the NCC board to Central Bank of Nigeria (CBN), which listed “technical expertise” and “at least 3 years operational history” as new criteria for ownership, also sent indications that the telecoms regulator was not comfortable with Teleology acquiring 9mobile, as a result of lack of technical expertise.

Saheed Akinade-Fijabi, chairman, House committee on Telecommunications, also threatened that the House of Representatives may be forced to stop the ongoing sale of 9mobile to Teleology Holdings.

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