A ghastly accident involving a bus and a train happened at Old Abeokuta Road by Odejobi junction on Friday. According to the Lagos State Traffic Management Authority Twitter handle, the accident occurred on Friday morning. The number of casualties wasn’t stated, except that it hindered the flow of traffic at that end of town. As…
Last week, when the news that one of Nigeria’s major Global System of Mobile communication (GSM) operator, Etisalat Nigeria, was going to be taken over by 13 banks, over N541.8 billion debt, I could not help but remember the coming of mobile telephone in the country some years ago and the changes therein. Yes, I remember the early years of the GSM launch, when the mobile telephone was seen more as a status symbol than a necessary communication channel. At that time, when the biggest GSM operator played God with exorbitant fees for the acquisition of line and the almighty per minute charge, it was only the well-to-dos that could afford and maintain mobile telephones.
Indeed, I remember the position at that time that per second billing was not possible, as Nigerians paid the full value for a minute call, even if the call dropped after one second. I remember the coming of other serious players in the industry, which brought about competition and improved services. I remember the coming of the per second billing, with the entry of an indigenous major player and others, to the extent that currently, lines are almost free and subscribers have the choice to even migrate to other networks and maintain their numbers, if they feel that their current service providers are not serving their purpose. I remember that there was once a GSM operator called Econet, which transformed severally, in name and management, with the attendant job losses and subscribers’ loss of confidence.
Therefore, the news that Etisalat Nigeria, easily one of the top GSM operators in the country and one that has contributed to the growth of the industry, in terms of subscriber base, economic expansion and job creation, was going to be taken over by its creditors, makes me uneasy. I do agree that a debtor has to pay his debt. However, a company that employs more than 2, 000 people and contributes to economic growth deserves whatever support it could to get out of trouble waters.
Now, how did Etisalat come to this mess? The telecoms company defaulted repayment of loan from a consortium of 13 banks from which it borrowed $1.2 billion, four years ago. From what is in the public domain, there is no proof yet that this is as a result of financial recklessness or mismanagement. And if it is, those involved should be made to answer questions and face the law. However, just like other companies, it is obvious that the foreign exchange crisis took a toll on Etisalat. Indeed, following the foreign exchange crisis, it was impossible to fund the dollar loan liability with naira, just as it is difficult to sustain importation.
With a firm belief that the future of our economy lies with the private sector, I am persuaded that Etisalat should not be allowed to go under, as the multiplier effect of this would be enormous. The company must remain afloat, continue business and generate funds to pay its debts. Before now, Etisalat met its payment obligations. From records, the company paid about 42 per cent of its original loan taken from the consortium of banks, as acknowledged by Ibrahim Dikko, Etisalat vice-president, corporate affairs, when he said: “As at today, we can categorically state that the outstanding loan sum to the consortium stands at $227 million and N113billion, a total of about $574 million if the naira portion is converted to US dollars. This, in essence, means almost half of the original loan of $1.2 billion, has been repaid. Etisalat continued to service the loan up until February 2017, when discussions with the banks, regarding the repayment restructuring commenced.” If Etisalat was faithful in repaying the loan, until recession and economic crisis overwhelmed the company, it follows that the chances of offsetting the debt, with sustained business, is high.
At a time of recession, it would be bad if companies that could help the country, in one way or another, gain economic rebound, are left with challenges that may consume them. To be sure, if Etisalat Nigeria goes under, the workers, shareholders, banks and others will be the biggest losers. Yes, where debtor companies fail to meet loan obligations, they may be taken over by the banks. Where the creditor runs the companies, usually, downsizing of workforce and assets stripping are subsequent actions. In other cases, the companies are liquidated. In many cases, the debts are not fully recovered and the banks’ bottom lines are severally affected.
Talking about losses, in the event of liquidation of Etisalat, the jobs of about 2,000 workers, businesses of operators of 115 its Permanent Experience Centres, 10 Temporary Experience Centres and 90 kiosks at Total filling stations across the country will be on the line. In fact, it will be a loss-loss situation, moreso, since thousands of others connected with the company, as vendors, sub-contractors, ancillary support services and many indirect businesses will also be hit. If the company shuts down, therefore, Nigeria’s economy will suffer.
The Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) deserve commendation for making an intervention to save Etisalat from liquidation. To be sure, the CBN had said, through its Acting Director, Corporate Communications, Mr. Isaac Okorafor: “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 negative implications for the banking system itself.” The apex bank did reveal that the NCC was working with it, as they suspected that if banks took over the telecoms company, they may downsize the staff base and possibly dispose of assets to recover their money. What this means is that creditors are more interested in recovering their money and not necessarily in managing debtors’ assets. The Etisalat case may not be an exception.
Indeed, what underscores the possibility of the creditor banks pouncing on the assets is the fact that the enabling Act does not make takeover easy. According to Tony Ojobo, Director, Public Affairs, NCC, the lender banks must take note of relevant provision of the NCC Act (NCA) 2003 as well as relevant provisions of the laws, guiding the transfer of licences issued operators by the telecoms regulator. Section 38 and Sub section 1 of the NCC Act says: “The grant of a licence shall be personal to the licensee and the licence shall not be operated by, assigned, sub-licensed or transferred to another party unless the prior written approval of the commission has been granted.” The implication of this is that Etisalat’s creditors are constrained by the law to manage the company, which means that their takeover could only lead to liquidation, which is bad for the economy.
If Etisalat goes under, the customers of the company will lose the benefit of the network expansion programme, which was the reason the company incurred the debt, in the first place. Therefore, Etisalat, like other companies offering jobs to Nigerians and contributing to the nation’s economic growth, should stay afloat. When it is afloat, business will continue, revenue will be generated and the banks will get their money back. GSM subscribers will also continue to enjoy the network’s services and government will be reaping revenue from the network and staff, in form of company and PAYE taxes.
Methinks it will be too bad for Nigeria if the telecoms industry is in distress. As the NCC once said, the telecom sector contributed 8.9 per cent to the National Gross Domestic Product of the country in 2016, against the 8.6 per cent in 2015. In naira and kobo term, according to Professor Umaru Danbatta, executive vice chairman of the NCC, the sector has contributed about N15 trillion to the Nigerian economy since the liberalisation of the sector and since the inception of digital mobile communications about 17 years ago.
Etisalat is an important player in the industry. Out of Nigeria’s 150 million subscribers, the company services over 20 million. Its liquidation will leave the industry in shock, as well as sends wrong signals to potential investors in the telecoms industry.