Teleology: New driver for 9mobile’s old vehicle

After a long tortuous process, 9mobile new owners – Teleology Nigeria Limited – have formally taken over the management of the ailing telco. The takeover marks a significant development in the quest to resuscitate the telco. LUCAS AJANAKU writes on the challenges ahead of the new management.

For Adrian Wood, pioneer chief executive officer, MTN Nigeria, and promoter of Teleology Nigeria Limited, and now a non-executive director in the newly constituted board of Nigeria’s fourth largest carrier, 9mobile, it is a dream come true.

In just six months after superintending over the first call on the global system for mobile communication (GSM) in the country, he was quoted to have said that “business has been good” for the telco. It was believed in the sector that MTN, which paid $285 million for one of the four GSM licenses auctioned by the Nigerian Communications (NCC) in January 2001, hit profitability less than a year after it started operations.

Wood’s magic wand would now have to be put to test as the emergence of Teleology Holdings Limited as the preferred bidder for 9mobile, has offered yet another opportunity for him to prove his mettle.

The opportunity is coming 11 months after the company made it to the top five companies bidding to take over the telecommunications company.

9mobile, formerly known as Etisalat Nigeria, was taken over in July 2017 following a N541 billion debt overhang it owed a consortium of local lenders.

According to a statement endorsed by one of the new non-executive directors of the board, Mohammed Edewor, “Teleology is pleased to announce the constitution of a new Board of Directors for Nigeria’s multi-award-winning telecommunication company, 9mobile.

“This follows the successful completion of the tenure of the former Board appointed by the Central Bank of Nigeria (CBN) and in the fulfillment of the consequential transfer of final ownership to the new investors, Teleology Nigeria Limited.

“We thank all out-going members of the Board for helping to shepherd 9mobile through the critical transition phase it has passed through since July 2017 and wish them the very best in their future assignments.

“For us, the composition of the new Board of Directors is another significant milestone, and this follows the issuance of final approval of no objection by the Board of the Nigerian Communications Commission (NCC) to the effect that the technical and financial bids Teleology submitted for 9mobile met and satisfied all the regulatory requirements.

“This is indeed the dawn of a new era in the evolution of the 9mobile brand in the Nigerian market.”

On the board are: Nasiru Ado Bayero (Chairman); Stephane Beuvelet (Acting Managing Director); Abdulrahman Ado (Executive Director); Asega Aliga (Non-Executive Director); Adrian Wood (Non-Executive Director); and Winston Ndubueze Udeh ( Non-Executive Director).

Bayero appreciated the telco’s employees and subscribers, who he said should be prepared for best-in-class services forthwith.

His words: “As we begin this new epochal phase, we wish to thank all the employees who built this viable business. Our debt of gratitude also goes to our subscribers even as we assure them to get ready for real best-in-class additional value for their relationship with the 9mobile brand.

“Without you, there could not have been a 9mobile business for us to invest in today. We will justify your confidence in our brand by making significant investments that will improve the value you get for using 9mobile.”

In collaboration with the Nigerian Telecommunications Commission (NCC), the CBN had, in July last year, appointed a Board of Directors under the chairmanship of its Deputy Governor, Dr. Joseph Nnanna, to administer the company, pending the completion of the mandatory due diligence of the bid documents submitted by Teleology and 16 others for its acquisition. The bid process was superintended by Barclays Africa. But, with the emergence of the Board, the long process for the acquisition of 9mobile has reached a definitive end, marking the beginning of a new era for the telecommunication company. Teleology eventually won the final bid, ahead of Airtel, Globacom, Smile and Helios.

Genesis of crises

Determined to boost its infrastructure in the ultra-competitive telecoms market that has incumbents such MTN, Globacom and Airtel, some of which enjoyed humongous incentives from the Federal Government and controlled comfortable slice of the market, Etisalat Nigeria approached a consortium of local lenders and got a $1.2 billion medium-term seven-year facility.

The funding of the repayment of the facility was not in the public space until the economic downturn of 2015 which triggered sharp devaluations of the naira and negatively impacted the value of the dollar-denominated loan. This situation was aggravated by the policy of the CBN which restricted access to foreign exchange/dollars. That policy forced many firms to abruptly closed shops.

According to the telco, the outstanding loan to the consortium stood at $227 million and N113 billion, a total of about $574 million (if the naira portion is converted to dollars). In essence, almost half of the original $1.2 billion has been repaid.

Loan repayment palaver

Etisalat continued to service the loan until sometime in February last year, when talks on repayment restructuring with the banks began. The $1.2 billion loan was efficiently serviced up until earlier this year, the telco added.

The company’s engagements to renegotiate the terms of the loan have been on for a while but yet to be finalized, though at an advanced stage.

Some of the options being considered include: a restructuring of the shareholding/change in ownership. Final arrangements regarding ownership and board structure are still in development stage.

Sequel to this negotiation, Etisalat Group announced to the Abu Dhabi Stock Exchange it was transferring its shares in the company to an appointed security trustee of the banks.

The trustee is the vehicle employed by the banks to hold the shares in trust for the consortium.

What has effectively happened is a ‘change in ownership’ not a receivership, bankruptcy or winding up. So, operations will continue to run and subscribers can continue to access services on the network as usual, the firm had assured.

Banks push for investigation

Sensing foul play, the banks urged the Federal Government to investigate the telco over the management of the loan.

But, the telco denied being under any investigation by the Economic and Financial Crimes Commission (EFCC) foran alleged petition to “the Federal Government asking that Etisalat be investigated” on how the funds from the syndicated loans were utilised.

It said: “Etisalat wishes to categorically affirm for the avoidance of doubt that the reports are patently false and most unfortunate considering the damage such misleading information can have not only on our business, but indeed on the telecommunications industry and the country as a whole.

“A simple interrogation of the rigorous process for securing a syndicated loan from a consortium of reputable banks would have exposed the truth to the original writer of this story and other media channels who have subsequently re-circulated the falsehood without interrogation or verification.

“Concerned parties have access to our books and do not require an investigation into how the loan sum was utilised. All of the infrastructure investment and services for which the loan was secured,

“Contrary to the widely reported misrepresentations about Etisalat Nigeria’s debt obligation to the consortium of 13 banks, it has become pertinent to set the records straight. Prior to this time, Etisalat had in fact consistently and conscientiously met up with its payment obligations.

“As at today, we can categorically state that the outstanding loan to the consortium stands at $227 million and N113 billion (about $574 million if the naira portion is converted to 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,” the telco said in a statement.

CBN, NCC to rescue

The two regulators, the CBN and NCC, intervened at ensuring that the loan deal was brought to a peaceful closure.

The intervention was meant to save the over 4,000 workers on Etisatat’s payroll, avert asset stripping and maintain the stability of the sector in the eyes of foreign direct investors (FDIs).

“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,” CBN spokesman, Isaac Okorafor, said in a statement.

He said the firm could have gone ahead to downsize the 4,000 workers but for regulators’ intervention.

Regulatory caveat

The NCC said its attention had been drawn to a planned takeover of Etisalat by a consortium of banks. It said it was aware of the Etisalat’s indebtedness to the consortium of banks. In conjunction with the CBN, it had mediated by holding several meetings with the banks, Etisalat and other stakeholders with a view to finding a resolution. It lamented that these meetings did not yield the desired results.

It said: “In view of the recent development, NCC wishes to reassure all stakeholders in the telecommunications sector in particular the subscribers on the Etisalat Network that the Commission will ensure that the integrity of Etisalat Network is not compromised.

“Accordingly, the Commission has drawn the attention of the banks to provisions of the Nigerian Communications Act (NCA) 2003 Section 38:

“Sub section 1 – The grant of a license shall be personal to the licensee and the license shall not be operated by, assigned, sub licensed or transferred to another party unless the prior written approval of the commission has been granted;

“Sub section 2 – A licensee shall at all times comply by the terms and condition of the license and the provision of this act and its subsidiary legislation,” NCC said statement in a statement.

Etisalat’s metamorphosis

Emerging Markets Telecommunication Services Ltd. (EMTS), trading as Etisalat Nigeria later gave notice of the withdrawal of the brand name in the country.

The board and management, led by Hakeem Bello and Mathieu Wilshere stepped aside.

This culminated to a rebrand to 9mobile and subsequent appointment of Barclays Africa as advisors to the telco. Its former Chief Executive Officer, Boye Olusanya, said the brand name change will not affect the quality of services to customers, adding that all its commitment to CSR will remain. He also said the telco had its windows opened for new investors.

The suitors

Prof Danbatta announced the five entities that emerged as bidders for 9mobile. He listed them as Globacom, Airtel, Smile Communications, Helios and Teleology Holdings Limited. The five were part of the 16 firms that initially expressed interest and filed bids with Barclays of Africa, 9mobile’s financial advisor.

They include: MTN, ntel, Virgin Mobile from the United Kingdom and Vodacom of South Africa. Others are BUA Group, Morning Side Capital Partners, Obot Etiebet & Co, Blackstone Private Equity, and Hamilton and George International Limited.

The NCC boss said: “Five bidders have emerged for 9mobile. They have been allowed to access the data room of 9mobile in order to enable them access the financial situation of the company and subsequently make bids for the takeover of the company. But the takeover must be in a regulated manner.

“The CBN and NCC are supervising what is going on through an interim board jointly appointed by the NCC and CBN. We are going to do due diligence on the financial capacity of any potential bidder as well as the technical capacity.

“In the final analysis, we will like to see a 9mobile taken over by a bidder who has the financial and technical capacity to improve on the operations of the telco and add value in the delivery of qualitative telecom services in the country.”

Court intervenes

The Federal High Court in Lagos nullified the appointment of an interim board for 9mobile.

Justice Ibrahim Buba made the order based on an application by Spectrum Wireless Communication Ltd, which invested $35 million in 2009 in Emerging Markets Telecommunications Service (EMTS)/Etisalat, the fourth largest telecommunications service operator in Nigeria.

According to certified copies of the judgment endorsed by Alokpesi CN, the court registrar, the judge ruled: “An order is hereby granted discharging the ex-parte order made by this court in this suit in favour of the respondent on the 3rd day of July 2017.

“The order made pursuant to motion ex-parte dated 3rd day of July 2017 was a nullity, made without jurisdiction and obtained by misrepresentation of facts. Same be and is hereby discharged and vacated as prayed.

“The motion for stay is struck out, having set aside the order. The respondent shall reverse all steps taken by it since the order was a nullity.”

The order nullified the appointment of Nnana as chairman, Olusanya, Mrs Funke Ighodaro as Chief Financial Officer, Seyi Bickersthet and Ken Igbokwe on the EMTS board.

The nullification followed Justice Buba’s dismissal of a preliminary objection filed by United Capital Trustees Ltd in response to the application by Spectrum Wireless, a shareholder of EMTS.

United Capital comprises a consortium of local banks that provided funding for Etisalat.

Spectrum Wireless claimed that the order was obtained through the misrepresentation of facts that alienated its interests in the company.

The interim board of EMTS, which enjoyed CBN and NCC) backing, received bids from five bidders in its intended sale of the company, which was to be concluded by December 31,  last year but shifted to January 16, 2018.

Spectrum Wireless Communication’s lawyers warned that any institution or company transacting business for the purpose of sale or acquisition of EMTS or 9mobile would be doing so at his or her own risk.

Following the exit of Etisalat and its directors in June last year from EMTS, United Capital obtained the ex-parte order of July 3, 2017 to appoint a Transitional Board to superintend over the company’s affairs.

The transitional board rebranded the company 9mobile and announced a bid for its sale to interested investors. Concerned that United Capital’s action did not consider their stake in EMTS, other non-bank investors in EMTS, led by Spectrum Wireless, challenged the ex-parte order granted United Capital in December, last year.

Justice Buba nullified the order and the board’s appointment on the grounds that it was granted based on misrepresentation of facts.

Spectrum Wireless accused the NCC of not taking the interest of non-bank investors in the telco into consideration before deciding to put it on sale.

Spectrum Wireless which owned 17.5 per cent shares in the firm, said its interest and that of two others were not taken care of in the process leading to offering the telco for sale.

Specifically, solicitors to Spectrum Wireless, J.A. Achimugu & Co and Dr R. O. Atabo & Co, all Kaduna based, lamented that its client invested $35million in Etisalat since 2009, adding that no profit was declared

Dr. Reuben Atabo of Dr. R O Atabo & Co who spoke in a telephone interview, said several letters were written to the regulator with a view to notifying it of the need for all shareholders in the telco to be carried along, lamenting however that nothing was done.

According to Dr. Atabo, his clients and about two others invested $100 million in Etisalat for building of infrastructure, lamenting that when the telco went to raise loan from a consortium of local lenders, they (shareholders) were not informed.

Bid submission, result

Airtel pulled out of the bid for 9mobile. Globacom and Helios Investment Partners LLP submitted bids but failed to attach any cash for the troubled telco to Barclays Africa.

Teleology Holdings Limited submitted a bid in excess of $500 million while Smile Telecoms Holdings quoted close to $300 million.

Effectively, only two companies made financial offers by the January 16, 2018 deadline. Going by the financial bid submitted by the two firms, Teleology Holdings Limited naturally emerged the preferred bidder and Smile Telecoms the reserved bidder.

Airtel, Smile dissent

Airtel’s U-turn came as a surprise to industry experts who had expected the company to push all the way through in order to become the largest operator in the country.

It would automatically have grown from being number three to number one by increasing its numbers to 52 million for voice and 33.5 million for internet if it emerged the preferred bidder.

Airtel allegedly decided to pull out because “many things are not too plain with the entire process. Airtel is not interested in 9mobile because it sees little value in the company,” one source said.

Another source said the Indian carrier did not have sufficient information to make an informed bid.

“Airtel believes too many things are hidden about the health of 9mobile, and that it is too risky for anyone to buy the company. Things became compounded with the court case by Spectrum Wireless. Remember the Strive Masiyiwa case over the ownership of Econet which hurt the company for a long time,” an insider said.

Spectrum Wireless, an EMTS shareholder – which owns the 9mobile licence – went to court against United Capital Trustees Limited – representatives of the debtors – in order to stop the constitution of an interim board for 9mobile after the take-over in July 2017.

Although it lost the case, the Federal High Court later nullified the ex parte order and United Securities went on appeal.

Smile Telecoms Holdings Limited decried the tardy manner in which Barclays Africa handled the sale of 9mobile. It called for a process review to uphold transparency.  Smile wrote a letter addressed to Barclays Africa dated February 21, 2018 and signed by Templars; the company’s solicitors.

It expressed surprise and disappointment at the manner in which the selection process for the preferred and reserve bidders was conducted.  Of particular concern to Smile was the fact that the selection of the preferred bidder was announced before the February 26, 2018 deadline. The company therefore requested Barclays, to as a matter of fairness and urgency, provide a practicable with verifiable (and preferably third-party authenticated) proof that the company that has been selected as the preferred bidder has indeed satisfied all the conditions precedent to that selection.

However, in its reply of February 26, 2018, Barclays Africa promised to “be in touch with Smile to discuss any updates on the Transaction, to the extent considered necessary”.  It expressed gratitude for Smile’s continued interest in the transaction but noted that its clients exercised their rights at their sole discretion to pursue an alternative path to completion of the transaction. Barclays restated its willingness to explore transaction completion with Smile should the pending process not reach a satisfactory conclusion.

Smile insinuated that Barclays Africa’s letter evaded the critical issues of due process and eligibility of the announced preferred bidder, wondering if the bidder was able to meet the laid down requirements for the transactions to reach agreement on any financial accommodations with the syndicate lenders and the trade creditors.  The requirement also entails the preferred bidder to have firm, unconditional and committed funding for any cash payments and to provide a binding offer that is unconditional, excluding the formal licence approvals.

NCC’s intervention came on the heels of news that Teleology Holding had emerged the preferred bidder for 9mobile. The announcement was greeted with protests in some quarters. A non-governmental organisation, Business Renaissance Group (BRG), protested against the process, accusing Barclays Africa of sending the letter to Teleology in a hasty and preemptive manner. The group stated that Barclays Africa jumped the gun in announcing a preferred bidder.  It noted that in a meeting held with the interested bidders on January 26, 2018, Barclays gave the two finalists in the bid process – Teleology Holdings and Smile Telecoms Holdings – the opportunity to raise their bid within 30 days, extending the deadline to February 26, 2018.

The group wondered why Barclays could not wait till the agreed date before the hasty announcement of a preferred winner. Aslo alleging bias against Barclays in the handling of the sale of 9mobile, BRG recalled that Barclays had earlier affirmed that any preferred bidder on selection will need to sign a Sales Purchase Agreement immediately and will have to instantly pay a non-refundable deposit of $50 million.

It decried a situation where Barclays gave its preferred bidder 21 working days to pay the non-refundable fee of $50 million.  The group further underscored its allegation of a less than transparent handling of the entire bid process by Barclays Africa by recalling that some of the earlier entrants, among them two major GSM network operators, had opted out of the process alluding to lack of transparency.

It also claimed that at least two major vendors of 9mobile rejected the financial offers of the preferred bidder and had no confidence in the weak and unrealistic business plan presented. It wondered how such a bidder with questionable business plan would be able to sustain and improve the operations of 9mobile.  BRG contended that the precipitated announcement by Barclays is indicative that the preferred bidder did not satisfy any of the precedent conditions.

Teleology unveils plan

But Teleology said that its key executives have held series of meetings with the Nigerian bank syndicate, the regulatory authorities and advisors. These meetings have culminated in the signing of the Share Purchase Agreement (SPA) and other contractual documents pertaining to the acquisition.

Ahead of the March 22 deadline set by the Financial Advisors, Teleology had transferred a non-refundable completion deposit of $50 million to the Trustee for the bank syndicate that held the ownership of 9mobile.  The payment underscored Teleology’s financial capability and readiness to revive the organisation.

Equally important, Teleology produced a detailed and ambitious plan of action that will guide its rapid overhaul not only of the network but all aspects of the operations.

Wood said: “9mobile is transiting into a new phase that will be defined by optimal value delivery:  value to our employees, value to our customers, value to local communities and indeed to all stakeholders.”

He said the new organisation to emerge would be “engineering led and brand driven.”  In delivering service, “we will strive to ensure that 9mobile operations deliver fulfillment to our customers, empowerment to local communities, protection to the vulnerable and excellent rewards not only to our shareholders but to all stakeholders.”

Wood added that Teleology has set out a 10-point plan that aggregates its mission and how it intends to turn the 9mobile organisation around.

According to him, Teleology plans to double the 9mobile network with new 3G/4G specific cell sites as well as several thousands of kilometers of fiber optic cable across the country.

It will drive a special program of rural internet coverage, focusing on 4G with broadband access planned for all of Nigeria’s 774 local government areas, Wood said.

Youth engagement and employment programmes are also planned with contractors, distributors and consultants, he said, besides the investment in broadband internet access technologies which are completely new to Nigeria.

Very importantly, he added, the 9mobile network will be optimised for high speed and high capacity data, including imaging, video, games, music, IPTV and more.

He said: “Any three-point plan or three-dimension idea is naïve and completely missing the scope and complexity of the urgent Nigerian need to be brought into the 21st century broadband era.”

Teleology, he added, envisaged an increase of 50 per cent in direct employment in the new 9mobile. There is also an active plan to introduce within the first year, several million 4G-capable premium quality smartphones, at exceedingly affordable pricing.

“Nigerians should look forward to a new regime of intensely exciting and innovative brand loyalty rewards programs, from the new 9mobile,” he said.

He said that his company had entered into an alliance with Safaricom, the largest network operator in East Africa.  Safaricom is famous for its global “Mpesa” mobile financial services system, which advances financial inclusion and supports the network with the highest operating efficiencies in Africa.

Teleology is promoted by a group of 12 telecom industry veterans with considerable experience not only in Nigeria and Africa, but in the global telecom space.  The executive management for instance, boasts of more than 337+ years of collective frontline operational management experience.

Mr. Wood expressed gratitude to Barclays Africa, the Financial Advisers to the transaction, the Nigerian bank syndicate, the fulsome backing and support of the NCC and CBN which made 9mobile’s survival possible, and the loyal 9mobile management and staff who carried on in the face of skepticism, doubt and negative market sentiment.

Wood assured that additional details including formal relaunch plans would be unveiled in due course.

Stakeholders react

ALTON

The Association of Licensed Telecoms Companies of Nigeria (ALTON) welcomes the new development, describing it as gladdening.

Its Chairman, Gbenga Adebayo, in a telephone interview, said as industry operators, he expects that the new management would work hard to restore the dwindling fortune of the telco.

According to Adebayo, the NCC and CBN should offer the requisite support to the telco as it moves to inject new ideas into the management of the telecoms company.

He urged the management to take time in taking decisions as rushing to take important decisions concerning the management of 9mobile might not augur well for the troubled carrier.

Adebayo urged 9mobile new owners to take the interest of subscribers and shareholders into consideration in it drive to take the telco to the next level.

He said: “As an association, we are glad that new owners have taken over 9mobile. It means the company will contribute to the growth of our network and by so doing, contribute to the growth of our economy. As an association, we shall continue to provide the necessary support to the company.”

His counterpart, the Association of Telecoms Companies of Nigeria (ATCON) also welcomed the new board and wished the board members safe trip.

Its President, Olusola Teniola, said the immediate task for the new board now is “an effective 100 day plan that provides a clear direction of where 9mobile is in the market, what needs to be immediately put in place to turn-around the organisation and what the status of the assets it has acquired’.

Teniola a former Chief Executive Officer (CEO) of Internet Services (IS) and now Client Partner for Detecon International, a subsidiary of Deutsch Telekom Group, Germany, said that going through some transitions was not strange in the telecom industry.

He said: “Employees’ future and stability of operations is a key criterion to getting the organisation on a turn-around path. We clearly need an understanding of where and how the company is going to fund its growth over the next 12months, 24months and 36months post acquisition

“Customer engagement is also key in establishing a renewed identity from the outset and providing a brand the targeted market segment can relate with and create monetised value.”

He urged the new team to enforce the NCC Code of Corporate Governance to keep a close eye on the operations of the telco to ensure that early warning signs are heeded to avoid a repeat of the past.

Teniola said: “Keep an eye on input costs that may place nore pressure on tight or non-existent margins. Work closely with ATCON and ALTON to address industry issues (FOREX, multiple taxes and reguations etc).”

Subscribers’ interest

A subscriber of the telco who simply identified himself simply as Ogunleye expressed delight that finally, light has come from the dark end of the tunnel.

He commended the interim management that oversaw the transition of the telco and urged the new board to work hard to restore the confidence of the subscribers.

Ogunleye said the telco used to be one of the best either in the provision of voice or data services. He expressed the hope that with the injection of fresh funds and ideas, the telco would bounce back.

Another subscriber, Emmanuel Udodinma, advised the new management to improve on service delivery.

Like Ognuleye, he said both the voice and data services of the telco stood among the best in the country.

Udodinma urged the new managers to work hard to expand its network coverage to the hinterlands.