7 funding options available to Etisalat to avoid going bust

Etisalat UAE, the largest shareholder in Nigeria’s third largest GSM Network, Etisalat Nigeria, may have discretely agreed to pull out of Nigeria. This was mainly contained in an exclusive report by Premium Times, Bassey Udo on Monday June 19, 2017.

Etisalat has been embroiled in negotiations with a consortium of Nigerian lenders who it owes about $1.7 billion. The story suggest Mubadala has decided to exit Nigeria but are delaying an announcement to ensure a smooth transfer to a potential buyer. Here are the nuggets;

Etisalat Exits

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Etisalat UAE invested into Nigeria using the vehicle Emerging Market Telecommunications Services (EMTS). It owns 40% ordinary shares in EMTS and another 25% equity in Preference shares. Former Chairman of UBA, Hakeem Bello-Osagie owns the rest. Mubadala, the United Arab Emirates state owned investing firm, is an indirect investor in EMTS through its stake in Etisalat UAE. It was expected to bailout the Nigerian entity.

The story suggest, Etisalat UAE could be exiting Nigeria as its shareholder, Mubadala has decided not to bail out its Nigerian entity.

Why delay the announcements

• The optics are very key for any negotiations with a potential buyer for Etisalat UAE’s stake in EMTS.  A such, announcing that it intends to leave in an acrimonious manner could deter investors and negatively impact on its valuation.
• Analysts also opine that Etisalat’s GSM license may be on the line if Etisalat UAE exits. The GSM license is thought to be issued to Etisalat UAE because they were also technical partners with Etisalat.
• For the Nigerian consortium of banks, it is also important to continue to manage Etisalat UAE considering that their preferred option would have been for the parent company to once again bailout its Nigerian subsidiary.

The way forward?

As negotiations continue, the parties are said to be considering a possible takeover by a foreign firm (an unnamed investment consortium in the UK has been mentioned). For Etisalat and the banks time seems to be running fast and we believe the following options are the like way forward for the company if it plans to avoid going bust.

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Note: An earlier version of this article has suggested Mubadala had direct interest in Etisalat Nigeria.