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Companies

NCC says just 10 internet service providers may be active in the country

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NCC Building, MTN, Glo, Airtel, 9mobile, NCC, Acquisition, Teleology

The tough climate in which players in the telecommunications industry operate, was once again highlighted as a representative of the Nigerian Communications Commission  (NCC) said operators  just 10 Internet Service Providers (ISPs)  had applied to renew their license in the past five years, of the 103 licences issued .

Applying for renewing a licence means the companies are active. The NCC’s Director of Licensing and Authorization, Mrs Funlola Akiode made the comment at a stakeholders workshop for ISPs held in Lagos.

At the same event, the Executive Vice Chairman of the NCC, Prof Garba Dambatta blamed the struggles which the ISPs were facing on the larger business environment, such as exorbitant operating costs, difficulties getting right of way to lay fibre optic cables,and multiple taxation.

This in turn had led to poor internet penetration in the country.  The Central Bank of Nigeria (CBN) and NCC had to intervene to prevent a consortium of banks from taking over Etisalat Nigeria over a $1.2 billion loan the company had defaulted on.  ISPs are companies that provide people with internet access. Unlike GSM companies, they usually don’t offer voice services.

Why ISPs are struggling

The internet service providers are limited in terms of coverage, with access mostly in state capitals and big cities. Many ISPs had difficulties expanding because they could not raise the capital required. GSM providers have a wider coverage spread, which gives them access to a large number of customers.  Internet users also prefer to patronize networks that have a wide coverage area. The large subscriber base enables them to subsidize data costs with revenue from voice services. Some of the GSM companies also own their own fibre optic cables which makes lowers their cost of operations. The ISPs on the other have to pay for data

The way forward

The NCC had muted the idea of increasing the price floor for data but this was strongly resisted by the public, forcing the Senate requesting them to halt the move. The price floor is the minimum amount, companies can charge for data. Raising the floor would have given ISPs a breather, as GSM companies have been accused of selling below cost to attract customers to their base. The government also needs to enhance the ease of doing business by streamlining taxes across all tiers, and make it easier for companies to lay fibre optic cables.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training.He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE).He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy.You can contact him via [email protected]

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Companies

First Bank’s board replacement won’t affect profitability – Fitch

CBN’s remedial actions will not have a material effect on the group’s asset quality, profitability and capitalisation.

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Fitch Ratings has affirmed that the recent First Bank board replacement will not affect the bank’s profitability and asset quality, as it rates the bank at B- with a negative outlook.

This was disclosed by the rating firm via a statement seen by Nairametrics.

According to the rating firm, the development reflects its view that the impact of the Central Bank of Nigeria’s replacement of FBNH and FBN Ltd boards, the identification of corporate governance failings and the imposition of corrective measures are tolerable at the rating level.

What Fitch is saying

It stated, “We have assessed the near-term financial impact of these actions on FBNH and FBN and believe this is tolerable at the rating level, even though the final outcome is uncertain. In our view, any remedial actions imposed by the CBN, including a potential reclassification of related-party exposures as impaired, will not have a material effect on the group’s asset quality, profitability and capitalisation.

However, this does not consider any possible additional actions by the CBN, especially if FBN fails to implement the regulator’s corrective measures or if there were any further uncovering of corporate governance irregularities.

The Outlook remains Negative, reflecting FBNH’s pre-existing asset quality and capitalisation weaknesses as well as the group’s corporate governance weaknesses highlighted by the CBN. These could put pressure on the ratings.”

What drives First Bank’s rating

FBNH is the non-operating holding company that owns FBN. FBNH’s ratings are aligned with those of FBN (which represents around 90% of consolidated group assets) due to high capital and liquidity fungibility within the group, and low double leverage (at 95% at end-1H20) at the holding company level.

It added that FBNH’s IDR is driven by its intrinsic creditworthiness, as defined by its ‘b-‘ Viability Rating (VR). The rating, according to Fitch, considers the group’s exposure to Nigeria’s volatile operating environment and also factors in vulnerability in its capital position in the context of moderate earnings generation and asset-quality pressures, where headroom above the minimum regulatory capital requirements is also moderate. Capitalisation is a factor of high importance to VR.

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“The new boards appointed to FBNH and FBN comprise individuals with sufficient experience and expertise. However, we view such major change as hugely disruptive. There are no changes in FBNH and FBN’s executive management team.

“We believe the governance shortcomings cited by the CBN reflect poorly on FBNH’s reputation and on the group’s governance and control practices. As a result, we have revised down our assessment of FBNH’s Management and Strategy score to ‘b-‘ from ‘b’.

“We also assigned a negative outlook to this factor, which reflects the uncertainty surrounding additional remedial actions that the CBN may impose due to these related party exposures as well as the potential for further uncovering of governance irregularities. It also captures the lack of track record of the new board and its ability to restore confidence in FBNH and FBN,” it added.

Asset quality remains a rating weakness. FBNH reported an improved impaired loan ratio of 7.9% at end-1Q21 (end-2020: 7.7%). However, FBNH’s reported reserve coverage of 54.5% at end-1Q21 (end-2020: 48%) remains significantly weaker than domestic peers’.

“Our assessment indicates that if the related-party loan highlighted by the CBN were classified as impaired, the ratio would be unlikely to be above 10% (excluding any new impaired loan generation from ordinary business),” Fitch added.

What you should know

On 29 April 2021, the CBN removed the non-executive directors on the boards of FBNH and FBN and replaced them with new individuals appointed by the apex bank, according to Nairametrics.

The CBN gave a series of reasons for its action including the unjustified and unapproved change of the bank’s MD/CEO by the former board, corporate governance failings pertaining to long-standing insider loans that were affecting the bank’s capitalisation and failure to comply with regulatory directives.

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Appointments

Airtel Nigeria announces appointment of Surendran as new Chief Executive Officer

Airtel Nigeria, has announced the appointment of Mr C. Surendran as the new MD/CEO with effect from August 1, 2021.

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Like MTN, is Airtel Nigeria considering listing?

Telecommunications giant, Airtel Nigeria, has announced the appointment of Mr C. Surendran as the new Managing Director and Chief Executive Officer with effect from August 1, 2021.

Surendran would be replacing the outgoing Managing Director and Chief Executive of Airtel Nigeria, Olusegun Ogunsanya, who has been elevated to the position of Chief Executive Officer of Airtel Africa Plc with effect from October 1, 2021.

According to a report from the News Agency of Nigeria, this disclosure is contained in a statement issued by Airtel on Wednesday, May 5, 2021, in Lagos.

READ: Airtel Africa signs new $500 million loan with Bank of America, HSBC, others

The statement says that Surendran would also be appointed to the Executive Committee (ExCo) as Regional Operating Director, reporting to the CEO of Airtel Africa plc, and onto the Board of Airtel Networks (Nigeria) Limited.

Airtel in its statement said, “Surendran has been with Bharti Airtel since 2003 and has contributed immensely in various roles across customer experience, sales and business operations.

He was the Chief Executive Officer of Karnataka, which is the largest circle in Airtel India, with over one billion dollars in revenue.

Surendran delivered an exceptional performance with significant movement in Revenue Market Share (RMS) over the last few years, currently at 54 percent. He has over 30 years of business experience, including 15 years at Xerox.’’

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Airtel said that Surendran would transition into his new role from June 1, 2021, and spend the time onboarding into the business until July 31, 2021.

READ: Meet the latest billionaires on the Nigerian Stock Exchange

In case you missed it

It can be recalled that a few days ago, Airtel Africa Plc, a leading provider of telecommunications and mobile money services in Nigeria and 13 other countries, announced the appointment of Mr Olusegun Ogunsanya as the new Chief Executive Officer, following the notice of retirement given by the current Managing Director/Chief Executive Officer, Raghunath Mandava, to the Board.

In the notification sent by Airtel Africa to the Nigerian Exchange, Ogunsanya is expected to join the board of Airtel Africa with effect from October 1, 2021.

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