Competition for internet subscribers in Nigeria took a different turn as Nigeria’s largest mobile telecommunication company, MTN, led the way in the month under review. Operators in the industry showed no sign of relenting, as they intensified efforts to outcompete each other for market share in an increasingly fickle market.
According to data from the Nigerian Communication Commission (NCC), a total of 493,556 internet subscribers dumped Glo and 9mobile during the month in favour of MTN and Airtel, two of Nigeria’s largest data sellers.
MTN edges out Airtel after a 5-month drop
In a turn of events, MTN edged out Airtel for the first time in 5 months, gaining a total of 488,120 internet subscribers. This contrasts sharply against an earlier report which showed that MTN lost a whopping 667,245 internet subscribers, while Airtel Nigeria gained the biggest.
- Despite the rise in MTN’s number of internet subscribers, it still pales in comparison to the over 2.4 million internet subscribers added in May 2019. MTN now has 52,163,778 subscribers.
- Airtel, which had led the way in recent months in terms of gainers, recorded a slight drop. In October, it gained 420,031 internet subscribers, compared to 444,598 gained in the previous month. Airtel Nigeria continues to witness additional internet subscribers on a month-on-month basis.
- In total, active internet subscribers by GSM stood at 123,206,103 compared to 122,792,291. This represents an increase of 413,812 subscribers only.
- Internet subscribers on GSM networks have now increased by 11,573,587 since December 31, 2018, representing a growth of just 5.6%. The number of internet subscribers was 73, 122,552 5 years ago in October 2014.
[READ MORE: Analysis: Airtel is winning the data war]
Subscribers dump Glo again as 9mobile continues to slip
Globacom continues to lose internet subscribers as more people dumped the network for the second month in a row. The GSM company lost about 370,845 internet subscribers, an increase from the 155,118 internet subscribers lost in September. The company has lost a cumulative 525,963 internet subscribers in just 2 months.
9mobiles also failed to attract new subscribers as its steady decline persisted in the month under review. In October alone, 122,711 internet subscribers dumped 9mobile, as against 156,065 recorded in September.
Airtel continues to trail as MTN extends market share. While Airtel has significantly gained subscribers this year, it still trails behind MTN in terms of total internet subscriber base.
- At the end of October 2019, MTN’s total market share was 65.87 million subscribers from 65.3 million subscribers recorded in September.
- Airtel rose to 49.08 million subscribers, Globacom is 50.25million, while 9mobile continues its free fall with 14.7 million subscribers left.
- In terms of market share in percentages, as at October 2019, MTN controls 36.57%, Glo (27,90%), Airtel (27.25%) and 9mobile (8.21%).
Critical concerns to Nigerians continue to linger
While GSM companies continue to jostle for market share, it has often come at the expense of poor service and lack of accountability. Just last week, Nairametrics reported the reactions of Olanrewaju Ogunmefun, popularly known as Vector, who took to Twitter along-side other Nigerians to criticize MTN’s data charges.
Vector expressed his frustration at quick data depletion. He said Nigerians work hard to earn their pay, only for telcos to scoop everything through data depletion. His outburst against MTN led to the hashtag, #MTNdoBETTER on Twitter.
While reporting, Nairametrics interviewed random subscribers’ opinions to determine recent developments during the month.
According to an MTN user, who spoke to Nairametrics, “MTN internet service is fast, but the data burns out quickly.”
A Glo user, stated, “Glo data is cheap as they give several bonuses but very frustrating at the same time. I recently subscribed and ended up not being able to use my data because of bad network.”
To an Airtel user, “Airtel data is fast, but the data still gets exhausted quite fast. Although I use a new data plan recently introduced with more gig, the consumption rate is very high.”
[READ ALSO: Why Nigeria’s Data woes may not end soon]
A 9mobile user lamented, “I still use 9mobile for my internet bundle, but I really don’t understand what is wrong with the system. I recently subscribed for 2 gig, which got exhausted in two days without any downloads. I will move to another network soon.”
Nigeria’s internet download speed remains among the slowest in the world, and while the telcos continue to rake in heavy gains from data sales, consumers’ continue to groan for lack of fast, cheap and affordable internet services.
How Access Bank got Japaul to pay up N37 billion loan that had gone bad
Brute force, Courts, quid quo pro are hallmarks of Access Bank’s debt recovery schemes.
In 2018 when Access Bank took over Diamond Bank, in what is the largest merger in Nigeria’s banking history, they knew it was not a match made in heaven like their PR agencies will make you believe.
In merging with Diamond Bank and taking over their juicy assets, they had also taken over the lemons that had for years bedeviled the bank who had pioneered mobile banking applications well ahead of its time.
When Access Bank merged with Diamond Bank, the latter had total loans and advances of N787.8 billion out of which N219.9 billion in loans were impaired. Oil and gas-related loans made up a significant chunk of the loans and were estimated at about N302.6 billion, most of them distressed.
Included in the oil and gas loans was a $66.4 million in loans owed to the bank by Japaul Oil and Maritime, as they were referred to at the time. The loans had gone bad accumulating unpaid interest of about $11.2 million. By the time Access Bank took over the loans, Japaul agreed to a restructuring rolling over both the principal and interest.
This is typical of most Nigerian companies burdened with debts they cannot pay. To avoid being run over by the bank, the debtors will negotiate a restructuring, extending the loans by one to three years and if lucky, reducing the interest rates. In return, the bank books new fees (which are often paid in advance of the restructuring) and then gets to avoid huge provisioning mandated by the central bank.
It is often a ‘win-win’ situation that essentially kicks the can down the road until, like in the case of Diamond Bank, the chicken comes home to roost. But Access Bank is not new to slugging it out with debtors, particularly those who do not pay up. Upon takeover in 2019, Herbert Wigwe, the CEO of Access Bank announced that his bank was going to go after Diamond Bank debtors. In an interview in 2019 he maintained that “we recovered N2.2 billion bad debt in the year under review. Access Bank will intensify effort to ensure that it recovers the debt owed to Diamond Bank. We will go out for Diamond Bank’ debtors and if they are not ready to redeem their debt we will publish their names in the newspapers.”
In 2019, Access Bank swooped on Japaul Plc seeking repayment of their Diamond Bank loans which was now about N37 billion. The bank took over Japaul’s trading assets and integral to the going concern status of the company. Before now, Japaul made money rendering marine services, dredging, mining and construction mostly for the oil and gas companies.
But business has been bad for years now leading the company into net accumulated losses of over N50 billion as of 2018. For the 5 years leading to 2018, the company posted back to back losses with revenues going from N5.3 billion in 2015 to about N85.8 million in 2019. External loans had also ballooned from about N18.8 billion to about N38.8 billion. Its share price had also fallen to about 20 kobo per share by the end of 2019. It was nearing bankruptcy and something had to give.
They began a court battle with Access Bank over the loans and the threat of a liquidation eventually settling for a deal. Sources inform Nairametrics that Access Bank is one of the most aggressive banks in the business when it comes to playing dirty with debtors. Unlike Diamond Bank, Access Bank is ready to battle in the courts and is ready to deploy any legal means necessary to recover their loans even if their actions are viewed as uncanny.
Recently, the bank obtained a Mareva injunction sealing the offices and taking over the assets of Seplat due to a related party loan owed by the latter’s Chairman, ABC Orjiakor. Just like Japaul, the loans owed by ABC Orjiakor were also obtained from Diamond Bank. According to sources, when Access Bank swoops in for their loan recoveries, they deploy all tactics in the books to ensure all or most parts of the loans are recovered from chronic debtors.
Eventually, Access Bank and Japaul agreed to settle the matter outside the court. In exchange for repaying the N38 billion loan, Access Bank settled for a repayment of N30.9 billion. The deal involves Access Bank taking over two of Japaul’ s Dredgers (12& 13) for N5 billion and a Barge (Beau Geste) for N25.9 billion. Japaul also gave up its land in exchange for working capital of N1.5 billion from the bank.
In return, Japaul gets to clean up its balance sheet erasing what is left of its debt, booking a profit of about N40 billion and wiping off its negative equity of N35.5 billion. However, in one fell swoop. From negative equity of N35.5 billion, the company’s net assets are now N4.69 billion. A win-win for everyone.
We are not exactly sure what Access Bank plans to do with dredgers and barges it took over from Japaul. Interestingly, in the deal, Japaul also gets to lease back the two dredgers for a period of 6 years from Access Bank for a sum of N1 billion paid annually from 2021 – 2026. Japaul got a one-year moratorium on repayment expiring in December 2020.
Japaul has since changed its name to Japaul Gold and Ventures citing the dwindling oil and gas sector for its reasons. The company believes gold mining and technology are the future and is seeking to raise N25 billion in equity to pursue this course. Its share price has ostensibly risen by 150% since the turn of the new year, the best performing on the stock exchange.
For Access Bank, aggressively going after bad loans have paid off immensely. In 2019 the bank recovered N38.9 billion in bad loans barely a year after taking over Diamond Bank. In the first 9 months of 2019, a total of N24.7 billion was captured in bad debts recovered. It is a strategy that is working and there is no betting against Access Bank doubling down on aggressive recovery this year.
Champion Breweries, Raysun deal highlights disclosure shortcomings
Is Heineken taking over Champions Brewery?
Champion Breweries Plc informed the Nigerian Stock Exchange, last week, via a press release that an insider, Raysun, had purchased about 1.9 billion shares at a price of N2.6 per share.
The disclosure was part of the stock exchange’s requirement that listed companies must reveal deals made by insiders of the company for the benefit of shareholders and the investor community.
That’s about how far the press release went. It did not reveal why Raysun was purchasing? Who they purchased the shares from and why the deal is being consummated? In terms of corporate disclosure, this was a dud.
Raysun is the largest shareholder and majority owner of Champions Breweries. Raysun is also an entity owned by Heineken, the majority shareholder in Nigeria Breweries Plc – the largest brewer in the country. Thus, Heineken is an indirect shareholder of Champions Breweries.
These relationships give this deal enough scrutiny to warrant a better disclosure starting from the actual purchase of shares revealed in the press release.
Here are some contexts;
Champion Breweries shares breakdown
- Champions Breweries has a total of 7.82 million shares outstanding at the time of this purchase
- Raysun held about 60.4% shares in Champions Breweries according to disclosure in its 2019 annual report.
- Asset Management Nominees and Akwa Ibom Investment Corporation own 12.3% and 10% respectively. The rest of its shareholders own about 17.3% or 1,351,954 units.
- At the current share price of N1.12, Champion Breweries is valued at N10.57 billion by the market.
- However, Raysun’s purchase of 1.9 billion shares at N2.6 per share (valued at N4.9 billion, almost half of the current market capitalization), now values the company at about N20.3 billion.
Where did the shares come from? This is a vital question and here is why.
Going by the number of shares they bought last week (24% of equity), they only could have been able to purchase that many shares by buying up all the shares owned by the Asset Nominees (12.3%), all the shares owned by Akwa Ibom Investment Corporation (10%) and another 3% from other regular shareholders.
It could also be that either or both Asset Nominees and Akwa Ibom IC sold part of their shares and then they made up the rest by purchasing some from the market. Why is Heineken, through Raysun, acquiring so many shares? Is there a takeover deal in the offing? Do they plan to merge Champions Breweries with Nigeria Breweries or still keep it as a standalone company? Will Champions Brewery cease to exist if there is a merger or will they delist following this massive acquisition of the shares of their subsidiary?
The speculation is palpable.
This is what happens when listed companies refuse to properly disclose transactions involving mega share purchases of this nature. How does a majority shareholder go from 60.4% of shares to 84% and an announcement is not made explaining or clarifying who sold and if this is a takeover bid.
But investors seem not to mind at the moment, if the momentum of the share price is anything to go by. A 57% year to date gain is a testament to this. It appears investors expect a mandatory takeover announcement to be made anytime soon and are scrambling for the shares ahead of any announcement.
Unfortunately, this is not how markets should work anywhere, and the sooner it stops the better. The Nigerian Stock Exchange has made massive progress with compliance to disclosure requirements and we believe strongly that they will at some point bring Champion Breweries to order and have them disclose all the requisite information about this transaction. Better late than never.
Downstream players suffer revenue declines due to Covid-19, forex, fuel subsidy
2020 has no doubt been one of the most challenging years for players in the oil and gas downstream sector, having to deal with several issues.
Nigeria’s downstream oil and gas players are in the midst of one of the lowest revenue declines in their history of operations. In an industry used to the highs and lows of economic and commodity price cycles, 2020 poses one of the greatest challenges to oil and gas companies.
Total Plc, 11 Plc, MRS, Ardova and Conoil are some of the major downstream players (all quoted) that have suffered revenue declines and margin drops in one of the worst years in modern history.
- Conoil Plc, one of the major downstream players reported its 2020 9 months results revealing revenue declined 21.84% YoY t0 N88.1 billion.
- 11Plc, another major player in the sector, also saw its topline revenues plummet from N141.5 billion in the first 9 months of 2019 to N114.7 billion in the corresponding period in 2020.
- Total Nigeria Plc, one of the largest players in the downstream sector also recorded declining revenues. In 2019 it reported total sales of N181.6 billion compared to N117.3 billion in 2019. The 35% drop was the largest of the lot.
- The only outlier of the lot was Ardova Petroleum which somehow managed to record revenue growth with 2020 9 months revenue rising to N116 billion compared to N110.7 billion same period the year before.
In general, revenues for the major oil and gas downstream players in the country fell by a whopping 21% from N646.8 billion in 2019 (9M) to N514.2 billion in the corresponding period in 2020. What is to blame for these declines? Covid-19!
The Covid-19 pandemic triggered a nationwide lockdown for most of 2020 that has negatively impacted demand for petroleum products across the country. The lockdown has grossly affected volumes for downstream oil and gas companies hitting their margins and profitability.
Businesses across the country such as manufacturers, airlines, restaurants, schools, the transportation sector and motor vehicle owners have all reduced their demand for fossil fuel.
The downstream sector has also struggled to take advantage of the drop in oil prices as they still need to deal with the multiple devaluation of the naira and being able to gain access to foreign exchange. Their inability to access the forex market leaves them with little choice but to continue to rely on NNPC, the sole importer of petroleum products for their inventories.
In a recent comment, the Chairman of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Mrs. Winifred Akpani, lamented that “the inability to source FOREX from the official CBN FOREX window by independent marketers is continually hindering the effectiveness of the principles of DEMAND and SUPPLY market forces to correct the current inefficiencies in the pricing mechanisms adopted in the deregulation process.”
Mrs. Akpani also explained that inability of marketers to source FOREX creates a situation which can be described as “pseudo subsidy” in the market, suggesting that being forced to sell petroleum products at fixed prices means they cannot recover their importation cost, most of which is paid for in US dollars.
This is further exacerbated by the fact that the federal government regulates pricing irrespective of the unique operating costs of these private oil companies. Also, being the sole importer of petroleum products means the NNPC will likely pass on inefficiencies in managing cost to petroleum marketers, eliminating any chances of efficient pricing that can be obtained from increased competition. The effects of these are low profit margins and ‘never-shifting’ revenue positions, except for exceptional cases.
Last December, the Federal Government revealed it was ending its subsidy programme, increasing fuel to reflect its market cost. However, it balked after pressure from the labour unions, reducing prices without recourse to sector players.
Despite these challenges, the sector will likely eke out some profits largely due to cost cutting initiatives and income from ancillary businesses. However, dividend payment might be a challenge as it will be advisable for these companies to set aside cash for what could be a pivotal year.
The Petroleum Industry Bill (PIB) will likely be signed into law this year and will produce new investment opportunities for the downstream sector if things go as planned. The government will likely relinquish its hold on the sector and fully deregulate the downstream before the end of the year.
When it does, those with a strong balance sheet will be winners.