Distress signals from Nigeria’s telecom industry
Sir: A casual observer of Nigeria’s telecom industry may have been carried away a few months ago by news of supposed interest in acquiring 9mobile by hordes of corporations far and near. Several companies were said to have lined up for the bid including mobile network operators like Globacom, Airtel and the broadband services provider, Smile Communications. Others were Helios, a private equity firm and Teleology a special purpose vehicle of telecom industry veterans. A good number of these companies made considerable effort at generating hype around their ambitions and the media was awash with claims and promises, not too dissimilar to those commonly associated with politicians.
On the day of reckoning, however, only two companies, Teleology and Smile Communications were worthy of contention. While Airtel backed down before the bid proper, Globacom and Helios did not back-up their respective bids with financial propositions. Feelers from Barclays Africa indicate that Teleology actually bid more than double the USD 300 million which Smile Communications reportedly bid, which in addition to all of the technical and other assessments, qualified it for the preferred bidder position. Smile Communications automatically got the reserve bidder slot, a position which implied that in the event that Teleology defaulted in the discharging of its financial obligations under the terms of the sale, the preferred bidder slot would automatically be transferred to Smile.
A condition for the transaction was upfront payment of a non-refundable fee of USD 50 million within 21 working days of being appointed preferred bidder. Days before the deadline, Teleology paid the deposit and publicly announced its preparedness to execute a 10-point plan of action on taking over 9mobile. The industry is now literally waiting with baited breath to see if Teleology will discharge the second critical requirement of the deal, namely pay the bid amount within the specified period.
This is particularly so as news emerging from the media indicates that the reserve bidder, Smile Communications appears to be contending with severe financial difficulties bordering on indebtedness.
Should Teleology make good on its promise to pay up its bid price within the specified period, then the Nigerian telecom industry would have enjoyed a fortuitous shot in the arm. It may have been saved from a potentially turbulent situation, which some analysts say could even have been a fore-runner to systemic distress in the sector.
A few roadblocks remain. Some erstwhile minority shareholders have since gone to court to challenge the 9mobile sale, claiming that their interests were not accommodated by the decision and process of the sale. It is hoped that all of the stakeholders including the regulators, Central Bank of Nigeria, CBN and NCC would engage these investors and arrive at a consensus in due course.
The CBN and the NCC have played the very enviable role of forestalling the job losses and potential systemic risk to the larger telecom industry that may have accompanied the foreclosure of 9mobile by the bank consortium to which it is indebted. The choice of Teleology, a Greenfield operator that may conceivably inject fresh foreign capital into the telecom industry is fortuitous and is clearly a needed tonic for Nigeria’s struggling telecom industry.
Will Teleology live up to its billing as a savior of Nigeria’s telecom industry? Time will tell.
• Osebumere Odia, an economist and technopreneur, wrote from 17 Adekanye Street, Lawanson, Surulere, Lagos.
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