Mubadala, Etisalat Foreign Directors May Face Criminal Charges over Unpaid Loans

• NCC, CBN scramble to save situation, as Vodacom SA, Orange, among others, eye network

Kunle Aderinokun and Emma Okonji

It emerged at the weekend that the banking consortium owed by Mubadala Group and Etisalat Group may be planning to press criminal charges of reckless and fraudulent trading in Nigeria, United Kingdom and some other places where Mubadala and Etisalat operate, owing to their failure to meet their obligation and pay their debt.

According to inside sources, the charges stem from the fact that they borrowed money from Nigerian banks, gave guarantees as foreign directors of Etisalat Nigeria, obtained facilities when they knew they had no intention of paying following their decision to pull out of Nigeria altogether, leaving the banks, suppliers, vendors and service providers in the lurch.

This comes as Vodacom Group of South Africa and Orange Telecoms of France were moving to take up the 45 per cent share owned by Etisalat Group and 40 per cent owned by Mubadala in Etisalat Nigeria. There had been protracted issues arising from Etisalat Nigeria’s repayment of $1.2 billion loan involving 13 local banks, including Access Bank, Guaranty Trust Bank and Zenith Bank over settlement of outstanding obligations on the loan. Subsequently, one of the core investors, Etisalat Group, last Tuesday, announced at the Abu Dhabi Securities Exchange in Abu Dhabi, United Arab Emirates, its intention to pull out of the Etisalat Nigeria structure, and approved transfer of its entire 45 per cent shares in Etisalat to the United Capital Trustees Limited, the legal representative to the consortium of banks. United Capital is the security trustee, which is the vehicle employed by the banks to hold the shares on behalf of the consortium.

The decision of the core investor to pull out of Etisalat Nigeria has raised moral questions on the appropriateness of borrowing money, defaulting and then pulling out of the country, hoping that their shares would be used to write off the debts. This has also raised strong suspicion that they may have borrowed the money under false pretenses.

But the banks have said they wanted their money back and that they were not interested in the shares because they fear that they may be taking over liabilities, the extent of which they do not know. There are however fears that the failure to repay the loan may affect many banks.

Sources also pointed out that Nigeria was not the first country where Etisalat Group would try to play smart. They alleged that Etisalat had refused to repay loans in other countries such as Tanzania and India.

“The United Arab Emirates telecom operator, Etisalat, invested in Zantel in Tanzania with 85 percent stake in Zanzibar Telecom Limited (Zantel), and in India, 45 per cent stake in Etisalat DB, a joint venture between Indian player DB Group and Etisalat of UAE,” sources said.

In a confidential note obtained by THISDAY, the EMTS Holding BV, had on June 8, stated that restructuring negotiations were ongoing between the syndicate lenders and EMTS. It added that “in view of the extent of variance between the lenders last formal communication to EMTS and Mubadala Cyprus Holdings Limited’s proposal of 1 June 2017, we are mindful that the process of a successful restructuring are not as promising as the parties may have considered. Also, EMTS is presently in a precarious cash position as is unpaid obligations to trade creditors materially increased in the month of May, vis-à-vis the end – April cash position.

“Taking the above into careful consideration, we believe that it has become imperative for EMTS and the lenders to jointly commence discussions around the contingency plan to be implemented in the event that (i) the restructuring negotiations breakdown irredeemably and/or (ii) EMTS is unable to continue to trade without incurring new trade debts which it has no reasonable prospect of paying.

“In view of the forgoing, we, EMTS Holding BV, hereby affirm our commitment to a collaborative approach working with the lenders to assure our orderly exit from EMTS should such exit become necessary due to the occurrence of (i) or (ii) above. We are mindful that a non-collaboration approach (such as a receivership or winding up) would be disruptive to the business and lead to a further loss of value for all stakeholders, including in particular, the lenders.”

EMTS however stated that it would cooperate with the lenders to ensure that a non-disruptive approach is adopted in any handover process.

“We note that pursuant to the Deed of Share Charge entered into between ourselves and the Security Trustees (the “Share Charge”), we charge all our charge in EMTS in favour of the lenders. In this regard, should the lenders seek to take control of those shares, we would as appropriate, authorize EMTS to take all actions necessary for a seamless handing over to the lenders, including without limitation, the transfer of share and /or recomposition of the board of directors of EMTS,” it added.

The banks have however rejected the share holding offer saying they do not want to take over liability they do not know.

The Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) are currently scrambling to save the situation because they consider Etisalat a critical national asset, with its 21 million subscriber base.

Citing the Nigerian Communications Act (NCA), the NCC had last Tuesday stepped into the issue of transfer of ownership. It reminded the consortium of banks that it could not take over Etisalat’s operating licence without its approval.

Etisalat Group, which holds 45 per cent stake in the Nigerian subsidiary had announced earlier on Tuesday at the Abu Dhabi Stock Exchange that attempts to stave off the company’s takeover had proved abortive and that the lender banks were closing in.

Chief Financial Officer of Etisalat Group, Serkan Okandan, who made the announcement on behalf of the UAE group and operators of Etisalat Nigeria, said both parties had reached a deal to commence the transfer of ownership to the banks by 5 p.m. last Friday, a development that immediately caused ripples in the telecoms sector.

However, the NCC in a statement last Tuesday evening by its spokesman, Mr. Tony Ojobo, drew the attention of the parties to the provisions of the NCA, which provide that the issuance of a licence shall be personal to the licensee and is not transferable to a third party without the written approval of the commission.

Meanwhile, it also emerged at the weekend that two international telecoms companies, Vodacom SA and Orange of France, were interested in acquiring the shares relinquished by the core investor.

In eyeing the major stake in Etisalat Nigeria, analysts believe Vodacom may be using the opportunity to re-enter Nigeria’s burgeoning and lucrative telecoms market.

Vodacom, which is a leading African communications company headquartered in South Africa, made previous attempts to enter the Nigerian telecoms market up till 2004, in the early years of GSM, when it signified interest in Econet Wireless Nigeria, but retreated. Although the South African telecoms company reportedly had issues with the deal, bordering on “inappropriate level of risk” and “good corporate governance, and trust”, it was clear that it could not muster the courage to face the kind of risk the likes of MTN Group, its competitor in South Africa, faced. While many saw Vodacom’s initial attempt to enter Nigeria’s telecoms market as an attempt to meet or surpass the performance of MTN, its South African rival, the latter had enjoyed tremendous growth and outstanding performance through its investment as it is now the biggest telecoms operator in the country.

As for Orange, it is one of the largest telecoms operators in Europe and Africa and a global leader in corporate telecommunication services. Its operations span eight countries in Europe and 22 countries in Africa and Middle East.

Industry sources revealed that the two leading telecoms operators in Nigeria, MTN and Glo, initially had interest in the company when the news of its indebtedness to the consortium of banks broke. Both companies, it was gathered, had reasoned that acquiring dominant shares in Etisalat, the fourth largest telco in Nigeria with a subscriber base of about 21 million, would expand their subscriber bases and consolidate their leadership positions in the industry. While MTN has a subscriber base of about 60 million, Globacom subscriber base is about 37 million.

However, the negative media reports that trailed the loan repayment issue, which was believed to have eroded the share value of the company, made the two companies to have a rethink, THISDAY gathered.