Etisalat Group’s Nigerian Default: Alarming Bells for Pakistan

Over the last three weeks, Etisalat Group has been in the news for its debt crisis in Nigeria and before that it was Mobily-Etislat Saudi Arabia which was in the limelight for accounting issues. Importantly, while Nigeria is thousands of kilometer far off but this could possibly be alarming bells for other markets where Etisalat operates specially in Pakistan (PTCL and Ufone – the Group has shareholding and management control as well) where it is going through the declining market shares and subscribers base unlike other major telecom groups across the world. Etisalat Group’s Nigerian Default: Alarming Bells for Pakistan.

Etisalat Group is a multinational UAE based telecommunications services provider, currently operating in 17 countries across Asia, Middle East and Africa and as of today the company claims to be the 16th largest mobile network operator in the world. Back in 2012, Etisalat was named the most powerful company in the UAE by Forbes UAE. But unfortunately the Group didn’t successfully maintained its company profile for long. This is evident from the troubling relations of Etisalat Group in some of the countries it operates, the list importantly include none other than Pakistan.

Etisalat Group’s Nigerian Default: Alarming Bells for Pakistan

Etisalat Nigeria’s Debt Crisis has a New Twist – The Story So Far

Interestingly, Etisalat in Nigeria was the 4th largest mobile company but then it defaulted on a facility agreement with a syndicate of Nigerian banks (EMTS Lenders). Till last 2 weeks a consortium of banks which is led by the “Access Bank PLC” and some other Nigerian and foreign banks has taken over entire management of the Etisalat Nigeria due to the reason that Etisalat Nigeria owed a debt amount of around N541 bn ($1.72 billion) to all these banks. On 3^rd of July, the Central Bank of Nigeria finally took over “Etisalat Nigeria Ltd.” This was followed by the resignation of the company’s CEO, Mr Matthew Willsher and CFO, Mr Wole Obasunloye.

Also Read: Access Bank and Others Take Over Etisalat Nigeria Over N541 Billion Debt

The situation has recently taken a new twist as the regulators stepped in to save “Etisalat Nigeria” from collapse. The Central Bank of Nigeria and its telecoms industry regulator have intervened to save the country’s 4th largest telecom firm after talks with the local banks to renegotiate a $1.72 billion loan failed. The company also has appointed Joseph Nnanna as its new CEO and some other new board members too.

If one analyse this situation, it can be accessed  that going through extreme business failures and troubles, Etisalat should have quit from Nigeria on better terms and pay its due loans.

Etisalat Exit from India

Unfortunately, Etisalat Group could not do well in the Indian telecom market too. In 2012, Etisalat announced to cease its operations in India after the cancellation of licenses by Supreme Court of India. It issued notice to its subscribers, giving them 30 days to switch to another operator. On 5 September 2012, Etisalat announced that it would not bid for new spectrum in the November 2012 2G spectrum auction as it has decided to cancel its licences. The Group silently quit from Indian telecom market which ethically was a correct decision but importantly indicated that all is not well at Etisalat Group specially when it is hit with a competitive market situation.

Alarming Bells for Pakistan

Etisalat Group’s deal of PTCL and Ufone in Pakistan has also put it them in trouble with the Government of Pakistan almost from the start when the time came for the last tranche to be paid. The Senate Standing Committee on Information and Technology and Telecommunication has asked many a times the Etisalat Group to return the defaulted amount of $800 million which was part of the PTCL privatization agreement back in 2006. Instead of making the situation worse like in the case of Etisalat Nigeria, the Group needs to seriously rethink the repercussions of yet another market failure and save its falling brand identity. If the situation persist, eventually, its net worth will certainly have a negative impact due to its failed/falling performance in four of its largest markets. Due to the launch of various advanced technologies, telecom groups across the world such as Telenor, VEON, China Mobile (all three continue to enjoy Positive growth in Pakistan) are getting stronger day by day and continuously invest in their customers, people and networks. Etisalat Group probably needs to have a more balanced and far sighted strategic approach and philosophy to take the group out of the present situation.

Also Read: Senate Committee Again Asked Etisalat to Pay $800 Million Outstanding Dues

Equally, important is for the Government of Pakistan to engage with Etisalat Group to strike some amicable solution for resolving its balance payment issue as well as its long term strategy to get the existing companies on the growth trajectory. The Pakistani market has already heated up with the mobile broadband spectrum auction over the past couple of years and if the situation is not arrested then it may get out of hand with both entities fast becoming liabilities like Pakistan Steel Mill or TIP-where tax payers money is being spent to pay off salaries without any gains.