Nigeria: 9mobile sale still on course despite court order

The deal to sell 9mobile to teleology is still on course despite challenges from different groups trying to stop the sale. However, if the deal fails to pull through Smile communications may end up not being the prefered bidder.

About a month ago it was reported that a Nigerian Federal High Court halted the transaction for the acquisition of distressed telecommunication company 9Mobile due to a tendered legal action by aggrieved shareholders of the company. According to the shareholders, their anger stemmed from the mismanagement of 9mobile—previously Etisalat—and the move by the company to conduct a sale to the detriment of its shareholders. This came after Teleology met the deadline for the payment of a $50 million non-refundable deposit to have full possession of its $500 million 9mobile bid.

According to reports some operators have been lobbying for the 9mobile case, which could end up with Teleology being auditioned in front of the House of Representative to present the viability of its project for 9mobile. However, sources familiar with the deal said it would be hard to find grounds to stop the deal from happening on both of these fronts. Following all the delays in this deal, it is reported that it could close by late June.

For this deal, Teleology has hired UBS to help it raise a $300 million bridge loan which will come from local banks and investors. Teleology has eight Nigerian shareholders from the six regions of the country and the incoming executive management team has a lot of experience working in the telecommunication sector. Some of them have worked with MTN, Orange, Vodafone, and Celtel. These shareholders will be unveiled once the transaction is closed.

Teleology is under the stewardship of Adrian Wood, one of the past CEOs of MTN Nigeria. The former CEO of MTN is forming an alliance with East Africa’s mobile operator, Safaricom in order to tap into M-pesa for mobile money services.

Why is Smile Telecommunications in the news again over this deal

The data telecommunication company, Smiles Communication Nigeria Limited is being accused of presenting false information in the bidding round. It was disclosed that its Nigerian shareholders have ongoing and challenging debt issues with a consortium of banks. This is threatening its position as the reserved bidder for the transaction.

Smile Communications which was unsatisfied with the bid process had on 9 May 2018, written to the Board of Directors of Emerging Markets Telecommunication Services Limited and Guaranty Trust Bank Plc. It is alleged that smile said that Teleology does not have the financial capacity to buy 9mobile. They said that if they are given the opportunity to acquire 9mobile, they will reposition the company and make it attractive and competitive again. Smile Communications boasted that it would inject millions of dollars from foreign financing outside Nigeria into 9mobile to pay off its indebtedness to the banks and any other group that the company is indebted to, and it will still have enough to invest in 9mobile and make it competitive.

Smile Communication Nigerian partners and shareholders owe a consortium of banks $125 million. This day reported that according to a reliable source, Smile Communications got the loan through a consortium of banks including Afrexim Bank, and in turn routed the loan through Diamond Bank, a domestic bank, resulting in the lenders huge non performing loans. The banks are saying that if shareholders of Smile Communications have the money to buy 9mobile, it should have long paid the banks the money it is owing, “asking why they would replace a bad loan with another bad loan.”

Disturbed about the letter written by Smile Communications to the Board of Directors of Emerging Markets Telecommunication Services Limited and Guaranty Trust Bank Plc, telecoms lawyer Olaniwun Ajayi wrote Smile Communications on 14 May 2018, warning it to desist from presenting false information about the 9mobile sale.