The acquisition of 9mobile takes a new twist as Teleology Pulls Out

Adrian Wood-led Teleology Holdings Limited is pulling out of the 9mobile deal almost two months after getting approval for the transfer of ownership from the Central Bank of Nigeria (CBN) and the Nigerian communication commission (NCC).

According to reports, the special purpose vehicle has been blocked from concluding a management services contract with the local joint venture, Teleology Nigeria Limited. The management services contract would have enabled Teleology Holdings and its team of experts oversee the implementation of the organisation’s business plans. It is important to note that the successful bid of Teleology Holdings was largely due to the quality of its proposed management team led by Wood. The team was approved by the NCC Technical Evaluation Committee, the 13-member bank lending syndicate as well as the acquisition finance provider, Afreximbank.

By this exit, Teleology Holdings Limited will exit its shareholding in the local joint venture, Teleology Nigeria Limited, which will also be required to change its name. Backing out of this deal will also affect the $50 million initial deposit paid by Teleology Holdings for the acquisition of 9mobile. According to Boason Omofaye, the Head of Business News Channels TV who spoke with The Nerve Africa, pulling out of the deal means Teleology is ready to forgo its initial deposit since it was clearly stated as non-refundable.

Apart from the non-refundable $50 million, Teleology also paid $251 million into an escrow account of the Central Bank of Nigeria to complete the total sum of $301 million to perfect the full takeover of 9mobile.

In response to the situation Adrian Wood who has resigned from the boards of Emerging Markets Telecommunication Services, which is trading as 9mobile released a statement expressing his disappointment.

“9mobile is an exciting opportunity to build a revolutionary mobile network that could be the pride of Nigeria, unfortunately, it appears that we will not be able to participate,” said Wood said.

“We now must stand down from further work on the 9mobile project,” he said further.

The issues regarding the acquisition of 9mobile would have a negative effect on the telecommunications company which is the smallest service provider in Nigeria. It would take years for 9mobile to become a reliable brand in Nigeria again and any company that acquires the telco will have to spend a lot of money in order to reposition the company to compete with bigger players. These telcos also have more money than 9mobile and they have also increased their capital expenditure and have taken some of 9mobile subscribers. Currently, 9mobile has about 15 million active subscribers which is a lot lower than the  22 million customers on its network in October 2016.

The Journey so far for 9mobile

In 2013, a consortium of about 13 Nigerian banks led by Access Bank, GTB and Zenith Bank gave Etisalat a syndicated loan of $1.3 billion. This loan was expected to help refinance its existing loans and finance its working capital. $650 million was set aside for refinancing and the balance for network expansion.

As of 2016, the company had started defaulting on its loan obligations, which led to a few bailouts from its parent company in Abu Dhabi.

In early 2017, it was reported that the consortium of 13 banks, which lent money to the company 4 years prior, had threatened to take over the telco to recover the money.

The CBN, along with the Nigerian Communications Commission stepped in to avoid a forced receivership. The consortium of Nigerian banks later requested that Etisalat UAE’s main investor, Mubadala provides another bailout fund but Mubadala insisted on divesting from Etisalat Nigeria.

Etisalat Nigeria then offered the consortium of Nigerian banks shares in the entity via debt to equity swap deal, but the consortium of Nigerian banks declined the offer insisting on a bailout.

After several unmet deadlines, the consortium of Nigerian banks again put forward a deadline of June 23, 2017 for the Etisalat Group to come up with a solution or transfer its shares to a trust, which would be managed by an independent trustee.

In July 2017, Etisalat Abu Dhabi announced that it had transferred 100 percent of its shares with Emerging Market Telecommunications Services Ltd (EMTS) to United Capital Trustees Limited, the legal trustees of the banks. EMTS is the vehicle Etisalat Abu Dhabi used to invest in Nigeria. After the exit, a new board was constituted to run the company pending when a buyer is found. The name of the telco was immediately changed to 9mobile.

On the 22nd of February this year, Teleology Holdings emerged as the preferred bidder for the acquisition of 9mobile with Smile Communications emerging as the reserved bidder. In order to have full possession of its $500 million 9mobile bid, Teleology, led by Adrian Wood, made a non-refundable deposit of $50 million for Nigeria’s fourth largest network operator.