Etisalat Group will pull out of Nigeria

Etisalat has terminated its management and technical support related agreements with Emerging Markets Telecommunication Services Limited (EMTS) with effect from June 30, 2017.

In a regulatory statement to Abu Dhabi Securities Exchange, the telecom firm said the termination of the agreements governing the use of etisalat's brand, including its trademarks, has been deferred to July 21, 2017.

"Etisalat Group has engaged with the company and is currently in the process of negotiating new agreements for technical services, strategic procurement support and the use of etisalat brand," the statement said, adding that these agreements are still under discussion between the parties.

"It is for this reason that Etisalat Group has deferred the termination of the existing trademark agreement at this time to allow the parties an opportunity to enter into a new interim trademark agreement without adversely impacting the company's ability to operate in the normal course," the statement said.

Etisalat Group entered the Nigerian market in 2008 through EMTS. At the time, Nigeria was widely regarded as one of the most strategically important telecom growth markets in Africa with the largest population in the region, yet a low mobile penetration of just 20 per cent.

"Etisalat Group follows prudent investment decisions and acts responsibly to protect its shareholder's interests," Hatem Dowidar, chief executive officer-International Etisalat Group, said.

He said the company reported EBITDA positive in less than four years of operations and has since become the fastest growing telecommunications network in the country. In 2014-15 the company witnessed record growth of 18 per cent achieving subscriber base of 22 million subscribers.

"Despite the fundamentals to support growth and increase mobile penetration, Nigeria's macroeconomic conditions, steep currency devaluation and market challenges have had a detrimental impact preventing 'EMTS' continuing its ambitious growth plan," Dowidar said.

He said etisalat progression to reach critical mass brought a significant growth of earnings and, more importantly, lifted its free cash flow from negative to positive. In summary, before the full impact of FX deterioration, etisalat management was delivering sustainable and profitable growth.

"On top of uncertain business climate, regulatory issues, irrational behaviour of some competitors, which entered into a price war most notably around data tariffs, limited the ability of the company to move prices upwards to balance for inflation and increasing costs," he said.

Elaborating, he said EMTS (Associates) negotiated in good faith with the lenders and offered a debt-restructuring proposal. The lenders did not accept the EMTS proposal.

"EMTS (Associates) have met repeatedly with Nigerian authorities, including the telecommunications regulator, NCC, and the Central Bank of Nigeria, to keep them informed of the seriousness of the situation and the need for a restructuring of EMTS debt to return the company to the path of insolvency."

He said Etisalat Group was not effected as rating agencies re-affirmed Etisalat Group high credit ratings.

"The carrying value of EMTS shares in Etisalat Group books is nil."

"One of the key reasons for 'EMTS' failure of the loan which was disbursed in part in US dollars is the worsening of Nigeria's exchange rate position, floating of the currency following the devaluation of the Naira and the closing of the possibilities for converting US dollars debt into Nigerian Naira debt by the monetary authorities."

"Etisalat Group has taken a difficult decision to exit the Nigerian Market to protect the wider interests of the Group and those of its shareholders," Dowidar concluded.

Source: Khaleej Times