Analysts say the recent development in the 9mobile bidding process where Bharti Airtel, one of the five listed potential investors has pulled out, may leave the telecommunications company with no other choice but to file for bankruptcy.
Nigeria’s telecoms industry was taken by surprise after Airtel decided not to submit a final bid by the January 16 deadline.
This was especially so, because industry watchers thought that Airtel had a strong chance of taking over the fourth largest telecommunications network, alongside Globacom, to become the largest network operator in the country, especially after the Nigerian Communication Commission (NCC) stated that a consolidation would be most likely.
Olusola Teniola, President, Association of Telecommunications Companies of Nigeria (ATCON) told BusinessDay in a telephone interview that; “There are two options that stare 9mobile in the face right now. It is either they file bankruptcy or the board finds a credible buyer for the company.”
The insolvency regime in Nigeria is mainly governed by the provision of Companies and Allied Matters Act (Chapter C20) Laws of the Federation (“LFN”) 2004 (“CAMA”, the Bankruptcy Act (Chapter B2) LFN 2004 (“Bankruptcy ACT”) and the Companies Winding-Up Rules 2001.
According to the Nigerian law, the winding up of a company could be by the members, creditors or shareholders. In a case where the creditors take a petition to the court for 9mobile to be wound up/declared bankrupt, the company’s assets will be liquidated and creditors will be paid according to a pyramid method in order of priority of payments where holders of fixed charges (if any) will be first priority. Secondly, amounts due and unpaid by the company to the employees’ compensation fund under the Employee Compensation Act 2010 will be paid and costs and expenses of the liquidation will be settled.
Other payments to be made include preferential payments, holders of floating charges which have crystalised; unsecured creditors and shareholders.
Under the Nigerian Law, a company is deemed insolvent when it is unable to pay its debts. Section 409 of the CAMA defines this. Where a company is deemed insolvent, there are two main options available to it to enable it to pay off its debts to the extent that it is capable. These options are by; either winding up of the company, by which the company’s business is terminated or a corporate restructuring carried out under schemes of arrangement with creditors as provided for under the CAMA.
However, the second option of restructuring seems to have failed and finding a buyer looks quite bleak at the moment, due to the nullification of the transitional board by the Federal High Court, after Spectrum Wireless took United Capital Trustees Limited, representatives of the bank debtors to court, challenging the earlier granted ex-parte order.
Apparently, the potential investors had not been informed about the previous dealings of Etisalat, which is now 9mobile, and therefore thought it was risky to dip their hands into something that was not clear to them.
BusinessDay sources at Airtel say; “We decided not to submit a final bid because we felt that we did not have sufficient information to make an informed bid.”
Another source told BusinessDay that; “Airtel and most other interested investors knew was that Etisalat missed a $1.2billion debt payment owed to a consortium of 13 Nigerian banks. They were never told about the other non-bank investors and why the main directors decided to leave the company until Spectrum Wireless took United Capital Limited and the new board to court.”
Teniola remains optimistic that the industry will survive the current challenge despite the so frequent hiccups in the bidding process and investor doubts due to the issuance of buyers beware.
“We hope that the withdrawal of Airtel in this process will not sway the decision of the others and hopefully, the process which has been suspended for now will generate a credible and most viable new owner of 9mobile in the end.
Regardless, the industry will survive this because at the end of the day, the consumer is king and as long as 9mobile still has consumers, it has to either run or migrate its customers to another network,” Teniola added.
Bharti Airtel, Smile Telecoms Holdings, Helios Investment Partners LLP, Teleology Holdings Limited and Globacom were in December 2017, shortlisted as the five bidders still in the running to take over ownership of 9mobile, after rescheduled bidding process took place with the approval of both regulators and lender banks involved.
According to The Cable News, Globacom and Helios Investment Partners LLP submitted bids but did not make any financial offer for 9mobile.
It was also reported that Teleology Holdings Limited submitted a bid in excess of $500 million while Smile Telecoms Holdings quoted close to $300 million.
Jumoke Akiyode- Lawanson