SM | ECONOMY
will further erode whatever latitude operators had hitherto utilized to boost financing, revenue and profit.
Given the acrimonious manner by which Etisalat pulled out of the country, Nigeria may now find it difficult to attract investments from the Gulf states. With the recent slump in global oil prices, Middle Eastern countries, particularly UAE and Saudi Arabia, have ramped up investments worldwide as part of efforts to diversify their oil-dependent economies. Saudi Arabia has launched a plan to add up to $ 2 trillion to the country ' s sovereign investment fund in order to diversify government revenues through dividends from investments.
In the wake of the Etisalat saga, Nigeria may be overlooked as a possible investment destination by some of these Gulf countries, who work together as members of the Gulf Cooperation Council. It certainly doesn ' t help Nigeria ' s case given that Etisalat ' s majority shareholder is the UAE government and Mubadala, the erstwhile second partner in Etisalat Nigeria, is the sovereign investment arm of the Abu Dhabi emirate.
Exactly what caused Etisalat ' s inability to meet its loan obligations was a muted public debate during the weeks of the difficult negotiations. Etisalat Nigeria had in 2013 obtained a seven-year loan facility of $ 1.2 billion from 13 local banks and their foreign counterparts to refinance a $ 650 million loan as well as fund the expansion of its network. The refinancing already indicated Etisalat was struggling with liquidity. Why the UAE group failed to inject new capital in less-costly financing suggested some disillusionment with the company. This aloofness to the servicing of the $ 1.2 billion facility characterised the position of the Etisalat Group.
The undercurrent of this would be that Etisalat Nigeria was playing from a position of weakness, compared with the other three mobile telecoms giants, who command significantly larger market shares. Etisalat had wanted to use the number portability policy to win dissatisfied subscribers and increase its market share, but this didn ' t bridge the gap. This may be instructive for potential investors in 9mobile. Being a back-bencher among the top four can be perilous.
It was suggested that Etisalat Nigeria might have been misgoverned. Whether this is true or not, its board has been sacked. 9mobile now has a new board, representing the new stakeholders.
Finally, opinions were more unified that Etisalat Nigeria would have suffered from the sharp depreciation in the exchange rate since the loan was contracted in 2013. Between 2013 and end of 2016, the naira had depreciated against the dollar by over 80 percent, while a debilitating dollar scarcity has bedevilled the forex market since oil prices slumped from its peak in 2014.
Etisalat ' s departure from Nigeria appears on the surface to be a business investment that went sour after stakeholders failed to reach an agreement. But on a closer look, the effects of that misadventure may haunt the Nigerian market for years to come.
30 | NOV. 2017