Exclusive | Airtel, Helios petition Nigerian government over 9mobile sale

Bharti Airtel International, owners of Airtel Nigeria and UK private equity firm, Helios Investment Partners, have petitioned the Nigerian government over the ongoing process to sell 9mobile formerly Etisalat Nigeria.

Technology Times can exclusively confirm that the two companies that ended up among five bidders shortlisted to buy 9mobile have petitioned Nigerian telecoms and banking regulators supervising the transaction alongside their appointed transaction adviser, Barclays Africa, in the ongoing sales deal said to be internally codenamed Project Nexus.

Bidders were offered 99.99% shares of Emerging Market Telecommunications Services Limited (EMTS) that trades as 9mobile following hostile takeover attempt of the number four mobile phone company by bank creditors over an estimated $1.2 billion debt.

“Government was petitioned to look into the 9mobile sale because the regulators had last year invoked the too-big-to-fail doctrine to wade in and salvage the mobile phone business from hostile takeover by the creditors banks owed $1.2 billion.”

Barring any last-minute change, Teleology Holdings Limited is expected to take over 9mobile after staking a winning bid of $500 million over the $300 million offered by Smile Communication Limited, the reserve bidder, TheCable, Nigeria’s authoritative online newspaper, has exclusively reported.

The report also says the other three bidders, Airtel, Helios and Globacom, Nigeria’s Second National Operator (SNO) refused to submit financial bids in the transaction.

Meanwhile, details have emerged today that Airtel and Helios have filed protests expressing concerns over alleged irregularities surrounding the 9mobile sales process by Barclays Africa.

A senior government official conversant with details of the situation told Technology Times in Abuja today that the Nigerian government has been asked to look into allegations that the 9mobile bidders were hampered from assessing the viability of the mobile phone’s business and the current status of its operations.

Professor Umar Danbatta, Nigeria’s telecoms regulatory chief and his banking industry counterpart, Godwin Emefiele have been asked to wade into the 9mobile transaction. Hasnen Varawalla of Barclays Africa was also petitioned, we were made to understand.

The regulators were told by an unnamed bidder that its refusal to submit a financial bid “was a direct consequence of the gaps we felt were present in the information provided, and limitations on the scope of our interaction with key stakeholders, both of which are critical to formulating an offer price. Given the complexity of the transaction and numerous stakeholders directly impacted by the current situation of the business, we had limited grounding upon which to provide a credible binding offer without this clarity.”

Government was petitioned to look into the 9mobile sale because the regulators had last year invoked the too-big-to-fail doctrine to wade in and salvage the mobile phone business from hostile takeover by the creditors banks owed $1.2 billion.

The regulators subsequently appointed an interim board and the appointed Barclays Africa as transaction advisers to sell 9mobile to new investors expected to turn around the fortunes of the mobile phone business.

Technology Times learns that the regulators have been asked to address claims by the aggrieved bidders that the process is considerably influenced by creditor banks of 9mobile who have allegedly excluded other non-bank lenders from the transaction.

The companies say they were unable to submit a financial bid because they did not have adequate information to evaluate the true worth of 9mobile and be able to take informed decisions on what constitute the true worth of the mobile phone business.

The regulators were told by an unnamed bidder that its refusal to submit a financial bid “was a direct consequence of the gaps we felt were present in the information provided, and limitations on the scope of our interaction with key stakeholders, both of which are critical to formulating an offer price. Given the complexity of the transaction and numerous stakeholders directly impacted by the current situation of the business, we had limited grounding upon which to provide a credible binding offer without this clarity.”

Government regulators were told that while 9mobile had significant unpaid balance and other debt obligations to other non-banking partners, key creditors said to include vendors like HIS Group, Huawei, Nokia, among others, were excluded from the transaction process.

The 9mobile sale process is being considerably run and managed by lender banks while bidders were denied access to details of contracts with other non-bank creditors, a development that leaves several unanswered questions, information gaps and concerns, the regulators were told.

“They said that the bankers driving the process didn’t allow access to other creditors of 9mobile and this has impaired their abilities to evaluate the true state of the company on offer from the network planning, integration and other exit costs”, the Technology Times source says.

Our source confirm that an unnamed bidder says the 9mobile sale “is a very complicated transaction, that includes a number of stakeholders with potentially diverging interests, all of whom would be required to work together to achieve a successful transaction.”

Though bidders were provided access to the company’s data room, visit to some sites and some officials, the concerned bidders expressed worry over lack of clarity on the impact of the outstanding debts and other financial obligations of 9mobile, particularly to other non-bank creditors and how these obligations will be treated in the valuation of the mobile phone company.

Importantly the regulators were told that “for a transaction of this magnitude, a prospective buyer will want to be provided clarity and comfort on NCC’s approval and authorisation to retain the existing 9mobile frequency spectrum assets and their ability to review or exit current business contracts and the cost to the buyer.”

The investors want the transactions managers to provide information and needed comfort on past regulatory compliance, lawsuits, statutory payments among other issues bordering on indemnities, warranties among other key details said to be critical for valuation, business health check, post-closing status, among others.

Technology Times was told that a key concern centered around the information gap regarding the operational health of the business and fresh funding required to support the recovery, turnaround and future growth of the 9mobile business.

Importantly the regulators were told that “for a transaction of this magnitude, a prospective buyer will want to be provided clarity and comfort on NCC’s approval and authorisation to retain the existing 9mobile frequency spectrum assets and their ability to review or exit current business contracts and the cost to the buyer.”

Helios says it wants to lead the 9mobile rebuild drive by reinvigorating a data-led strategy and new investments into 4G services to its Nigerian subscribers the same way it took control of a similarly complex situation in East Africa through the acquisition of a majority stake in Telkom Kenya and can leverage off this experience in the turnaround of the 9mobile, the government regulators were told.

Bharti Airtel which already has an operating mobile business in Nigeria, Airtel Nigeria, is expected to leverage the acquisition of 9mobile to become the telecoms market leader if it consummates the deal.