Company Trend Analysis - Limited Financing Options May See Etisalat Walk Away - MAY 2017

BMI View : Etisalat's reluctance to address its debt obligations in Nigeria hint s at dissatisfaction with the unit's inability to progress. It may, therefore, be prepared to walk away from the business, with far-reaching implications for Nigeria's highly-competitive mobile market.

Etisalat Nigeria has ceased servicing its USD1.2bn loan from a consortium of local banks, calling for time to develop a plan to restructure its outstanding. Under pressure from the devaluation of the naira, greatly reduced access to international currency markets and weak economic growth projections, the 13 banks are understandably concerned to prevent a default on this loan. Options - such as state investment in the operator, handing control of it to the banks or seeking a new investor - are both limited and fraught with risk. Nevertheless, Etisalat is the smallest GSM operator in the market and its UAE-based parent could use the current situation as an opportunity to mount a tactical withdrawal.

There are six mobile operators in the market, although the two CDMA-based networks have a minuscule (and declining) presence, effectively painting Etisalat as the weakest of the national operators. Its 13.6% share of subscriptions lags far behind that of market leader MTN and it struggles to keep pace with mid-ranked Globacom and Airtel. Etisalat Group is used to being a leading player in its overseas markets and the fact that infrastructure and service investments have made little difference to its standing in Nigeria three years after taking out this loan would, in isolation, give sufficient cause to merit a withdrawal. The current poor outlook for the Nigerian economy would add considerable weight to that view.

Etisalat May Be Prepared To Walk Away
Nigeria: Mobile Subscription Market Shares (%), Q416
Source: BMI, operators, NCC

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