Author: The Nation

Fresh moves by MTN Nigeria to acquire the spectrum of the fourth mobile network operator, 9mobile, are generating anxiety as many dread the emergence of a monopolist in the sector. But the Nigerian Communications Commission (NCC) said it will not shut its regulatory prying eyes and allow consumers to be taken for a ride. LUCAS AJANAKU reports.

When his name was linked to a relatively unknown company, Teleology Nigeria Limited, in the wake of the crises that threatened the soul of a United Arab Emirates (UAE) telecom company, Emerging Market Telecoms Services Limited (EMTS) then trading in Nigeria as Etisalat, the entire industry went to sleep with two eyes closed.
Adrian Wood became a household name in the telecoms sector having served as pioneer Chief Executive Officer of MTN Nigeria.
In just six months after superintending over the first call on the global system for mobile communication (GSM) in the country, he was quoted to have said that “business has been good” for the telco. It was believed that MTN, which paid $285 million for one of the four GSM licenses auctioned by the Nigerian Communications (NCC) in January 2001, hit profitability less than a year after it began operations.
A non-executive director of the board of the company, Wood’s magic wand at the backend, it was thought, would be put to use as the emergence of Teleology Holdings Limited as the preferred bidder for 9mobile, offered yet another opportunity for him to prove his mettle.
About six years after the takeover of 9mobile by Teleology, there is yet another fresh bid to acquire the spectrum of the company by MTN Nigeria owned by MTN Group of South Africa. The beleaguered youth-centric telco’s difficulties first came to light when its inability to continue servicing loans totalling $1.2 billion sourced in 2013 was reported to the NCC and the Central Bank of Nigeria (CBN) by a consortium of Nigerian and foreign banks.
Repeated failures to adhere to agreed repayment schedules had caused the banks to initiate take-over procedures, a move which caused its majority stakeholders, Mubadala Development Company of the UAE, to withdraw its shareholding in the company.
While 9mobile has denied the acquisition move, MTN Nigeria source has insisted that indeed, there are talks in that direction.
Public Relations Lead at 9Mobile, Chineze Amanfo was quoted to have said: “Our attention has been drawn to the speculated acquisition of 9Mobile spectrum by MTN. We would like to clarify that these assertions are entirely baseless and without factual merit. In the second quarter of 2023, 9mobile invested over N70 billion for ongoing network modernisation. Over 600 new sites, equipped with 4G LTE facilities for enhanced operations and market competitiveness were deployed alongside new broadband services to enlarge our fibre network across Nigerian cities. 9mobile remains focused on meeting the needs and aspirations of our growing customer base through our improved data rollout and innovative products and services.”

Lust for spectra

MTN Nigeria has been accused by insiders in the industry of having an insatiable appetite for grabbing spectra.
It has acquired the spectrum of Visafone, the only surviving operator in the code division multiple access (CDMA) sub-sector of the industry. It was also said to have acquired that of Intercellular.
Not too long ago, NCC approved the transfer and assignment of 10 megahertz (MHz) of spectrum in the 2.6 gigahertz (GHz) band from OpenSkys to MTN Nigeria.
The transfer was effective from September 7, 2023, and will be up for renewal on April 17, 2033.
MTN Nigeria CEO Karl Toriola said the spectrum will enable the telco to roll out its network capacity more efficiently and enhance its sustainability priorities.
“Not only will it help to support the growing demand for data in the country but will improve the overall Internet experience in line with our commitment to delivering quality service to our customers.
“Importantly, this also aligns with our ongoing support of the federal government’s plan to deepen broadband penetration in Nigeria,” Toriola said.
In May this year, NCC approved a spectrum lease transaction that allowed MTN Nigeria to lease 5MHz of spectrum in the 900MHz band and 10MHz in the 1800MHz band from Natcom Development and Investment Limited (NTEL) covering 19 states.
The lease was effective from May 1, 2023. It will span two years and cost N4.25 billion ($9.2 million at the time), including taxes, regulatory fees and ancillary charges.
In December 2021, MTN Nigeria and Mafab Communications both gained access to 5G spectrum during the first round of the licensing process paying $273.6 million each.
That spectrum enabled MTN Nigeria to launch its fifth-generation (5G) mobile internet services in seven cities in August 2022.
It would be interesting to see what the acquisition of 9mobile spectrum will mean not only for MTN Nigeria’s subscribers but for the country as well.
EMTS, trading as 9mobile now, was licensed in 2007, acquiring the Universal Access Service Licence (UASL) from the Commission. The licence enabled it to provide fixed telephony (wired and unwired/wireless), digital mobile services, international gateway services and national/regional long-distance services in addition to spectrum assignments in the 900 and 1,800 MHz bands.
The telco later bought a 3G licence from Alheri Mobile Services Limited, a subsidiary of the Dangote Group, owned by businessman, Alhaji Aliko Dangote. The licence thus put the telco on the same pedestal as the incumbents such as MTN, Airtel and Globacom.

Reactions

The PR Lead in 9mobile has clarified that these speculations were ‘entirely baseless and without factual merit,’ saying the telco had invested over N70 billion for ongoing network modernisation; over 600 new sites, equipped with 4G LTE facilities for enhanced operations and market competitiveness were deployed alongside new broadband services to enlarge fibre network across Nigerian cities.
“9mobile remains focused on meeting the needs and aspirations of our growing customer base through our improved data rollout and innovative products and services,” she said.
An expert in the industry who spoke in confidence on the subject matter said the choice of the word “acquisition” by the reports remained strong and curious.
“I know Spectrum leasing is something the regulator has considered. I have been seeing some sensational articles. Worldwide operators from time to time lease one another’s spectrum. Those transactions have never been considered as acquisitions,” the source said.
Pressed further, he acquiesced to the fact that the understanding of lease in land matters is that the owner of the land allows another person to use it for a specific number of years specified by the agreement after which the land reverts, arguing that in “this case, it is even more intertwined because both can still use the same spectrum during the duration.
So, even when 9mobile leases its spectrum, that will not mean cessation of offering services on its network as 9mobile.
“Of course yes. Not only that, it still uses the spectrum in its operations. Spectrum is a range. Specific frequencies can be used in different areas. Network planning takes care of that.”
On what 9mobile stands to gain in the deals, the source said: “That suggests 9mobile gets nothing out of such a deal. That should be the question if you ask me.
It’s sort of confusing then why 9mobile should agree to that deal should it finally sail through.
“Exactly; there must be a benefit to both parties. But we are only focusing on MTN, understandably,” the source said in a series of WhatsApp chats at the weekend.
The National President of the National Association of Telecom Subscribers (NATCOMS), Deolu Ogunbanjo has faulted the move by MTN Nigeria to swallow 9mobile, adding that it would make the former too powerful because it currently controls over 50 per cent of the entire industry subscribers.
He was quoted to have urged the NCC to frustrate the transaction as it was capable of birthing the era of an oligopoly in the industry.
“I must say that it is a bit surprising that MTN is now trying to talk to, you know, another mobile operator and in particular through the NCC to now acquire another spectrum belonging to another mobile network operator. I mean this should not be encouraged because MTN already has close to 50 per cent of Nigeria’s telecoms market subscription and then you have another mobile network operator with less than 10 per cent of the subscription.
“Do you want them (to go) extinct? Why do you want to talk to them? Do you want to acquire them because by the time you do not get the spectrum, the next thing will be that you want to acquire them, meaning MTN will now have between 50 and 60 per cent of the total telecoms subscription in Nigeria and that is a form of oligopoly? It is an oligopoly in the sense that they will become three major players however a particular player now has a lot of influence which is more than 50 per cent.
“That should be taken with a pinch of salt and should not be encouraged because MTN will become so powerful to the extent that it will now be dictating the pace of whatever it wants to do in the telecoms industry in Nigeria, that is what would obtain because it is having over 50per cent and getting close to 60 per cent of Nigeria’s total telecom subscription. “I do not understand why the mobile network operator in question is now allowing MTN through the NCC to have a shot at their spectrum,” Ogunbanjo was quoted to have said.

NCC reacts

The Director of Public Affairs at the NCC, Reuben Muoka said the Commission is not going to play the role of an interloper in a strictly business deal between two private entities. He, nonetheless, pledged to protect the interest of the subscribers against any predatory operators.
He said: “We don’t react to an ongoing commercial decision of two operators. Our spectrum trading laws are there. NCC will not be reporting the progress of their negotiations or transactions.
“You said we are not saying anything. Does it suggest they are getting the spectrum from NCC? “What will NCC say about the transaction between two companies? It is from them that you will get information and updates.
“Ours is that if any of the parties seek information regarding the regulatory standing of the other, we shall provide if it sufficiently informs the commission why the information is necessary; otherwise, we won’t be in the room where the negotiation is going on.
“They can only come when they consummate (their agreement) to seek approval. The rules are clear about spectrum trading with safeguards for subscriber interest. If the transaction will affect the industry negatively, NCC will be available to guide and advise with the application of the relevant rules. That is why the Commission is a responsible regulator.
“If an operator becomes dominant, there’re responsibilities imposed on it to mitigate such dominance so the matter of a monopolist arising does not arise.
“Also recall there was a time of exclusivity period which no longer exists. The important thing is to allow the industry to play by the rules.
“It would amount to micromanaging for NCC to read about two companies negotiating under spectrum rules and jump in to start directing.”

Red Also: Perform or be fired, Tinubu tells NNPCL board

There are, however, provisions in the Nigerian Communications Act (NCA) 2003 which the NCC had invoked to stop the hostile take-over of Etisalat (as it was then called) by local lenders.
“Accordingly, the Commission has drawn the attention of the banks to provisions of the Nigerian Communications Act (NCA) 2003 Section 38: “Sub-section 1–The grant of a license shall be personal to the licensee and the license shall not be operated by, assigned, sublicensed or transferred to another party unless the prior written approval of the commission has been granted; “Subsection 2 – A licensee shall at all times comply by the terms and condition of the license and the provision of this act and its subsidiary legislation,” NCC had said in a statement.
Ogunbanjo’s fears might not be baseless after all. According to NCC’s August subscriber stats posted on its website, of the total 220,715,961 subscribers, MTN has the largest number with 85,005,917 representing 38.58 per cent of the global system for mobile communication (GSM) market while 9mobile has 13,791,079 representing 6.26 per cent.

Long road to 9mobile
metamorphosis

The road to the emergence of 9mobile has been long and tortuous. After the exit of the investors from UAE’s Etisalat, which had a 45 per cent stake in the Nigerian business, which said its exposure to Etisalat Nigeria related to services was worth 191 million UAE dirhams ($52 million) the search for new owners earnestly began.
No fewer than 16 firms initially expressed interest and filed bids for the soul of 9mobile.
The former Executive Vice-Chairman/CEO of NCC, Prof. Garba Danbatta under whose watch the crisis began, announced the five entities that emerged as bidders for 9Mobile. He listed them as Globacom, Airtel, Smile Communications, Helios and Teleology Holdings Limited. The five were part of the 16 firms that initially expressed interest and filed bids with Barclays of Africa, 9mobile’s financial advisor.
They include MTN, ntel, Virgin Mobile from the United Kingdom and Vodacom of South Africa. Others are BUA Group, Morning Side Capital Partners, Obot Etiebet and Co, Blackstone Private Equity, and Hamilton and George International Limited.
The NCC boss had said: “Five bidders have emerged for 9mobile. They have been allowed to access the data room of 9mobile to enable them to access the financial situation of the company and subsequently make bids for the takeover of the company. But the takeover must be in a regulated manner.
“The CBN and NCC are supervising what is going on through an interim board jointly appointed by the NCC and CBN. We are going to do due diligence on the financial capacity of any potential bidder as well as the technical capacity.
“In the final analysis, we would like to see a 9mobile taken over by a bidder who has the financial and technical capacity to improve on the operations of the telco and add value in the delivery of qualitative telecom services in the country.”
Airtel pulled out of the bid for 9mobile. Globacom and Helios Investment Partners (LLP) submitted bids but failed to attach any cash for the troubled telco to Barclays Africa.
Teleology Holdings Limited submitted a bid over $500 million while Smile Telecoms Holdings quoted close to $300 million.
Effectively, only two companies made financial offers by the January 16, 2018 deadline. Going by the financial bid submitted by the two firms, Teleology Holdings Limited naturally emerged as the preferred bidder and Smile Telecoms as the reserved bidder.

Airtel, Smile dissent

Airtel’s U-turn came as a surprise to industry experts who had expected the company to push all the way through to become the largest operator in the country.
It would automatically have grown from being number three to number one by increasing its numbers to 52 million for voice and 33.5 million for internet had it emerged as the preferred bidder.
Airtel allegedly decided to pull out because “many things are not too plain with the entire process. Airtel is not interested in 9mobile because it sees little value in the company,” a source said.
Another source said the Indian carrier did not have sufficient information to make an informed bid.
“Airtel believes too many things are hidden about the health of 9mobile, and that it is too risky for anyone to buy the company. Things became compounded with the court case by Spectrum Wireless. Remember the Strive Masiyiwa case over the ownership of Econet which hurt the company for a long time,” an insider said.
Spectrum Wireless, an EMTS shareholder–which owns the 9mobile licence–went to court against United Capital Trustees Limited–representatives of the debtors–to stop the constitution of an interim board for 9mobile after the take-over in July 2017.
Although it lost the case, the Federal High Court later nullified the ex parte order and United Securities went on appeal.
Smile Telecoms Holdings Limited decried the tardy manner in which Barclays Africa handled the sale of 9mobile. It called for a process review to uphold transparency. Smile wrote a letter addressed to Barclays Africa dated February 21, 2018, and signed by Templars; the company’s solicitors.
It also expressed surprise and disappointment at how the selection process for the preferred and reserve bidders was conducted. Of particular concern to Smile was the fact that the selection of the preferred bidder was announced before the February 26, 2018 deadline. The company therefore asked for Barclays, to be a matter of fairness and urgency, to provide a proof that the company that has been selected as the preferred bidder has indeed satisfied all the conditions precedent to that selection.
However, in its reply of February 26, 2018, Barclays Africa promised to “be in touch with Smile to discuss any updates on the Transaction, to the extent considered necessary.” It expressed gratitude for Smile’s continued interest in the transaction but noted that its clients exercised their rights at their sole discretion to pursue an alternative path to completion of the transaction. Barclays restated its willingness to explore transaction completion with Smile should the pending process not reach a satisfactory conclusion.
Smile insinuated that Barclays Africa’s letter evaded the critical issues of due process and eligibility of the announced preferred bidder, wondering if the bidder was able to meet the laid down requirements for the transactions to reach an agreement on any financial accommodations with the syndicate lenders and the trade creditors. The requirement also entailed the preferred bidder to have firm, unconditional and committed funding for any cash payments and to provide a binding offer that is unconditional, excluding the formal licence approvals.
NCC’s intervention came on the heels of news that Teleology Holding had emerged as the preferred bidder for 9mobile. The announcement was greeted with protests in some quarters. A non-governmental organisation, Business Renaissance Group (BRG) had protested against the process, accusing Barclays Africa of sending the letter to Teleology in a hasty and pre-emptive manner. The group stated that Barclays Africa jumped the gun in announcing a preferred bidder. It noted that in a meeting held with the interested bidders on January 26, 2018, Barclays gave the two finalists in the bid process – Teleology Holdings and Smile Telecoms Holdings – the opportunity to raise their bid within 30 days, extending the deadline to February 26, 2018.
The group wondered why Barclays could not wait till the agreed date before the hasty announcement of a preferred winner. Also alleging bias against Barclays in the handling of the sale of 9mobile, BRG recalled that Barclays had earlier affirmed that any preferred bidder on selection would need to sign a Sales Purchase Agreement immediately and would have to instantly pay a non-refundable deposit of $50 million.
It decried a situation where Barclays gave its preferred bidder 21 working days to pay the non-refundable fee of $50 million. The group further underscored its allegation of a less than transparent handling of the entire bid process by Barclays Africa by recalling that some of the earlier entrants, among them two major GSM network operators, had opted out of the process alluding to lack of transparency.
It also claimed that, at least, two major vendors of 9mobile rejected the financial offers of the preferred bidder and had no confidence in the weak and unrealistic business plan presented. It wondered how such a bidder with questionable business plans would be able to sustain and improve the operations of 9mobile. BRG contended that the precipitated announcement by Barclays is indicative that the preferred bidder did not satisfy any of the precedent conditions.
Sector analysts are waiting anxiously to see how the new MTN Nigeria push for the soul of 9mobile will pan out.

QUOTE

That should be taken with a pinch of salt and should not be encouraged because MTN will become so powerful to the extent that it will now be dictating the pace of whatever it wants to do in the telecoms industry in Nigeria. That is what would obtain because it has over 50 per cent and getting close to 60 per cent of Nigeria’s total telecom subscription. I do not understand why the mobile network operator in question is now allowing MTN through the NCC to have a shot at their spectrum