S&P retains Etisalat rating despite Nigerian loan default

A man walks past a sign at the headquarters of telecommunications company Etisalat in Dubai, file. REUTERS/Jumana El Heloueh

S&P Global Ratings has given its vote of confidence to UAE telecoms operator Etisalat despite its Nigerian subsidiary defaulting on its loan payment.

The ratings company said it would maintain Etisalat’s AA-/Stable/A-1+ S&P rating even after Emerging Markets Telecommunication Services or Etisalat Nigeria missed its February payment on its US$1.2 billion.

Etisalat Nigeria said it missed the payment owing to an economic downturn in the country, a currency devaluation and a lack of dollars in the local market.

“We understand that debt at Emerging Markets Telecommunication Services is neither guaranteed by Etisalat nor does the default trigger a cross default under any of Etisalat’s own debt obligations,” said a statement from S&P Global.

“EMTS constitutes an insignificant part of Etisalat’s global business (no dividends received from EMTS since its establishment) and therefore does not impact our assessment of Etisalat’s stand-alone credit profile or our credit rating on the entity.”

Etisalat owns a 45 per cent stake in the affiliate. Etisalat Nigeria has 20 million subscribers, according to Nigeria’s telecoms regulator, making it the country’s No 4 mobile operator with a 14 per cent market share.

S&P Global said that since EMTS trades under the Etisalat brand, the default may have a negative impact on its brand value in Nigeria.

Etisalat Nigeria signed the $1.2bn medium-term facility with 13 Nigerian banks in 2013, which it used to refinance an existing $650 million loan and fund a modernisation of its network.

A Reuters report on March 8, quoting a banking source in the African country, said that Etisalat Nigeria had given notice to Nigerian lenders that it would miss a payment.

The report said lenders wanted Etisalat to increase its stake in its Nigerian affiliate to reduce the risk of the company pulling out of the country because of the debt issue.

Banks involved in the loan deal include: Zenith Bank, GT Bank, First Bank, UBA, Fidelity Bank, Access Bank, Ecobank, FCMB, Stanbic IBTC Bank and Union Bank.

Nigeria has been running short of dollars as oil revenues have fallen along with the price of crude, pushing the economy into its first recession in a quarter of a century.