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Etisalat's Tanzania telecoms business defaults on $96 mln loan
May 28, 2014 / 10:21 AM / 3 years ago

Etisalat's Tanzania telecoms business defaults on $96 mln loan

DUBAI, May 28 (Reuters) - An unidentified bank has demanded Zanzibar Telecom repay $96 million owed to it after the Tanzanian mobile operator defaulted on the loan, a bond prospectus for parent firm Etisalat said.

Zanzibar Telecom, which uses the brand name Zantel, has struggled against larger rivals Vodacom and Bharti Airtel. Its subscriber base fell 41 percent last year despite plenty of room for growth in the sector, with mobile penetration in the East African country at 61 percent.

“Zantel is currently in non-payment default under a bilateral bank facility,” a bond prospectus issued by Etisalat, the United Arab Emirates’ largest listed company, states.

The facility’s provider, which Etisalat does not identify, has issued an acceleration notice, the document showed.

This is a formal demand that the entire balance, interest and late fees be paid. The prospectus says the outstanding amount is $96 million, warning “unless this default is remedied, the lender may take enforcement action against Zantel”.

Etisalat repeated the prospectus’s details regarding Zantel in a statement to Reuters, but declined to provide further information. Zantel did not respond to Reuters enquiries.

Etisalat is expected to issue a bond to replace a 2.1 billion euro ($2.86 billion) bridge loan it used to help fund its purchase of a controlling stake in Maroc Telecom.

Etisalat bought a 34 percent stake in Zantel in 1999, in 2010, upping its holding to 65 percent. Zanzibar’s government owns 18 percent and Meeco International Company 17 percent.

Etisalat does not provide financial details of Zantel’s operations, but the bond prospectus omits Zantel from a list of foreign subsidiaries that last year made a “positive contribution” to the parent’s operating profit, implying the Tanzanian operator was loss-making.

Zantel provided 0.8 percent of Etisalat’s revenue last year, or 311 million UAE dirhams ($84.67 million), according to Reuters’ calculations.

Zantel is Tanzania’s No.4 mobile operator. It had 1.81 million subscribers at December-end, down from 3.08 million a year earlier. That decline cut its market share to 7 percent from 11 percent, according to the industry regulator.

A separate Etisalat presentation for its first-quarter results said a sim card registration programme in Tanzania had “negatively impacted” Zantel’s subscriber base. But Vodacom and Airtel added customers over the same period. ($1 = 3.6730 UAE Dirhams) ($1 = 0.7345 Euros) (Additional Reporting by Abhinav Ramnarayan in London; Editing by Louise Heavens)

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