Etisalat's Zantel defaults on $96m loan
Dubai, May 28, 2014
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 per cent last year despite plenty of room for growth in the sector, with mobile penetration in the East African country at 61 per cent.
"Zantel is currently in non-payment default under a bilateral bank facility," a bond prospectus issued by Etisalat, the UAE's 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 per cent stake in Zantel in 1999, in 2010, upping its holding to 65 per cent. Zanzibar's government owns 18 per cent and Meeco International Company 17 per cent.
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 per cent of Etisalat's revenue last year, or Dh311 million ($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 seven per cent from 11 per cent, 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. - Reuters