Strong competition in its various telecoms markets over the past five years, the devaluation of local currencies and the recent global health crisis have plagued the growth plans of the African operator Smile Telecoms. The company is currently playing for its survival.
The telecommunications company Smile Telecoms, operating in Nigeria, Tanzania, Uganda and the Democratic Republic of Congo is threatened with liquidation. One of its minority shareholders – Public Investment Corporation (PIC), the pension fund for South African civil servants – wants to withdraw from the capital, in accordance with the financing agreement signed in 2015 with the majority shareholder Al Nahla Group. But the poor financial health of the telecoms company is blocking the process.
PIC has in fact prevailed its put option on 7.69% of shares of Smile Telecoms acquired for 50 million USD. This is part of the 365 million USD raised by the group five years ago to finance its growth. The put option deadline expires on March 31. The liquidation could be the only solution to return in its rights.
Al Nahla Group offered PIC to extend its put option by 12 months, but the minority shareholder rejected this proposal. Its spokesperson, Sekgoela Sekgoela, has also called on the other shareholders of Smile Telecoms to find means to preserve the rights of PIC customers.
The financial difficulties that Smile Telecoms is encountering – which prevents it from respecting the terms of the financing agreement signed with PIC – are the consequence of the strong competition suffered in its African markets, in addition to the devaluation of certain local currencies during recent years, especially the naira, not to mention the repercussions of the global health crisis on an already struggling telecoms operator.
The case which has been brought before the English justice must be the subject of an additional hearing on March 30, 2021 to allow the continuation of the negotiations between the parties, and perhaps to avoid a liquidation of Smile Telecoms.