One Tip For New Etisalat Nigeria Board, To Fix The Telco

Etisalat Nigeria has a new board with an Acting CEO, Boye Olusanya. They have the mandate to pilot the affairs of this company and make sure that it remains a critical component of the Nigerian telecommunication sector. The work will be challenging and certainly no single solution will suffice.

A new board has been constituted. The new board appointments are: Dr. Joseph Nnanna (CBN), Mr. Oluseyi Bickersteth (KPMG), Mr. Ken Igbokwe (PWC), Mr. Boye Olusanya (former DMD of Celtel) and Mrs. Funke Ighodaro (former CFO, Tiger Brands)

There are many challenges which the new board has to deal with. A LinkedIn user enumerated some of them which resulted to the default in the $1.2 billion loan which Etisalat Nigeria took from banks (edited for clarity). He was responding to our earlier piece on the Etisalat problem.

I have looked at all what Analyst have said about Etisalat and it’s root cause and this comment here is the closest to the best explanation for the root cause of Etisalat’s problem..

At times like this everyone has an opinion to support his or her own bias, but the fact remains the fact…

Revenue is halved in dollar terms from devaluation. N325m used to be about $2m in 2014; now this is $1m. So technically Etisalat’s revenue reduce 2X.

Cost: most of the Network Operational Cost are priced in USD. So technically, a cost which was N155m in 2014 is now N325m.

Short term debt..Yes because we know that even USD borrowed from a Nigerian Bank is a short term debt; Etisalat is still in its growth phase and needed capital for expansion.

Debt value: Used to be $1.2billion, or let’s say $600m; without devaluation this was N90billion, with devaluation this is now about N200billion. So in naira terms, cost has risen, revenue has remained the same, debt has doubled.

The growth phase, J curve environment for Etisalat is different from the likes of MTN and all.. There was once ARPU was $20+..when MTN had 12million subs ARPU was $18..Today’s ARPU is less than $4.

So in a nutshell, Etisalat’s issue is what is being publicly branded. Other issues which has been raised or talked about is what my CFO would refer to as scratching the surface. Pricing, innovation, customer retention and all others are issues which could easily be solved just by tweaking some decisions within.

BTW Pricing has a volume end as well, you need to understand this relationship before you take price either up or down. I am even from a position that the Telcos are suffering from under pricing. Coke has taken price and the Telcos haven’t. It’s just a matter of time and the effect would be felt industry wise especially as regards capacity investment.

Great insights from the commenter. However, we disagreed in one key sentence: “Pricing, innovation, customer retention and all others are issues which could easily be solved just by tweaking some decisions within:. I do believe that if Etisalat has managed its pricing well, to avoid customer exodus, it could have managed the challenges better. You cannot be in growth phase and be losing 3 million subscribers in 6 months.; that is Etisalat records. The table below is from from NCC.(Nigerian Communications Commission), the industry regulator.  Comments below.

These are the key takeaways:

• Etisalat NG lost about 2 million users in Q4 2016. For a #4 operator to lose that number of customers means it is going to struggle. This has nothing to do with any loan in dollars or Naira. All other operators gained from it including MTN, Glo and Airtel
• In Q1 2017 , it lost about another 1 million. Etisalat lost nearly the same number of users as MTN, but MTN is about 3x its size. So Etisalat lost most, technically. Airtel gained users while Glo lost just a few (about 30,000)
• Had Etisalat NG kept the 2 million it lost in Q4 2016 and each of those subscribers spending  N2,000 during the period, on average, it would have earned N4 billion naira extra in revenue.
• Also, had Etisalat NG kept the 1 million it lost in Q1 2017, it would have added extra revenue of N2 billion using the same average spending of N2,000 per user. Please carry forward the N4 billion owing to the lost of 2 million users in Q4 2016. With that, Etisalat would have earned extra N6 billion in Q1 2017 on top of whatever it earned.
• Add these two extra revenues of Q4 2016 and Q1 2017, Etisalat would have made extra N10 billion (~$30 million). This would have kept it in a good position to be servicing its debt.

Rounding Up

As we wait for the latest quarter subscriber data from NCC, to ascertain if Etisalat has started growing again, the Board has one duty – stop the exodus and keep growing user base again. The loan will take care of itself if you can bring back the lost 3 million users in the last 6 months. You need to stop any more customer loss and move quickly into growing. Every Etisalat staff must be a sales person. Yes, the business for the board is simply Customer Retention and Customer Acquisition.

image credit: Dubai business directory

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