Funding frown: Smile Telecoms faces the prospect of liquidation

Funding frown: Smile Telecoms faces the prospect of liquidation

Without the Public Investment Corporation’s support, a restructuring agreement with major lenders will fail, meaning that $51m of new money will not be injected into Smile, and the company will most likely face the prospect of liquidation.

Smile Telecoms, an African telecommunications company, is facing liquidation after the Public Investment Corporation (PIC) pulled its funding and would not sign an agreement that would see a further $51-million injected into the firm.

Founded in 2007 by Irene Charnley and Mohammad Wajih Sharbatly , the company operates in Nigeria, Tanzania, Uganda and Democratic Republic of Congo (DRC). The founders resigned from the board in January 2021.

In 2015 Smile raised $365-million (R5-billion) in new debt and equity financing – the largest amount of funding raised by a telecoms operator in Africa. This consisted of $50-million of equity funding from the PIC on behalf of the Government Employees’ Pension Fund (GEPF) and another part consisting of a $315-million, multitranche, multijurisdictional debt facility led by African Export-Import Bank, along with the Development Bank of Southern Africa, Diamond Bank plc, Ecobank Nigeria, the PIC, the Industrial Development Corp (IDC) and Standard Chartered Bank.

The majority shareholder is the Al Nahla Group, a Saudi Arabian-based company, with 49% of Smile. The PIC is a minority shareholder along with Renven Investment Holdings, a pan-African investment vehicle; Verene, representing Smile senior management and social entrepreneurs from South Africa; Telecom Investments, a Saudi Arabian investment company; Capitalworks, an alternative management company; the PIC; and Smile employees.

In total, the PIC has invested $100-million in the firm, in a combination of debt and equity. At the time of the loan, the then PIC CEO, Dr Daniel Matjila, said: “We are excited about our investment in Smile Telecoms as it provides us with an opportunity to accelerate and realise our mandate to invest in the rest of the African continent.”

The Smile investment falls under the PIC’s unlisted investments of the Isibaya Fund, which mostly includes loans and equity investments made to companies with strong BEE profiles.

The funds were used to expand Smile’s 4G network and for operating costs. At the time, the business case seemed secure. Smile calculated that there were more than 300 million potential customers in Nigeria, Tanzania, Uganda and DRC.

Internet penetration in all four of these markets is low, so increasing the availability of speedy mobile connections can help more people go online, especially when combined with increased smartphone ownership.

The […]

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