Smile Telecoms, an Africa-focused broadband provider founded by former trade unionist Irene Charnley, says its has secured R550m new funding to recapitalise its business as part of a plan that it will strengthen and “safeguard” its operations.
Founded in 2007, the company provides high-speed internet services in countries such as Tanzania, Uganda and the Democratic Republic of Congo (DRC).
The company has been teetering on the brink of ruin for a number of years, owing to difficulty in making the operation profitable. Smile had been reported to be winding down after failed attempts to turn it around, Fin24 reported on Friday.
On Monday, the company said its new restructuring plan will provide up to $35.6m (R550.4m) of new money to fund the business in 2022 and that it was “business as usual”. This is in addition to $63.6m injected into Smile by its “Super Senior funder” in 2020 and 2021.
Smile launched the restructuring plan under the UK’s companies law on December 15 2021, with the court sanction hearing due to take place at the end of February.
“The recapitalisation to be implemented via the restructuring plan will strengthen and provide new funding to the business to allow Smile Telecoms Group to safeguard its operations and deliver its commercial objectives,” the company said in a statement.
The company, which did not indicate whether the plan would result in any job cuts or closing down of business units, aims to be done with the restructuring by end-May.
Smile had made a desperate attempt to save its business in 2021.
The Public Investment Corporation (PIC), which owns a minority stake in the company, was in talks in 2021 over an outstanding put option with Saudi Arabia-based Al Nahla Group, Smile’s largest shareholder.
In February 2021, Bloomberg reported that the company’s investors were in talks to save it from potential liquidation.
At the time, Smile had been handed a lifeline by its Saudi backer in the form of funds that allowed it to repay loans as part of a restructuring plan.
Smile Telecoms had launched a restructuring plan in the UK in February, according to Bloomberg. Al Nahla, an investment company for Saudi Arabia’s Sharbatly family, led a proposal to inject more than $50m cash in the company provided the PIC extended the terms of an option to sell its stake to other shareholders for $45m.
In an interview with Business Day a year ago, Ahmad Farroukh, Smile Telecoms’s group CEO, said the funding worth $51m had come from Al Nahla. As part of the deal, lenders were said to have pushed out Smile’s repayment of loans beyond March 2022.
“The commercial court in the UK has approved the restructuring plan and injection of fresh money by the major shareholder, Al Nahla, with agreement from all lenders, including the PIC,” Farroukh said.
“From an operation perspective, this is very good news for Smile. We will use the new funds to further strengthen the position of Smile in its existing markets.”
The success of the plan had hinged on an agreement between Al Nahla and the PIC, acting on behalf of the Government Employees Pension Fund.
Despite receiving the new funds, Smile had left questions unanswered about how it was performing operationally.
Industry pundits had pondered what led Smile to get to this point, and why it was necessary for the largest shareholder to lead the proposal of a restructuring plan in the first place.
That Smile has had to go through this process to inject fresh funding for the operations and push out some of the lending terms beyond March suggested a business in financial difficulty.
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