Finding a credible buyer - NITEL

By Elisha Bala-Gbogbo
June 6, 2009 11:23AMT

Five companies are bidding to acquire the state-owned Nigerian Telecommunications Limited and its mobile arm M-TEL. The information emerged shortly after the government reversed the sale of both companies to Transnational Corporation of Nigeria Plc.

According to Joseph Anichebe, the spokesperson for the Bureau for Public Enterprises, the body responsible for all privatisation deals, five envelopes were received from prospective investors.
“At the expiration of the May 30th deadline, we received about five envelopes but we haven’t opened the envelopes,” he said.

The Federal Government has struggled to find credible investors for NITEL, which is heavily indebted and is plagued by deteriorating infrastructure. The government first tried and failed to sell the ailing telecoms company in 2001. The preferred bidder then failed to pay up the $1.3 billion price before the stipulated deadline expired.

In 2005, Orascom Telecom of Egypt, a company with experience in countries with infrastructure problems, had its $256.5 million offer rejected because the government thought it was too low. In August 2006, Transcorp paid $500 million for 51 percent stake in the company. However, the company was unable to raise the financing required to effect a turnaround. This, and Transcorp’s failure to meet the terms of sale contract prompted the government to revoke the contract last week.

The potential investors
Mr. Anichebe also confirmed that Globacom, the second national carrier, was interested in acquiring the 51 percent controlling interest in NITEL.

Mike Adenuga, the chief executive officer of Globacom, led a team of investors who indicated interest in the company, at a forum organised by the government’s privatisation agency in London in May.

Mr. Anichebe said that there were other parties that expressed interest.

“Another notable group was led by Adrian Woods, the former MTN Nigeria managing director,” he said. “There were interests from investors from Libya, India, Malaysia and Russia.”

NEXT gathered that Globacom, Afrinvest West Africa, FutureView Financial Services Limited, and Redwood Technologies are some of the companies that have signified interest in the 51 percent stake.

Globacom is a composite telecommunications company with a license that covers fixed lines, GSM, international gateway services, broadband services and leased capacity services. The company is widely recognised as a mobile operator because of its more than 16 million subscribers.

Globacom is one of the two companies in Nigeria branded as national carriers, the other is NITEL.

If Globacom’s bid is successful, it will effectively have a monopoly over telecommunication services in the country, replacing the old NITEL.

Ike Chioke, managing director of Afrinvest said: “We have potential buyers who have indicated interest but I’m not at liberty to discuss it at this time. It is my client’s position.”

Also confirming its role was FutureView. Elizabeth Ebi, the chief executive of the financial service company said, “We’re acting on behalf of a client... It’s a foreign client.”

What has NITEL got to offer?
Nitel is plagued by huge debts and deteriorated infrastructure. The number of its fixed lines have declined to less than 100,000 from at least 500,000 in 2001, and MTEL, the company’s mobile arm, has seen its subscriber-base drop to a few hundred thousand from 1.3 million since Transcorp took over in 2006.

Despite this damning statistics, it is still able to attract a reasonable number of buyers. Industry players believe this is because the company, as the first national telecom carrier, boast significant assets like a fixed line network, copper to the home, national cable network and switches, competent human resources, and the SAT3 cable, the only international fibre optic cable connecting Nigeria to the rest of the world.

“NITEL still has the monopoly of the SAT3 cable, at least the others by Globacom and Main One Cable companies have not been finished,” says Lanre Ajayi, president of the Nigerian Internet Group.

Transcorp Revocation
The discussions in London last month for the sale of NITEL occurred amidst speculation in Nigeria that the government would take the company back from Transcorp, a conglomerate that currently has its two chief executives in the custody of the Economic and Financial Crimes Commission in Abuja on charges of fraud.

And on Monday, June 1, government announced that it had “terminated” the sale of the company to Transcorp, citing Transcorp’s inability to meet the terms of the contract.

Mr. Anichebe said that Transcorp “failed to meet the conditions stated in the contract of sale it entered into” with the privatisation agency, adding: “Yes, the government has terminated the contract signed by Transcorp.

“I won’t say revoked because, it will imply that all conditions of the contract were met.”

Mr. Anichebe mentioned two conditions in particular - that Transcorp was to have a technical partner for the management of the company but the arrangement with British Telecom fell through, and that “Transcorp was to inject N8.9 billion within its first 100 days of assuming control of the company, and pay about 11 months arrears owed staff, but Transcorp failed to meet all these agreements.”

Also on Monday, the National Council on Privatisation, which oversees the Bureau for Public Enterprises halted the sale of any NITEL asset and said it would create a “technical board” to manage the company until a new investor is found. This means that the process of selling the outfit will be stalled for a while.

According to Mr. Anichebe, “We’re not going to open the envelopes until a decision is taken whether we’re going to extend (the deadline) or not. Why we haven’t opened the five envelopes is because government have not taken a decision whether we want to extend it or not, given the new development.”

Nigerians hope that the sale of NITEL will be successful, putting an end to government’s attempt to revamp the moribund national carrier.