Nigeria - the decline and fall of NITEL

Nigeria: The Sorry Saga of Nitel

After several attempts to salvage the government-owned telecommunications company, NITEL had proven to be a basket case. For this reason, the federal government decided to sell off its controlling shares but the company has proven to be a hard sell.

In 2002, the government wanted to sell off 51% if its shares to a core investor and 16 bidders filed applications.

Three companies qualified, including Telnet, Newtel and Investors International of London (IIL), all of them comprising what was said to be consortia of reputable telecommunication firms. After two rounds of bidding, ILL won the tender by offering 1.317 billion dollars, beating the Telnet consortium narrowly.

As part of the conditions of sale, ILL paid 10% deposit of the bid price, with an agreement to pay the balance afterwards. However, when the deadline expired, ILL could not pay up the balance. The consortium, as part of the deal, lost its deposit and the federal government reverted to Telnet, the reserved bidder. However, Telnet had lost interest in the transaction and on this account, the sale of NITEL collapsed in March 2002.

Thereafter, government handed over NITEL to Pentascope as a managing contractor in controversial circumstances. Pentascope, according to reports, lacked the technically ability and financial muscle to manage NITEL. Significantly, the fortunes of the nation's telecommunications company, under Pentascope, dwindled and the federal government eventually terminated the contract.

Afterwards, the Bureau for Public Enterprises (BPE), in an opaque manner, sold NITEL to Transcorp, a company owned by Nigerian businessmen with close links to the Obasanjo government. Significantly, the sale was greeted with uproar as the bid price of 750 million dollars was seen as very paltry. However, government defied the weight of public opinion and sealed the transaction.

But instead of adding value to the ailing telecommunications company, Transcorp was fumbling while NITEL's condition was deteriorating. Transcorp, according to Mr John Odey, the Information and Communications Minister, failed to inject fresh funds into NITEL and it did not bring technical partners to the organization, after British Telecommunications pulled out of their partnership. The government, he further said, intervened to save NITEL from imminent collapse and the action, the minister added, was at the behest of Transcorp.

The presidency, after the minister's announcement, further clarified federal government's action, arguing that it didn't reverse NITEL's sale as widely understood. Rather, the federal government intervened following "petitions and appeals from several stake-holders, including the union and management of Transcorp." The federal government, in the new arrangement, will dilute its shares to 24 percent while Transcorp's shares will come down to 27 percent. The rest of the 49 percent controlling shares will be up for grabs by any prospective strategic investor. BPE, to this end, will undertake a transparent, public and sincere bidding for the divested shares, according to the presidency.

Significantly, we do not see any fundamental difference between the minister's statement and the presidency's clarification because they both amount to a reversal. However, Daily Trust commends the federal government both for saving the telecommunications giant from collapse and offering a new beginning to resuscitate NITEL. By making the process more open and transparent, credible telecommunications companies may bid for it and after wining the bid, may also add value to NITEL. However, noble intentions are not enough to pull the company back to its feet, as the devil is in the courage to carry the sale through in an honest manner.

The telecommunications company has suffered enough to the point that it is now almost totally irrelevant in the telecommunications industry. However, the poor services offered by the major players in the hugely popular mobile telephone market suggests that a company like NITEL could still be relevant. If a more efficient NITEL bounces back it will have to compete with other companies in a deregulated sector. This will widen the choice of consumers