Wednesday, February 10, 2010

Nigeria - Can Nitel survive competition if it is sold?

[daily independent] The stage seems ready for the final sale of 75 per cent equity in the Nigerian Telecommunications Plc (NITEL) and its mobile arm, M-Tel, following the conclusion of the submission of technical and financial bids.

The Bureau of Public Enterprises (BPE), the government agency responsible for the privatisation of government parastatals, has just concluded another stage of the renewed privatisation of NITEL/M-Tel and has entered the next stage in the exercise, the elimination stage.

The elimination stage, known as the evaluation stage, will involve BPE trimming down on the number of prospective bidders, who may not meet the set criteria for the evaluation of technical proposals submitted by bidders.

The BPE, yesterday, began evaluation of the technical proposals from 14 operators bidding for NITEL and its mobile arm, M-Tel, following last Friday deadline given for the submission of technical and financial bids for NITEL and M-Tel.

BPE had penultimate week, extended the closing date for submission from Friday, January 22, 2010 to Friday, February 5, 2010, occasioned by the appeal of the 14 prospective investors for an extension, due to their inability to conduct effective due diligence as a result of striking NITEL/M-Tel workers, protesting the non-payment of their salaries.

Having attained this stage of NITEL/M-Tel privatisation, it is quite certain that BPE will soon complete the privatisation process and handover NITEL/M-Tel to the preferred bidder, having failed several attempts in the past to sell the ailing parastatal. Now that hopes have started rising and the picture of NITEL/M-Tel privatisation is becoming clearer, Nigerians are skeptical about the ability of NITEL/M-Tel to bounce back into the mainstream of telecommunication business and compete with other telecom operators, who have already garnered a large chunk of the market.

Most Nigerians, who bared their minds, said NITEL has lost track of competition because every infrastructure it had in place, is now obsolete and would have to start afresh with the installation of new and modern telecom infrastructure to enable it compete. Considering subscriber number that has surpassed 70 million across networks, with MTN, leading with over 25 million subscribers on its network, some are wondering if NITEL will be able to capture five per cent of the total subscriber number, even if it has to come out with the best known marketing campaign in the world.

Some are of the opinion that unless NITEL is sold to existing telecom operator, it will be difficult for an entirely new operator to handle NITEL/M-Tel operations, coupled with all its liabilities, which include outstanding staff salaries and debts owed.

The 14 operators bidding for NITEL/M-Tel include MTN Nigeria Communication Ltd; Etisalat Nigeria; Brymedia (WA) Ltd; consortium; Omen International Ltd (BVI); Fugar Technologies and MTI Consortium. Others are Telefonica Consortium; Globacom Nigeria Ltd; Conau Ltd; Dansacom Technologies Ltd; Adison Consulting; AF21/ Spectrum Consortium and

There are, however, controversies trailing the interests of MTN, Globacom and Etisalat in NITEL/M-Tel operations, a situation that prompted the Nigerian Communications Commission (NCC), the industry regulator to issue a position statement that the Commission will not grant two similar spectrum of licenses to a single operator.

NCC's position statement tends to disqualify Globacom, who already has mobile and fixed line licenses, as well as MTN and Etisalat that already have mobile licenses only.

Globacom has, however, protested NCC's position, insisting it is qualified to bid for NITEL/M-Tel.

But Titi Omo-Ettu, a one time NITEL management staff, who retired as a Senior Manager, Network Planning, and currently the Chief Executive Officer of Cyberschuul, disagreed with those who felt NITEL has lost track and would not be able to compete with other operators.

According to him, what BPE is auctioning is a First National Operator Licence, which is a great asset that no other operator has. "What is close to it is the Second National Operator Licence, which Globacom has, and cannot be compared to the First National Operator Licence in the area of coverage and operations." Omo-Ettu further explained that NITEL is just a name and could be changed by any operator who eventually buys it. What the buyer must understand is that NITEL operations need an operator with good telecom track record to manage it effectively. Etisalat, he said, entered the telecom market recently, and is currently competing well because the operator has technical competence in the management of telecom operations.

Expressing government's commitment to truly sell NITEL, spokesman for BPE, Mr. Joe Anichebe said he was optimistic that the planned renewed sale of NITEL/M-Tel, would eventually lead to a conclusive sale, such that both government and the public would be satisfied with the sale.

According to him, BPE had adopted a new process that would change the entire sale process and make it more attractive. The new process, he said, was the unbundling of NITEL into many parts such that buyers could buy in parts or in whole, depending on their technical expertise and financial strength. NITEL, he said, had been split into SAT 3, Domestic Fixed Lines, National Fibre Optic Transmission Backbone, CDMA Network, M-Tel and the Analog System. He said those that would bid separately for M-Tel would provide investment that would detach it from the NITEL network.

BPE had since 2001, tried to sell NITEL, but failed in its several attempts. In 2002, government tried selling 51 per cent stake in NITEL to Investment International Limited of London (IILL) for $1.2317 billion, but at the point of payment, the National Assembly queried the process of sale, a situation that forced lending banks to have a change of thought, after accepting to offer loan to IILL, and the company eventually lost out and forfeited its initial deposit, having been unable to pay the balance money.

Next was the contractual agreement reached between government and Pentascope of Netherlands to manage NITEL for some years before government could get credible buyer. Pentascope eventually mismanaged NITEL and plunged it into a more deteriorating condition, before government realised it and terminated the contract.

In 2005, government, through the BPE, tried again to sell NITEL through a bidding process that eventually saw Orascom Telecoms of Egypt wining the bid, but because government was not satisfied with the $225 million it was offering, government decided to cancel the process and began yet another bidding process, but ended up reaching a negotiated bidding with Transcorp who paid $500 million to acquire 51 per cent stake in NITEL in 2006.

The Transcorp deal was, however terminated, for its failure to raise the stake of NITEL as agreed in the contractual agreement between it and government.

Following the revocation of Transcorps licence to manage NITEL, government again initiated another move to sell NITEL, and Anichebe said he was hopeful that NITEL would be eventually sold this time, following the new measures to un-bundle NITEL/M-Tel.

Now that BPE has reached a new level in its renewed plan to sell NITEL, Nigerians are optimistic that BPE will get it right this time around, even through some are skeptical about the ability of NITEL to bounce back and survive the test of time.

Nigeria: Can Nitel Survive Competition If Sold?

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