Sunday, February 28, 2010

Nigeria - The messy sale of Nitel

[next] There must be a sense of déjà vu among watchers of Nigeria's privatisation programme with the unfolding drama surrounding the sale of Nigerian Telecommunications Limited, better known by its acronym NITEL.

Last week, the Bureau of Public Enterprises proudly announced the choice of a preferred bidder for the utility months after the last core investor -Transcorp - was forced to give up a large part of its holdings in the company. In 2007, the Federal Government revoked the sale of NITEL to Transcorp because the company had "failed to achieve the objectives of the privatisation guideline".

The sale of the company to Transcorp itself came after several false starts, but the ongoing controversy over who actually won the 2010 bid is likely to complicate government's efforts to unload the company on private investors.

Hardly had the last drop of celebratory wine been drained from ecstatic mouths last week Wednesday than Unicom, a Chinese company advertised as a member of the winning team, denied having any part in the consortium's bid. An official of the company, speaking from Hong Kong, said neither the Beijing-based company nor its parent company, participated in the bid.

Things were going to get even messier. Telecom New Zealand International, listed as technical partners for another bidder, Brymedia West Africa Limited, which emerged third with an offer of $551million, also said they were never involved in the bidding process.

New Generation Consortium, which won the bid, decided to put a brave face on the debacle. It attributed Unicom's reaction to a case of mistaken identity between China Unicom (Hong Kong) Limited and China Unicom (Europe) Operations Limited, which it claimed was actually providing technical and managerial support for the consortium.

But even the European arm of Unicom denied any knowledge of its participation. China Unicom has, however, backtracked a bit by saying it was ready to work with New Generation to run Nitel.

But the denials and hedging tend to support allegations that due diligence and transparency were not the most important qualities considered by those in charge of the bid process.

The failure of Nigeria's privatisation programme could best be captured in the travails of the national utility, which was, at some time in the not too distant past, one of the key agencies of government.

In 2001, during the first attempt at privatising NITEL, Investors International London Limited (IILL) emerged the preferred bidder with an offer of $1.317 billion for 51 per cent equity in the company. This ended in disaster after the firm failed to meet the payment commitment for the bid and it, along with its financial backers, First Bank of Nigeria, lost their deposit.

In 2003, government tried a different tactic using a strategic investor sale through a management contract with another European firm, Pentascope; that also failed. Yet a third attempt, which saw Orascom of Egypt emerging the front bidder, with a $256.53million offer, did not succeed as the bid was deemed below the reserve price for a 51 per cent stake in the company.

There is no disputing the fact that Nigerians - aside from some harassed government officials, unpaid staff and former employees of the company- are hardly bothered about what happens to Nitel anymore. More nimble telephone operators have taken over the industry offering a suite of services that the former national champion would struggle to match.

But the company still matters because it is still a drain on the national purse and its staff of over 10000 cannot be left floundering. In addition, the company still runs the national telecommunications gateway - the Sat 3 - which remains a monopoly until cable projects of private companies such as Glo, come on stream.

So, it is imperative that a genuine core investor be found for Nitel.

Professionalism and decency demand nothing less.

The messy sale of Nitel

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