[Leadership/All Africa Global Media] The Nigeria Telecommunication Limited (NITEL) has gone into many troubles in an effort to privatise it with each effort crashing like a pack of sand at the end of every exercise. BETHRAND NWANKWO, in this report, x-rays the various attempts to sell the embattled telecommunication firm and concludes that the Bureau of Public Enterprises (BPE) still has an unfinished job.
The Bureau of Public Enterprises (BPE) on Thursday 17, 2011 announced the cancellation of the sale of the Nigeria Telecommunication Limited (NITEL) and its subsidiary, the Nigerian Mobile Telecommunication Limited (M-tel) to New Generation Telecommunications, the consortium that won the bid during the February 2010 privatisation exercise of the telecommunication firms. The cancellation, according to the privatisation agency, was due to the inability of the New Generation consortium to complete the agreed payment terms on the transaction.
In line with the rules, Omen International, the reserved bidder during the transaction was expected to be invited to acquire the troubled telecommunication firms.
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Giving reason for the cancellation of the exercise, the Director-General of BPE, Ms Bola Onagoruwa, while speaking at a budget defence session with the House of Representatives Committee on Privatisation, said New Generation failed to abide by the terms of the deal in spite of several extensions of the payment deadlines.
She disclosed that the BPE had already made recommendations to the National Council of Privatisation (NCP) that NITEL/M-tel should go to the reserved bidder, adding that the privatisation agency would seal the deal with Omen International as soon as the approval of the NCP was received.
"We wrote the NCP Chairman in January over the issue intimating him on the situation and gave him our recommendations. He wrote back seeking for clarification which we have given. What we are now waiting for is the permission of the NCP to go ahead to give the sale to Omen International," she said.
The New Generation Telecommunication won the bid on an offer of $2.5 billion for a 75 per cent stake in NITEL/M-tel, while the reserved bidder, Omen International Consortium, offered $956,996,091.
The current effort to transfer NITEL/M-tel to a competent investor is the fourth in the series and all the previous attempts ended in controversies.
In the history of privatisation worldwide, hardly has there been a more difficult privatisation process than the attempt to divest the Nigeria Telecommunication Limited (NITEL), and its mobile arm, the Nigerian Mobile Telecommunication Limited (M-tel).
The tortuous road to NITEL's privatisation first began with the liberalisation of the telecommunication sector in 2001. This empowered more efficient and business minded private competitors to reap from the sector while the political managers operating NITEL, busied themselves with stripping the national asset of the last breath of life remaining in it.
In 2002, Investors International London Limited (IILL) made an attempt to acquire NITEL, but defaulted in paying the bid price of $1.317 billion and lost the opportunity. After that attempt to sell the firm failed, BPE, under the former Minister of Federal Capital Territory (FCT), Mallam Nasir el-Rufai working on the instructions of former President Olusegun Obasanjo, took formal steps to outsource management of NITEL by engaging an unknown firm, Pentascope of Netherlands to manage the pioneer telecommunication company in Nigeria.
However, despite the hues and cries from Nigerians that Pentascope had no known address and telecom experience to revive the ailing company, the then director general of BPE, Mallam el-Rufai stood his ground and handed over the telecom firm to the Dutchmen.
Under the contractual agreement, Pentascope was expected to manage and prepare NITEL for its eventual privatisation. If it had been properly managed, NITEL would have attracted capable and eligible investors. The management contractor was also expected to expand its services in 2003, by creating more land lines and providing at least 500,000 lines for M-tel, that was never to be.
In spite of inheriting several billions of naira upon taking over NITEL, Pentascope was said to have incurred several billions of debt within the two years, thereby creating doubts about its ability or competence in managing the troubled NITEL. By the time the Dutchmen left, NITEL, which hitherto, had over 400,000 lines could not boast of 300,000 lines.
However, NITEL's problem was compounded when its monopoly was broken with the award of second national carrier licence to Mike Adenuga's Globacom.
The second attempt at privatising NITEL was in the late 2005, when BPE came close to selling it to Egypt's Orascom Telecom, which analysts said had experience of countries with infrastructure problems as Nigeria and would have been well-placed to revive NITEL's fortunes, but it failed as a result of greed on the part of government.
The Egyptian telecom had offered $256.5 million which federal government said was below expectation and thereafter cancelled the transaction. It was learnt that federal government has pegged the price as $500 million but the Egyptian firm only offered $256.5 million which was rejected.
After the failed attempt to sell NITEL to Orascom, a group of Nigerians led by the former Director General of Nigeria Stock Exchange (NSE), Prof (Mrs) Ndi Okereke-Onyiuke and guided by former President Olusegun Obasanjo, horridly formed Transnational Corporation (TransCorp) and NITEL and Mtel were handed over to TransCorp at the cost of $500 million.
The sale of NITEL to TransCorp in 2006 was believed to be the most successful with TransCorp acquiring 75 per cent share of NITEL/M-Tel which was later reduced to 51 per cent due to issues of finance and labour problems.
NITEL's problem under TransCorp was more internal than external. A combination of visionless/inexperienced majority owners, inept management, poor financial profile, demoralised employees and a lack of customer service acumen made nonsense of the exercise.
There is no doubt that the federal government contributed in the company's woes and helpless situation NITEL finds itself at the moment. Nevertheless, if one looks back with the benefit of hindsight, it is apparent that the process that led up to its privatisation had set NITEL up to fail and eventually go bankrupt.
Prior to the last privatisation exercise which was won by the New Generation consortium, BPE had planned to unbundle NITEL and sell it in bits but at the same time wanted an investor who was ready to acquire the entire conglomerate. The NITEL's components include: the undersea cable, otherwise known as SAT-3; domestic fixed line telephony; national fibre optic transmission backbone; code division multiple access (CDMA) network; and M-tel (the GSM arm).
Prospective investors were then invited to apply to acquire either a 75 percent equity in the entire NITEL conglomerate or a stake in one or several of its components. So many telecommunication firms including; MTN Nigeria Communication Limited and Globacom Nigeria Limited indicated interest to acquire the entire conglomerate but were latter disqualified on the advice of the Nigeria Communications Commission (NCC), which advised that any existing GSM operator in Nigeria should not be allowed to buy entire NITEL because since the operator has a GSM licence, it would amount to having two licences.
The Mike Adenuga's Globacom was disqualified from NITEL conglomerate because it has both GSM licence and another licence as the second national carrier. Acting on the advice from NCC, firms such as MTN and Globacom were barred from bidding for the NITEL conglomerate but could only bid for one or several of the components they did not have similar licences.
Based on the rules, MTN Nigeria, therefore, placed a $25 million bid for a stake in the SAT-3, the undersea cable; Globacom was allowed for other components, except for undersea cable and the mobile unit.
At the end of the day, BPE cleared six companies to bid; these were: Brymedia (WA), AFZI/ Spectrum Consortium, MTN Nigeria Communication, Globacom Nigeria Ltd, Omen International Ltd (BVI) and New Generation Telecommunications Ltd (formerly Telefonica Consortium).
Since BPE said it would give preference to any firm or group of firms that would bid for the entire NITEL conglomerate, the firm was given to the New Generation Telecommunications Consortium which emerged preferred bidder offering $2.5 billion, Omen International came second with an offer of $956,996,091. Brymedia emerged third with $550 million offer. Other contenders who bid for the acquisition of 75 per cent equity in NITEL and its M-Tel subsidiary included AFZI/Spectrum Consortium, fourth with a bid of $375.5million.
The New Generation Consortium included: China Unicom of Hong Kong, Minerva Group of Dubai and Nigeria's GiCell Wireless Ltd.
After the emergence of the preferred bidders, an outcry was raised challenging the conduct of the process following controversial denials by some members of the consortium of some of the bidders denying any knowledge of the deal.
About six months after the bid was concluded, China Unicom (Hong Kong), a member of New Generation Consortium, took paid advertorials in one of the national dailies and denied being involved in the deal.
The telecom firm announced in a statement that one of its subsidiaries, China Unicom (Europe) Operations Ltd was interested in NITEL, but there are no discussions on any "substantive and legally binding agreements." Filing on the Hong Kong Stock Exchange (HKSE), quoted the firm as saying that its UK unit, China Unicom (Europe) Operations Ltd., "would be interested in exploring the possibility of equity investment in NITEL," and "indicated its interest in the provision of technical and managerial support services." The statement credited to China Unicom (Hong Kong) made many Nigerians uncomfortable, as why a member of the winning consortium was telling the world that there are no "legally binding agreements" on the sale of a corporation it bid for $2.5 billion. Worse, to say that its subsidiary "would be interested in exploring the possibility of equity investment in NITEL," after completion of the exercise raised serious questions about the position and interest of China Unicom in NITEL, and by extension, the New Generation Consortium.
Furthermore, according to postings on Bloomberg.com and Dow Jones, the firm, in the statement added that a possible investment in NITEL "is subject to certain conditions being fulfilled." The firm also disclosed that it has not started discussions on any "substantive and legally binding agreements." The controversy was ignited when Sophia Tso, spokesperson for China Unicom denied that the firm was part of the New Generation Telecoms consortium which won the bid for NITEL.
Speaking with Bloomberg on telephone from her Hong Kong base, Tso said, "neither Unicom nor its unlisted parent joined the bidding for NITEL, as Nigerian Telecommunications is known." The denial by China Unicom, was speedily followed by that of another consortium member, Telcom New Zealand, which also denied being part of the Brymedia consortium that came third in the bidding process, adding to speculations that all was not well with the deal even though Brymedia also swiftly responded to the denial which it claimed was not true.
Though BPE swiftly rose up to defend itself by denying the claims of the firms, the controversy raged on until it consumed the job of the former Director General of the Agency, Dr Christopher Anyanwu, which led to his suspension.
However, the Managing Director of GiCell, Alhaji Usman Gumi, the Nigerian member of New Generation Consortium, was able to douse the fear of many Nigerians when he reiterated the Chinese firm's involvement in NITEL bid, which he said, only extended to an interest in offering technical and managerial support.
Gumi assured Nigerians that the consortium had the financial backing from Dubai's Minerva Group and that the $2.5 billion bid was fair value for the firms.
Questions thus arose over the participation of China Unicom (Europe). For instance, was the "technical and managerial support" Gumi said Unicom was offering part of the $2.5 billion bid, or was the support coming free of charge? But Gumi, who is the only visible member of the consortium, was optimistic that the consortium had both the financial and technical know-how to manage the embattled NITEL. He said that China Unicom (Europe) would "consider a minimum of 20 per cent equity participation on terms to be agreed." What was not clear then was whether the remaining 55 per cent equity would be paid by Minerva Group and by extension, how much was each member of the consortium, including his GiCell Wireless, was going to contribute. Nigerians were not bothered on how much each member of the consortium would contribute, but what mattered to many was that the full price be paid, but that never came to be as the consortium kept dribbling BPE and the entire country.
In order to address the controversy, NCP set up a seven-man committee in March, 2010 to conduct further due diligence on several bidders, after Ms Bolanle Onaguruwa, a director in the Agency was named Acting DG.
In spite of the controversy, acting chairman, Technical Committee of the NCP, Taiwo Osipitan, after three months, in an assessment report not only recommended that the bid result be ratified, but that the preferred winner should be issued with a confirmation letter, as the transactions followed a "very transparent bid process" in accordance with international best practices and standards.
The President, thereafter, set up another committee headed by the former Attorney General and Minister of Justice, Adetokumbo Kayode, but the committee was still on its assignment when the cabinet was dissolved. Although, information available had it that the report prepared by the minister alone, upheld the transaction. Another committee, headed by the current Minister of Justice, Mohammed Bello Adoke was also constituted which equally upheld the transaction and asked the President to approve the deal.
However, after a few months delay, the President gave New Generation Consortium the go ahead to make the payment.
The New Generation was given 10 calendar days starting from October 25, 2010 to pay $750 million to secure the bid and thereafter pay the balance of $1, 750 million in 60 days from the date of the issue of an offer to close the deal that would give it operational control of NITEL.
The deadline expired on November 4, 2010, without the group making any payment but instead, sent a letter to the NCP, asking for an extension of time to 30 banking days to enable it remit the funds through its bankers.
The Consortium, thereafter, got another 20 working days extension to enable it pay the $750 million to secure the bid, having failed to pay within the initial 10 days in accordance with the provisions of the Requests for Proposal (RFP).
The GiCell boss hinged the inability of the consortium to make the payment to difficulty faced in concluding the due diligence and compliance processes associated with the transfer of such huge funds because its bankers had developed 'cold feet'. "The partners needed to be reassured of their investment security," he added.
New Generation made spirited efforts to meet the deadline, with two of its officials travelling to Dubai in an attempt to close the deal with the proposed financier and a member of the consortium, Minerva Group. But despite the attempts made, the consortium was unable to come up with the money.
With the inability of the consortium to meet up with the payment, the Federal Government had two options on its next line of action. One was to grant further extension or invite the reserved bidder, Omen International.
Last month, the GiCell boss had told LEADERSHIP in a telephone interview that the Consortium had secured funds from its foreign financiers and had written a letter to the BPE asking for more time to make the payment after the Christmas holidays because the financial world has closed for the year.
But before the Christmas break, the DG of BPE, Ms Bola Onaguruwa had warned that there would be no further extension of the deadline if the consortium failed to meet the deadline and true to the warning, the privatisation agency, on February 17, 2011 announced the cancellation of the exercise.
As it is now, many Nigerians expect the BPE to invite the New Generation Consortium which claimed it had secured funds from its foreign financiers to make the payment or better still, invite the reserve bidder, Omen International, which came second in the bidding process, to come forward and make payment. But it remains to be seen if New Generation will be considered again because the Director General of BPE had vowed never to extend the deadline.
Commenting on the issue, a source within the BPE who opted to remain anonymous, wondered how bidders without any track record in the telecom industry won the bid to manage a firm as big as NITEL.
His words: "NITEL is a prized national asset which unfortunately was ruined by mismanagement. We have made several efforts to sell it in the past without success and we should have learnt our lesson by now. The right thing to do is to allow a company that knows the Nigerian environment, a company that has a stake in the country, a company that can immediately revive the organisation. Going for a greenhorn in the industry may take us back to the days of Pentascope and IILL and we will begin another round of endless search for a core investor," he stated.
For a former staff member of NITEL and President, Association Telecom Companies of Nigeria (ATCON), Mr Titi Omo-Ettu, "NITEL no longer exists to me. I have long run out of ideas on saving NITEL." Like Omo-Ettu, many Nigerians have run out of ideas on saving NITEL, the telecom firm appears to have defied every solution to make it come back to life.
Writing on "NITEL, BPE and Strange Allegations," Mr Segun Oruame said there are mounting questions on whether the BPE has not already chosen a private-sector owner for NITEL and whether its advertisement asking prospective buyers to bid for NITEL is not a sham. According to him, there are growing allegations of bribery and money exchanging hands to pave way for a pre-selected buyer.
But the truth of the matter remains that, BPE has a litany of failed privatisation exercises that put the onus of responsibility on it to prove that it is transparent on the exercises. More than ever before, the BPE must show that it has no hidden agenda on the 'NITEL plague.'
Nitel/M-Tel - One Privatisation, Too Many
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