Ijeoma Nwogwugwu
18 February 2008
column
Lagos — What on earth is wrong with this administration? It approbates and reprobates at will as though it functions in a vacuum. It even acts like a government in opposition and not one serving as a continuum of the last administration, produced by the same political party. No thought is given whatsoever to thinking things through before it takes decisions. It is all about scoring cheap popularity points, cleverly disguised under what has now become its mantra: 'due process and rule of law'. Those words have become so annoying that they make me want to scream in frustration every time I hear them.
The reversal of the sale of NITEL and its mobile subsidiary, MTel, two days ago is a typical example of yet another policy reversal that will cost this administration dearly. It was prompted by a 21-day ultimatum given by the Senior Staff Association of Transport and Communication workers union urging the government to reverse the sale of the telecommunications company to the majority shareholder in NITEL, Transnational Corporation of Nigeria Plc. The union was unhappy over attempts by Transcorp to carry out a retrenchment exercise of the staff of NITEL and Mtel, and the non-payment of workers salaries for an extended period. The union also accused Transcorp of not making any meaningful progress to turn around the fortunes of the firm since its take over in November 2006. All this is true.
What is not entirely true is the argument by the union that Transcorp had ceded part of NITEL's Sub-Atlantic 3 submarine optical fibre cable network (known as SAT-3) to a consortium comprising three telecoms service providers - South Africa's Dimension Data, Cisco and Cable and Wireless, both of the US. What Transcorp did was to outsource the marketing of the transmission capacity of the fibre network to the three operators, which was a better marketing strategy than what presently prevails whereby NITEL markets the capacity itself. The problem is that in entering into the agreement, Transcorp foolishly did not carry the staff of NITEL along. They therefore wrongly assumed that their "priceless" network had been surreptitiously sold. Trancsorp also failed to inform its minority partner, the federal government, when it closed the deal. The government only got to hear of it through the pages of the papers, just like it got to know of plans to retrench staff through other means.
However, without much ado, the government has rushed head long to reverse the sale of NITEL without due consideration for the impact such a reversal can have on its finances. Neither did it give second thoughts to the thousands, and perhaps millions, of investors, local and foreign, who have an indirect stake in NITEL. Transcorp, after all, is a public quoted company listed on the Nigerian Stock Exchange. And irrespective of the fact that the company got series of waivers that enabled it get listed without a balance sheet or track record, it attracted several investors that risked their stake in the corporation on the basis of its assets, one of which is NITEL. At this stage of Transcorp's existence, it does not matter if its initial public offer was improperly carried out. Neither does in matter that its offer was undersubscribed. The bottom line is that the company today belongs to thousands of investors with the potential of losing their investment and possibly their life savings because of a stupid stunt pulled by the federal government. Some how the "rule of law and due process" was set aside when it forgot to spare some thought for these investors.
Moreover, I often wonder if the president carries out wide consultations before he sanctions certain decisions. I am certain that the decision to reverse the NITEL sale was carried out with the full complicity of the Minister of Information and Communications, John Odey. His ministry stands to gain a lot by getting its sullied paws around NITEL and MTel's emaciated necks. But it will be to the detriment of the government's purse. It will have to cough up $750 million (perhaps less since NITEL has lost considerable value) to repay Transcorp for the 51 per cent stake it has in NITEL. It would also have to dig deep to provide funds that could be put to better use, instead of funding NITEL's operations. I am certain no provision was made in the budget to assume such needless expenditure on privatisation proceeds that have been long shared by the three tiers of government.
If I were Transcorp, I would insist that in addition to the $750 million, the interest burden it has shouldered ever since it borrowed the money it used to acquire NITEL from the banking syndicate over two years ago be taken over by the government. Transcorp should not stop at that. It should also slam a multi-million dollar class action suit on the government for breech of contract, demanding massive punitive damages where it would hurt the most: its pocket. That should teach the government a lesson. That is if it would ever learn. In any case, Transcorp is not that smart. I can bet my last penny that Transcorp is going to embark on some mindless publicity blitz currying the sympathy of the public. Through the back door, it shall go to Aso Rock and hope that the presidency will reverse its reversal.
Transcorp has never been smart about the manner it set about the acquisition of NITEL, right from the outset. It leveraged on its closeness to the presidency to muscle out other competitors who were probably better positioned to manage NITEL. Two years ago, I used this medium to declare that Transcorp was anything but right for NITEL. I also felt the $750 million offered was too exorbitant and that Transcorp was insane to have offered so much for a company worth a lot less, especially under a leveraged buy out. However, the Bureau of Public Enterprises defended its selection of Transcorp saying the transaction was concluded under a willing buyer, willing seller negotiations process. By their very nature such transactions are far from transparent and leave room for considerable manipulation of the transaction process, but are used by privatisation agencies as a last resort when all else fails.
What the BPE, however, failed to explore was the possibility of extending negotiations to other willing telecoms firms (Telkom South Africa was one of several) that had also expressed interest in acquiring NITEL. But for reasons I found rather hard to accept, the federal government determined that it was not in Nigeria's strategic interest to allow another South African firm to ride roughshod in the telecommunications sector. That being the case, we had no choice other than to settle for an investor that was anything but perfect. But I still hoped that the gamble the government had taken would pay off.
When it became apparent that my worst fears about Transcorp's capacity to turn around NITEL were being confirmed, in another article, I suggested that NITEL's fixed wireless line business (the CDMA component) be spun off, and a demerger of the mobile business arm - MTel be considered. A demerger of NITEL and MTel would have enabled Transcorp raise badly needed cash and depending on the strategy still have given it enough leeway to retain some shares in the mobile business. At some point, discussions were even held between Transcorp and some firms; notably, Alheri Engineering which has a 3-G licence and Vodacom of South Africa. But that was stalled due to a combination of Transcorp's ineptitude, coupled with an innocuous clause in the share sale purchase agreement that imposes a 60-month holding period on the transfer of shares to a third party. However, another clause allows Transcorp to request the permission of the BPE to sell down its stake in NITEL, for which that permission shall not be unreasonably withheld.
In other words, there was an ouster clause that could have and should still be explored by all parties to save NITEL. What the government has done is just typical of its modus operandi and shows its lack of grasp of the finer issues. It simply skirts around the surface and manages to conceal its decisions under some "rule of law" which it willfully breaks. Before causing further embarrassment to itself and the country, it should call all parties concerned to the table along with a retinue of lawyers to explore all termination/ouster clauses provided in the share sale agreement. During which a competent telecommunications firm should be wooed into buying part of Transcorp's and the government's stake in NITEL in order to transfer controlling interest to the new buyer.
In doing this, expectations should be kept to the minimum. NITEL whether we like it or not, has become a carcass. All it has to offer is its transmission capacity. Even in that segment, where until recently it had some monopoly, its dominance has been gradually eroded by the likes of MTN and Globacom. At this stage, we should be grateful for whatever is offered for her.
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