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Nigeria: Transcorp/Nitel - What Does the Future Hold?

Olufemi Adeagbo

2 July 2008

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opinion

Lagos — Ownership of Nitel is again about to take a focal position within the Nigerian telecommunications landscape. The Transcorp arrangement has clearly not delivered the expected turnaround within Nitel. Some view it as a result of the inability of many big ego's to pursue a common vision. Others consider it the consequences of trying to fuse old habits with new blood - old habits typified by the Nitel bureaucracy and new blood exemplified by the Transcorp team.

I remember writing many years back that Nitel was overvalued and almost impossible to run profitably, it were purchased for the type of monies Government was expecting. These expectations were pinned on the perception of a large unserved population, Nitel's unaudited technology and infrastructure assets, and lack of appreciation for the changing dynamics of the market, like declining consumer spend expressed as Average Revenue Per User (ARPU) , increased competition from GSM and CDMA providers, impending transatlantic cable from Globacom, political realities and a host of other factors. When a Nitel staff committed suicide, I opined that:

Suggestions on how to dispose Nitel have been proffered to mirror every phase in the evolution of its competitive environment. The advice it seems continued to fall on deaf ears and hardened hearts and it is a crying shame had little or no value and it is a shame that people who have no means to loot Nitel's coffers - like Aliyu Lawal - have decided to take their own lives, than continue to endure the hardship their employer was meting out to them.

Unbundling and tactical disposition could have been embarked upon three years ago, when we suggested it. A lot of duplicated effort by the other operators, and PTO's may well have been avoided - not to mention expended forex. Nitel's infrastructure would have been utilized to lay the framework for the new generation of vibrant telecom companies, if it was impossible to find a buyer for the entire entity.

So what exactly are the benchmarks the BPE intends to use and how does it propose to weight and blend the delicate ingredients: commercial, technical and perhaps political sagacity of the organizations.

This balance will be a key success factor to ensure that the eventual buyer can safely navigate the difficult terrain of acquiring a government organization with 11,800 employees who have worked within a culture of entrenched corruption for many years.

Without a clear strategy, and the wherewithal to navigate that terrain, Nitel may simply transform from a public sector mess, to a private sector nightmare that will force its buyers to cut corners. We need to keep one thing sharply in focus.

There is no Nigerian precedent for a privatisation of this scale, against this backdrop and within this competitive sectoral context.

Some of the short-listed names and alliances undoubtedly have the ability to make a relative success out of Nitel, considering the competitive environment. However, the BPE needs to be cautious in how it manages both the transparency of the process and the appearance of transparency to avoid controversy that will unduly affect Nitel's fortunes.

With people now contemplating suicide hopefully the BPE now realizes that Nitel needs to be transferred to capable hands sooner rather than later; before more lives are lost.

The reality is that NITEL was acquired at a time when all the advantages it hitherto enjoyed as a monopoly had been significantly diluted, notably by a number of critical market dynamics.

Every Nigerian that can afford a telephone probably has one. This is particularly true in terms of wireless telephony where most of the heavy spenders have more than one phone/line. In effect, the market opportunity is not the same as it was a few years ago.

Pent up demand has been largely served, at least within the conurbation areas of the high spending base. The competitive turf is moving towards sustained quality delivery, pricing and overall value.

Unified licensing regime eliminates Nitels advantages in terms of international gateway, fixed line services etc. The new licensing regime effectively means that anyone with the resources can do everything Nitel can do.

The big operators can evolve into total communications solutions providers, offering value bundles of fixed, internet and mobile communication services - and perhaps even a converged customer billing bundle. The reality though is that Nitel still has this powerful international gateway weapon within its corporate arsenal. And that must be optimally geared to deliver, if it means concessioning or getting partners to make it work.

So I ask myself, what really are the issues? Are we saying that a combination of the individuals leading Transcorp can not navigate the slippery terrain? Are we saying that proven managers like Tom Iseghohi can not strategise and execute? Are we saying they do not have the financial muscle to follow up their initial investment? I think not. I have studied Nitel for many years and am steadfast in my conviction that the problem may lie within the realms of management control. The old guard will not let go, and yet the old habits persist.

To be frank, I cannot see how any one who has anything to do with the management of Nitel in the past 20 years can even make a moral case to be involved in its management or affairs. We are where we are today because of their mismanagement of Nitels assets. They should resign in shame, apologise to the millions of Nigerians they have failed and pray that their actions in the past do not attract sanctions in the future. The jobs created by Glo, MTN, CELTEL within a few years is testimony to what could have been, and what is still possible. But over the years rather than build an institution that would propel macroeconomic benefits, a few have mismanaged an organisation to the point of near collapse.

Nitel requires rebranding to communicate the new values and value propositions from the new Nitel - if it is allowed to emerge. Many think Nitel has a strong brand. I disagree. Nitel is a brand that immediately fills the mind with visions of inefficiency, ineptitude and an obdurate posture - where corruption is concerned. But then, part of our societal dysfunction is a skewed sense of patriotism which prevents us from rapidly recognizing a crises. We leap into the abyss of self delusion and somehow think we are the best, even when our standards are collapsing all around us. We swagger at those moments when we should bow our heads in shame.

This often misplaced confidence in the shape of our reality is a reason why remedial action always arrives very very late in the day. It is this type of dysfunctional thinking that leads to the conclusion that NITEL is a strong brand. Whilst I concede the patriotic dimension may help accelerate its reacceptance, the branding effort required to turn it around will be significant, if not Herculean.

Considering the points made, and the need for substantial technology investments, I hope government will look at the macroeconomic benefits of having a viable Nitel. The middle cadre jobs, the knock on effects on the economy at large and of course, the protection of the perception of investment viability that is critical for Nigeria and relevant across all sectors. That is why Transcorp - who paid well over the top in my opinion - ought to exist in an arrangement that allows them to deliver on their promise.

I am inclined to think no one could have a good shot at change within the current arrangement where new part owners are struggling with incumbents who have the baggage of a negative history.

I am also convinced that Nitel needs to be totally realigned and refocussued to guarantee long term value and macro contribution. Government needs to demonstrate its commitment to a private sector driven economy by leaving Nitel to the private sector. The arguments of security are not sound ones.

The biggest providers of telecommunications today are MTN and Globacom, and they have no government equity holding. The public is also skeptical about the argument of Government holding shares in trust for Nigerians. The citizenry is not that trusting - and with good reason, grounded in historic reality.

So, what does the future hold? Well it is still my estimation that Nitel ought to carve a niche for itself. And one area that is of importance and significant value is the enterprise networking environment, particularly for banking and petroleum sectors.

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