Prince Osuagwu
8 October 2008
analysis
The federal government is on the verge of selling NITEL again. In-fact it has concluded arrangements to give Nitel to a new core investor, come February 2009.
But this renewed effort has drawn serious flak from notable stakeholders in the telecommunications sector who described the attempt as another wild goose chase only meant to waste the nations scarce resources.
To many of the stakeholders who spoke to Vanguard exclusively, no credible organisation can buy NITEL with any amount of Federal government's interest still remaining in it. Such organisations that could risk the venture would only dilly dally until the government gets frustrated and allow sale under devalued rates.
For them, even as this happens, such companies would still come to experience the same fate that befell Pentascope and Transcorp; both, failed suitors of the moribund national telecommunications carrier.
The privatisation history of Nitel began in 2001 when the government through the Bureau for Public Enterprises, BPE, initiated a process once considered as having the powers to transform Nitel to a modern organization, expose its workers to standard global practices and arm them with new and competitive technologies.
After a heavily criticised bid process, Pentascope which was partly funded by a consortium of Nigerian banks, acquired 51 percentage of equity in Nitel. It managed to raise the estimated meager 400 lines which Nitel had before privatisation, to about 440,000 and took the mobile arm of the company, Mtel which also competed and won GSM license same year, to a little over a million connected lines.
Barely three years after, the deal snapped. Government felt Pentascope was too slow for its liking and may have exhausted all its magic, since it was only struggling with just a million mobile lines at a time when other telecom companies like MTN and Zain(then Econet wireless and later Vmobile) which took off same time with pentascope's Nitel and Mtel, were crossing the 5 million mark .
However, Pentascope also blamed the government for being too interested in the running of Nitel, saying that its contributions rather impaired every good moves it (Pentascope) made as a core investor, to reviving Nitel.
Nevertheless, the government was determined to sell Nitel, again. This time, according to it, to a more serious investor. So, in 2006 Transnational corporation, Transcorp, acquired 51 per cent of Nitel for $500m. But since November 14 of that year when it officially became the core investor in Nitel, Transcorp seemed to be struggling to keep a standing position. It has allegedly reduced the workforce by 70%, disengaging about 7,000 staff out of the 11,000 left by Pentascope. The fortunes of the company, further deepened as the 440,000 Nitel lines and above 1 million Mtel lines left by Pentascope, nosedived to miserable 40,000 and 200,000 lines respectively under Transcorp.
This looks unfortunate in the same market where MTN was doing over 19million lines, Globacom, over 17 million lines and Zain, over 15 million lines, justifying the rating of Nigerian telecom market as the growth parameter for the emerging markets of Middle East and Africa.
While the government through the Ministry of Information and Communications was to quickly point out again that Transcorp has failed, Transcorp says government was responsible for its fate in the whole affair. Such is the blames and counter blames that have kept the true position of things away from Nigerians and left Nitel, Mtel at a grind.
Incidentally, the Ministry of Information and Communications, recently wrote the presidency, asking it to look for a possible revival mechanism for Nitel, since Transcorp has not proven fit to do that.
But like Pentascope, Trans-corp is also alleging that government's interests stalled its progresses in turning Nitel around. Tom Iseghohi, Transcorp's MD, in a press conference, stated that quite a lot was done to revive Nitel but governments overzealous interest killed the moves.
Yet, the federal government recently announced the need to get a foreign investor to invest in Nitel. The excuse once more is that there was need to reduce call cost for Nigerian subscribers and in that vein, free the congestion that has come to characterise the call traffic of the GSM operators.
Considering that nearly all the over 95 million subscribers in the country today, rely heavily on the mobile phones, government feels there is no reason, even as it is a waste of resources for one to make call with a mobile phone while at home or in the office, when ideally, a fixed wired line which tariff comes cheaper is available.
That seems to be the justifiable target for selling Nitel. And to express convictions that NITEL still can attract investors, the Vice President, Dr Goodluck Jonathan was sometime sent to the UK to shop for a possible investor. One of the reasons he gave journalists who were curious of the reality of ever bringing NITEL back on track was that "if the land lines are working efficiently, it will reduce the dependency on the mobile telephony which is part of the reason there has been poor quality of service.
The Minister of Communications and Information, Mr John Odey also agreed with him, that "it will even free the poor voice communication quality which is as a result of poor infrastructure, although, the GSM operators are trying to tackle the issue" With these convictions, Dr Jonathan approached Vodacom of UK which Vanguard gathered was indicating interest. However, stakeholders in the industry have reservations over the ability of NITEL to attract credible investors in its present structure, or even allow for a successful operation, considering that the history of NITEL's sales has not been all the best.
Besides, they wondered what has become of Telkom South Africa, Orascom of Egypt, Vodacom and France Telecom which were previously reported to have shown interest in NITEL, arguing that desperate search for NITEL buyers, means there could be personal interests looking for under the table deals.
Meanwhile, should an investor eventually emerge now, the new arrangement is that government would relinquish 24 percent of it's holding of 49 per cent in Nitel/Mtel to the new investor and retain 25 percent for divestment to Nigerians through the Nigerian Stock Exchange.
TransCorp is to relinquish a maximum of 27 percent of its 51 percent holding to the new operator/investor in order to make up the 51 percent to give the core operator/investor majority leadership.
By definition, in the Privatisation and Commercialisation Decree 1999 Part VI (Miscellaneous) Section 34, a strategic investor means "a reputable core investor or group of investors having the requisite technical expertise, the managerial experience and financial capacity to effectively contribute to the management of the enterprise to be privatized."
But from telecoms engineers, Titi Omo-Ettu, Gbenga Adebayo, and ahost of others i9n the industry, the belief is that a strong government influence, as has always been the case in the seven years history of Nitel sales, makes true core investing impracticable.
To them, government interest, no matter how small, in a privatised outfit, is not only a formidable force to confront by any core investor, but an anathema in a free trade economy like Nigeria.
" Selling NITEL with any form of government stake remaining in it is like selling a goat and the owner still having a rope round the goat's neck. Government should hands-off Nitel totally or the renewed effort would still end in a stalemate.
Everyone knows that NITEL's success lies in a private hand since government has proven overtime to lack the right commitment to manage such public corporations effectively. We can see what the private telecom operators are doing and image what the fortunes of Nitel would look like without government interest in it". That is the way Engr. Gbenga Adebayo, Chairman of Association of Licensed telecom Operators of Nigeria, ALTON, saw it.
Even the Executive Chairman of the Executive Cyberscuul, Engr. Titi Omo-Ettu, who himself was a former staff of NITEL, said: "I understand from some press report that the Vice President sometime, went to UK to meet Vodafone. The moment you see a seller going to meet his buyer then something has gone wrong.
The only way to solve NITEL's problem is to declare it for sale 100% and whoever wants to buy it knows he is buying an FNO- First National Operator with all its condiments. An FNO in which government has shareholding has been devalued automatically. The degree of devaluation rises with the percentage of ownership of government in the enterprise. That is a natural theorem of privatization as is applicable to telecommunications".
Meanwhile, experts in the industry have said the value of NITEL is the value of its License. For them, the First National Operator License is worth $1.5Billion today while its right of way facilities are worth $0.5billion.
By that calculation, NITEL can still serve a good purpose for Nigerians and should this palpable fury over government's retention of interest in Nitel subsists, perhaps, BNP Paribas which recently emerged as consultants/Adviser to the National Council on privatisation and the BPE, may have to talk government into selling Nitel outright and channel the proceeds towards Universal Access Provision of telecommunications services in every nook and cranny of the country where the services are needed.
That way, it may have not only served the purpose which its continued interest in Nitel would have served Nigerians but also would be affecting all with dividends of democracy and as well paving way, perhaps once, for the right investors in Nitel .
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