Sale of Nigeria’s Nitel bogs down in confusion

The sale of Nitel, Nigeria’s incumbent telecom operator, has bogged down in confusion following the failure by Omen International Consortium to pay a US$105 million bid security to the Bureau of Public Enterprise.

The failure by the British Virgin Islands based consortium leaves the Bureau of Public Enterprise (BPE), the body that is responsible for overseeing the sale, at an impasse on how to proceed with the privatization of the company following several failed attempts.

Omen becomes the second bidder to back out of Nitel’s sale bid in less than four months. Another consortium, the New Generation Consortium — consisting of China Unicom, China’s second largest carrier — backed out after failing to pay bid price of $2.5 billion for a 75 percent stake in Nitel.

Omen was in February this year declared reserved bidder with an offer price of $956 million.

Omen International Consortium had up to June 15 to meet an extended deadline for the payment of the bid security. The privatization process was however, terminated by BPE even though Omen claimed that it had deposited the money into the BPE’s account a day after the deadline.

Nitel and its subsidiary, M-tel, have been up for sale for a decade now but recent bidders have all failed to raise the required security deposit on time. Like many other African countries, the Nigerian government is selling the operator after failing to recapitalize its operations. Several complaints have been raised that the bidding process itself was manipulated and bribes were offered to influence the outcome.

In March last year, Nigerian President Goodluck Jonathan set up a panel to probe the sale of Nitel and its M-tel arm following complaints of corruption in the bidding process. The findings of the panel were not made public. But Jonathan suspended the head of BPE following accusations that the officials were manipulating the privatization process of the company in order to receive bribes from bidding companies.

There are several issues that may be hindering the Nitel sale, analysts said.

“Firstly, either the company is priced beyond the financial capacity of many operators interested in investing in Africa,” said Amos Kalunga, telecom analyst from Computer Society of Zambia.

“Or secondly, the bidding process is not so transparent to get on merit a credible bidder,” Kalunga said.

The problems facing the sale of Nitel underline the difficulties that African governments face in privatizing incumbent telecom operators. Generally, corruption and lack of transparency among senior government officials has been at the root of the problems.

In Zambia and Ghana, the sale of incumbent operators was also embroiled in corruption allegations and challenged in the court. In Zambia, the then-minister of communication and transport, Dora Siliya, was found guilty of manipulating the bidding process. She immediately resigned her position.

The privatization of Ghana Telecom (GT) to Vodafone of the U.K. was also marred with similar accusations and the matter also ended being challenged in court.

Nigeria is Africa’s largest telecom market by investment and subscription. Hence, the controversy over the latest effort to put Nitel in private hands is likely to scare international telecom investors. The operator had initially been sold to Transnational Corporation of Nigeria in 2006, but in 2009 the BPE revoked the company’s 51 percent equity stake in Nitel, citing a breach of Share Sale Purchase Agreement (SSPA) by the company.

Several other international telecom companies, including Pentascope of Netherlands, Investors International London Ltd (ILL) and Orascom Telecom of Egypt have attempted to buy the company but failed.

Following the latest failure by Omen International Consortium to buy Nitel, Microfone Telecom Nigerian, an initiative by Nigerian Capital Development Fund, has approached BPE offering to buy the company and revamp its operations to international standards within just five years.

Microfone said it wished to take over Nitel to the benefit of the poor and underserved in Nigeria. The company wants to offer the BPE a management and transformational contract that includes financing the development of Nitel and the sale of the company at the end of the contract period.

IDG