That Unhealthy Development in Nitels’ Privatization Process

Few weeks ago the process of finding a new investor for Nigerian Telecommunications Limited entered concluding stage with the emergence of New Generation Telecommunications Consortium as the preferred bidder. The announcement of the consortium by Bureau of Public Enterprise, the agency saddled with the responsibility of selling 75 percent stake in the moribund telecommunications company raised hope for some Nigerians who said, ‘at least Nitel will work again’, while staff of the company are happy that when the new company takes over fully those who are retain will no longer be owe salaries.
Unfortunately, there was a twist in the process as one of the technical partners to the preferred bidder submitted to BPE came out to state that the company is not part of the arrangement, thereby posing questions on transparency of the process.
It all started after BPE had announced New Generation Telecommunications Technologies as preferred bidder with $2.5 billion naming China Unicom as technical partner and Minerva Group of United Arab Emirates as financier.
Bloomberg reported that china Unicom’s spokeswoman, Dr. Sophia Tso, had denied the company’s participation in the bid for Nitel. China Unicom is China’s second-biggest telecoms carrier and Tso said, they have double checked with their head office and have not heard of the project.  Reacting to the disclaimer, New Generations Telecommunications Consortium explained that the deal would be financed substantially by the Minerva Group of the United Arab Emirates and not China Unicom. It also explained that China Unicom would provide technical and managerial support and consider a minimum of 20 per cent equity participation in Nitel on terms that were to be agreed. According to the Authorized Representative of the consortium, Mr. Usman Gumi, New Generations Telecommunications Consortium is a consortium of several companies for the purpose of the Nitel bid and naturally, the consortium would have financial and technical partners. He said: “the financial backbone of the New Generations Telecommunications Consortium is the Minerva Group of the United Arab Emirates and they have what it takes to turn around Nitel and give Nigerians good telecommunication services.” Gumi further listed other partners of the consortium to include GiCell Wireless Limited, a Unified Access Service Licence from the Nigerian Communications Commission, Sumatra Star GT Limited and BGL Private Equity Limited. Other partners with whom the consortium had reportedly signed Memorandum of Understanding including GT Afflnalia in association with Ring South Europa, Spain and Xtra Telecommunications/Phone House Group, Fibre Homes Technologies, Huawei Technologies Limited, operators of the National Rural Telephony Programme in Nigeria and China Academy of Telecommunications Technology.
In a swift reaction to the development, the sent out a letter signed by Chu Ka Yee Company Secretary of China Union (Europe) Operations Limited, made available to Nigeria CommunicationsWeek, confirmed the company’s willingness to be the technical partners to support New Generations Telecommunications Consortium to bid for Nitel and provide technical and managerial support.
The letter reads: “The board of directors of China Unicom (Hong Kong) Limited would like to make an announcement in relation to various recent media reports, in which the Company was reported to have participated in the proposed privatization (the “Proposed Privatisation”) of Nigerian Telecommunications Plc (“NITEL”).
The board of directors the Company would like to make an announcement in relation to various recent media reports, in which the Company was reported to have participated
in the Proposed Privatisation.
China Unicom (Europe) Operations Limited (“Unicom Europe”), a wholly-owned subsidiary of the Company incorporated in the United Kingdom whose main business is telecommunications operations in the United Kingdom, has been in contact with certain potential bidders who propose to participate in the Proposed Privatisation. Unicom Europe has indicated its interest in the provision of technical and managerial support services in relation to the Proposed Privatisation. Unicom Europe has also indicated that, subject to certain conditions being fulfilled, it would be interested in exploring the possibility of equity investment in Nitel. As at the date of this announcement, Unicom
Europe has not commenced any negotiations with the relevant parties with respect to any substantive and legally binding agreements. The Company has not participated in any direct discussions or negotiations with any relevant parties involved in the Proposed Privatisation. China United Network Communications Group Company Limited, the Company’s controlling shareholder, has also informed the Company that it has not participated in any direct discussions or negotiations with any relevant parties involved in the Proposed Privatisation either. The Company will continue to observe the development of the Proposed Privatisation, and will make announcements as and when appropriate.
The Company is very concerned about the various recent media reports in which the
Company was reported to have participated in the Proposed Privatisation, and advises investors not to rely on any information concerning the Company or any of its subsidiaries in relation to the Proposed Privatisation other than information provided in the Company’s announcements. The Company has not authorised and the Company is not aware of anyone having authorised any person to release any information regarding the Company’s or any of its subsidiaries’ participation in the Proposed Privatisation.
The Company has not authorised any person to comment on, and it will not comment on,
any media reports or market rumours relating to the Proposed Privatisation.
However, BPE the country’s privatisation body has also cleared up any confusion over China Unicom's involvement in a $2.5 billion bid for the former state telecoms monopoly, allowing it to go for final approval.
The new generations Telecommunications Company has presented a bank draft of 30% of the bid price at the spot even though the acquisition does not include Nitel’s debt obligations which is estimated to run in billions.
It would be recalled that a similar thing happened during the time Transcorp acquired 51% stake in this same Nitel. It made bid for Nitel based on its said agreement with British Telecom that was expected to provide it with technical expertise in turning Nitel around as well as eventual acquire some 30% stake in the company. We are all witness to how British Telecom left as a result of lack of legal agreement to that effect, which eventual led to failure of Transcorp in reviving Nitel.
Uncertainty over the bid also arose because of the mysterious identity of the group in Dubai, which the consortium said would provide much of the financing for a bid that was five times higher than many analysts had believed Nitel was worth.
Taiwo Osipitan, head of the technical committee of the National Council on Privatisation (NCP), said the technical committee had examined the bid, and it was satisfied that due process had been followed correctly and to the highest international standards.
"In the light of this, we have resolved to recommend to the NCP that the result of the bid be accepted," he said.
Nigeria has been trying to sell Nitel for almost a decade, and the controversy over the latest effort to do so is embarrassing for sub-Saharan Africa's second biggest economy.
Engr. Bayo Banjo, managing director, Disc Communications said that the amount of bided by New Generation Telecommunications is ridiculously high compared to the fact that Nitel has zero subscriber base and that it is only real estate that is valuable asset in the company, even as most of its transmission equipments are obsolete.
He added that there should be investigation to ascertain if China Unicorn was ever part of the consortium from the beginning, if not; it means that the emergence of New Generation Telecommunication consortium is surrounded with fraud.
He expressed doubt that with the current state of affairs in the controversy, if the consortium will be available to revive the moribund telecommunication company.
Gbenga Adebayo, chairman, Association of Licensed Telecommunications Operators of Nigeria (Nitel) said that the process of privatization of Nitel is still at a bid stage which is subject to federal government approval and that there is no commercial agreement signed yet with New Generation Telecommunications until they are able to pay complete the sum that made them emerged as the preferred bidder.
He urged Nigerians to await and see as events in the coming days play out to be able to ascertain the competent of the preferred bidder’s ability to revive Nitel.
Fola Odufuwa, founder eShekel, a telecom research company, said that the pricing appear on the high side and that it may be tough for the winning bidders to fund the deal. He added that it is also important that the stated cost of the bid is separated from the hidden cost which includes the huge liabilities and the capital expenditure that will have to be incurred to revive the company. He added that, though the deal itself may succeed, securing operational control of Nitel will be a different matter altogether. He expressed the hope that Nitel can be transformed but that the jury will be out on the ability of the buyers to succeed where everyone else so far has failed.