The Nigerian government is hoping to finally begin the privatisation of state-owned telco NITEL following the signing of a management contract with Pentascope, a Dutch consultancy linked to KPN. Once the management contract has been sealed, the government hopes to start planning the telcos domestic initial public offering (IPO), with the target of raising USD156 million from the sale of a 20% stake. If the IPO is successful, the government may then sell a further 20% on overseas stock exchanges.
The government has been trying to launch the privatisation of NITEL for some time. It first advertised the sale of a 51% stake to a strategic equity partner in 2001. Sixteen prospective bidders filed applications, among them a number of established foreign carriers, and in the end three prequalified: the Investors International London consortium (IIL), which reportedly included KPN and Technologia das Comunicades (TDC), the consulting arm of Portugal Telecom; the Telnet Consortium, comprising Telia and Korea Telecom; and the Newtel consortium which included Deutsche Telepost Consulting (DeTeCon). After two rounds of bidding IIL won the tender with an offer of USD1.317 billion for the stake, narrowly beating the Telnet Consortium. IIL paid a 10% deposit, but was unable to secure financing for the remainder by the deadline. Its provisional award was removed and its deposit forfeited. The reserve bidder, the Telnet consortium, was under no compulsion to take up its option to acquire the stake, and the process collapsed in March 2002. In an attempt to salvage something from process, the Bureau of Public Enterprises then proposed awarding a management contract and floating a 20% stake in the company on the Nigerian Stock Exchange. The government originally selected Pentascope to win the management contract in January 2003, but on the very day the agreement was to be signed the government postponed completion of the transaction to investigate allegations surrounding the bidder.
Operational statistics for NITEL are notoriously difficult to obtain. The state-owned fixed line operator is reported to have had an installed capacity of some 720,270 lines in 2000 but only around half of these (497,070) were connected or in working order. There has been little if no rollout since then, and as a result teledensity has stalled at 0.43%. Official statistics are subject to due diligence, but around half of the connected lines are believed to be analogue. Moreover, the dilapidated network is highly unreliable, with vast tracts of the country lying beyond the reach of the PSTN.