Will the Enitel sell-off run smoothly?

2 Apr 2003

The Nicaraguan government has announced that on 8 April it will enter the final phase of a tender to find an investment bank to manage the sale of its 49% stake in fixed line incumbent Enitel. Six advisers have already pre-qualified; BNP Paribas, DiamondCluster, SCH, Credit Suisse First Boston, Appliance Technology and Latin Pacific Capital. The sale itself has been set for 30 September, though if the previous share sale is anything to go on, this deadline could well slip.

It took seven years for the government to place a 40% stake in the company, with success finally coming in August 2001, when Telia Swedtel-EMCE (also known as the Megatel consortium) secured the holding with a bid of USD83.1 million, after two other rivals declined to table offers. The consortium should have paid USD33 million up front but negotiated a delay in payment until transfer of ownership issues were finalised in mid-January 2002. A further USD10 million fell due on 30 September 2002, with four further payments of USD10 million due each year until 2006. An additional 11% of the company’s equity has been reserved for Enitel employees, although Telia Swedtel-Emce has the option to purchase any shares left unsold; it may also up its stake in the future through a capital increase. The government has had the right to sell its remaining 49% since June 2002; to this end it has created Uretel (Unidad Residual de Enitel) to oversee the sale.

The pertinent question currently facing the Nicaraguan government is: if it took seven years to sell a 40% stake in Enitel, how long it will take to find a buyer for its remaining 49%. With the international appetite for telecoms stocks at an all time low, and Nicaragua’s long-standing reputation for corruption, finding a purchaser is likely to be no easy task. Perhaps the easiest and most timely solution, at least for the government, would be for the Telia consortium to buy the additional stake, but the extra outlay may well be beyond its means.

At the end of 2001, the latest verified figures, Enitel’s fixed line network had 153,630 main lines in service, down from 158,555 a year earlier, equating to a teledensity of 2.95%, one of the lowest in the region. At the same date there were 3,208 public telephones, up from 3,068, operated by Enitel, Gambatel and Publitel. According to local press reports by the end of January 2003 Enitel presided over a network of 182,000 lines, although whether these were all in service was not clear.

CIT’s Datafile of Latin American Telecommunications