NITEL privatisation gathers pace as Globacom gets serious

25 Aug 2004

Nigeria’s Bureau for Public Enterprise (BPE) has said it is ready to re-launch the privatisation of the country’s national operator Nigeria Telecommunications Limited (NITEL), and to that end has announced plans to list 20% of the company’s shares on the stock market next month in an initial public offering (IPO). The agency is already committed to selling a majority 51% stake in NITEL to a core investor and earlier this month said that six foreign companies had expressed an interest in bidding. Although the names of the interested parties have not been disclosed, they are thought to include BT, a group headed by entrepreneur Richard Branson, a Singaporean telco and a consortium including Vodafone. The government’s latest effort to sell off a majority interest in NITEL follows the failure of its first attempt in December 2002, which was abandoned after the chosen bidder, Investment International (London) Limited (IILL), failed to stump up the USD1.119 billion it originally offered. In the wake of the debacle, in March 2003 the state appointed Pentascope of the Netherlands to manage the next sale.

The Nigerian government was one of the pioneers in terms of telecoms sector reform in Africa, but despite its efforts the industry is still far from developed, and the PSTN remains woefully inadequate to the needs of the people. By the end of March 2004 the number of main lines in service stood at 888,854, which though considerably higher than the 553,374 reported in December 2000, represents a fixed line penetration rate of just 0.6%. Wireless services have fared better, with the country’s four GSM operators – Glo Mobile, V-Mobile, M-Tel and MTN Nigeria – reporting a total of 3.8 million subscribers at the end of March 2004.

Deregulation of the country’s telecoms market began in 1992 with the passing of Decree 75 which allowed private companies to participate in the sector and develop the country’s infrastructure. However, it was the passing of the Nigerian Communications Act 2003 which marked a turning point in the history of the country’s telecoms industry. The Act repealed the Nigerian Communications Commission Act – Decree No 30 (1998) and the Telecommunications and Postal Offences Decree No 21 (1995), and all its subsidiary legislation and amendments. It established the independent regulator the NCC and gave it the powers previously held by the Ministry of Communications under the Wireless Telegraphy Act (1990). The new body was also given powers to formulate a proper regulatory framework and the necessary mechanisms to issue licences, and in 2003 Nigeria finally saw the entrance of the second national operator (SNO) in the shape of Globacom. The SNO holds licences to provide GSM, fixed voice, data and long-distance telephony services, and has contracted Siemens to deploy a backbone fibre-optic network spanning 2,800km which, upon completion, will cover most major cities and provide a raft of services to subscribers. Globacom is to begin rollout of its fixed line network next month, deploying 50,000 lines in Lagos and 20,000 in Ibadan, as well as a mobile network expansion covering 20 cities in the north of the country.

The government has also announced details of a National Rural Telephony Programme (NRTP) which was formally implemented in August 2004. The project proposes to connect 500,000 new lines in 343 local government areas within a year through an investment of NGN28 billion (USD200 million) provided as a concessionary loan from the Chinese government, topped up with NGN2.8 billion from the federal government. The three aspects of the project include Rural Radio Systems (RRS), which will provide services to 125 local government areas (LGAs), Alcatel Shanghai Bell (ASB) covering 108 local governments, and one provided by ZTE which will cover 110 LGAs.

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