Concerned over the worsening situation in incumbent telco Nigerian Telecommunications Limited (NITEL) and its mobile subsidiary, Mobile Telecommunications Limited (MTel), President Olusegun Obasanjo yesterday chaired a meeting in Abuja between Transnational Corporation of Nigeria Plc (Transcorp) and the Bureau of Public Enterprises (BPE), reports Nigerian newspaper This Day. The President called the meeting out of concern that since NITEL was sold to Transcorp in November 2006, the fortunes of the telecom firm and its mobile subsidiary have taken a turn for the worse. Attendees are said to have discussed a number of options on how best to save NITEL from outright liquidation, including a request by Transcorp to sell 27% of its stake in NITEL to a third party with the hope that BPE will sell the 24% not owned by Transcorp to the same investor, thus transferring a controlling stake of 51% in NITEL to the new investor. Another option may entail Transcorp entering into a strategic partnership with a telecom firm that will inject funds into NITEL and MTel in the form of a convertible loan. This would allow for the five-year holding period imposed on Transcorp at the time it bought into NITEL that bars it from transferring its shares to a third party without BPE’s consent. A third way would require the demerger of MTel from NITEL, and the subsequent sale of MTel’s shares to either a strategic investor or via an initial public offer (IPO). Nigeria’s Privatisation and Commercialisation Act 1999 gives the BPE authority to monitor and oversee enterprises for at least twelve months after their privatisation. It also has power of attorney on the Ministry of Finance’s stake in NITEL.
The outcome of the meeting is not known, although one unnamed source the BPE recently wrote to Transcorp drawing its attention to the five-year holding period, having got wind of the fact that Transcorp had held discussions with a number of interested third parties about taking a stake in NITEL. Some of the firms that have approached Transcorp are South Africa ’s Vodacom, Indian-owned Tata Teleservices and Alheri Engineering, which was recently awarded a 3G licence by the Nigerian Communications Commission (NCC).
NITEL and MTel had been plagued by problems well before their take over by Transcorp last November, and the woes show no sign of disappearing. BT withdrew from the technical service agreement it had with Transcorp quoting a lack of working capital and issues with corporate governance. There have been disagreements between board members over the network expansion program for MTEL; the possibility of withdrawal of Internet Protocol (IP) services to NITEL’s SAT-3 undersea optical cable network by Cable & Wireless over non-payment of outstanding fees; Transcorp’s inability to raise money from the capital market due to poor subscription during its IPO; and Transcorp’s mounting debt to the banking syndicate that lent it USD500 million for the acquisition of NITEL, have all made the situation worse. These along with a plethora of other debts owed by NITEL and MTel to suppliers, banks, and other telecom operators, and the poor quality of their infrastructure, have cost both firms considerable market share. NITEL has around 120,000 fixed line subscribers, while MTel is down to less than 200,000 subscribers, most of whom are inactive.