The Bureau of Public Enterprises is back on the road searching for an able investor for the ailing Nigerian Telecommunications Limited and its mobile subsidiary, Mtel
By Clement Oriloye
No agency or parastatal has given the Bureau of Public Enterprises, BPE, in its privatisation assignment, more headache than the Nigerian Telecommunications plc, NITEL. For virtually the entire run of this decade,
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| • Ndi Okereke-Onyiuke, Chairman, Transcorp. |
the BPE has been engaged in a fruitless hunt for a worthy buyer for the sick first telecommunications national carrier.
With the last effort - sale of NITEL to Transnational Corporation of Nigeria plc (Transcorp) - terminating disastrously, the BPE, heeding government’s directive, has started searching for fresh investors to scoop up majority shareholding in the company. The Bureau disclosed two weeks ago that it is currently seeking the services of an advisory consortium that will include financial, legal, marketing, accounting, technical and valuation advisers to advise it on the privatisation process.
The consortium is expected to review the operations of NITEL/Mtel and prepare an information memorandum and valuation reports that will give an indicative base price for the enterprises, prepare draft contract documents and all other transaction documents required for competitive and transparent bidding process, market the two telecommunications outfits to prospective investors and assemble all documents that will be required in keeping an adequate data bank.
The privatisation advisers would also be expected to evaluate the technical proposals submitted by prospective core investors and advise the National Council on Privatisation, NCP, accordingly and prepare a comprehensive post-transaction report for the Council.
Already, the NCP has directed the BPE to begin the process of securing a capable new core investor with the requisite technical, managerial and financial resources to take over the management of NITEL/Mtel from Transcorp, its present managers and owners. Government is yanking NITEL off Transcorp’s grip because the latter proved practically incapable of pulling up the drowning firm.
Under the new arrangement, Transcorp’s stake in the company is expected to drop to 22 per cent from its current 51, while Federal Government’s holdings will reduce from 49 per cent to 27 per cent. The incoming investor will command the controlling share of 51 per cent. In a meeting with Transcorp last December, government declared its intention to get a capable investor to salvage the telecommunications company. As argued by government officials, the idea is to redress the worsening condition of the company after Transcorp took over its operations over a year ago. “There is the need for a new core investor who is an industry player with a focus, technical expertise, managerial experience and financial capacity to turn NITEL/MTEL around,” they contended.
In a memo entitled “Re: Unmerited Six Months Tolerance of Transcorp’s Sloppy Management of NITEL/Mtel By Top Ministry Officials” sent by NITEL workers to President Umaru Yar’Adua, Transcorp was accused of falling short in about 32 areas. The memo alleged that Transcorp failed to meet up with the post-acquisition plan on NITEL/Mtel. The workers said Transcorp could not raise the required sum of N8.9 billion working capital loan to turn around the company available while it has not met the repayment of N15 billion inter-connection debt to local and international network operators.
The workers also cited incessant changes and disagreements between board members and top management as a major factor that has brought about instability in strategy and programme implementation. In the post-acquisition plan, Transcorp had agreed to inject about N6.3 billion into the telecoms firm to cover current and outstanding operational expenses and to revive Mtel. The conglomerate had also not been able to pay over four months salaries to NITEL workers and there had been no promotion or pay rise.
After the 17 December meeting which was attended by John Odey, Minister of Information and Communications and officials of the Nigeria Communications Commission, BPE and Transcorp, it was resolved that the government would relinguish 24 per cent of its holding to the new investor and retain 25 per cent for divestment to Nigerians. Also, Transcorp was to let go a maximum of 27 per cent share holdings.
At a point, government considered reducing Transcorp’s stake in NITEL to 10 per cent. As the shareholding restructuring of Transcorp in NITEL remained uncertain, investors in Transcorp expectedly continued to off-load their shares at the secondary market of the Nigerian Stock Exchange, NSE. However, the management of the NSE was smart enough to place the stock on technical suspension at a price of N3.95 per unit. When, last month, government decided to return the 51 per cent holdings to Transcorp, it was not enough to convince the doubting investors. Though the technical suspension has been lifted, the stock traded for only N3.33 per unit on 7 April this year.
For Professor Ndi Okereke-Onyiuke, Chairman of Transcorp and Director-General of the Nigerian Stock Exchange, it was illegal under the subsisting privatisation laws to sell or cede part of the shares until 2009. Transcorp had no plans to circumvent the privatisation laws which barred it from distorting the current share structure until after three years, beginning from 2006.
The Transcorp chairman noted that the company has succeeded in attracting world class telecommunications firms to commit their skills and funds in revamping NITEL. But it was the prevailing circumstances and dynamics of the global telecommunications industry that had compelled Transcorp to seek government permission in altering the status quo.
Transcorp’s buy of NITEL has congenitally been steeped in controversy. When the conglomerate emerged as the preferred bidder for the 75 per cent government equity in NITEL on 3 July 2006 for the sum of $750 million, the corporation was only able to make an initial payment of $75 million on 14 July. No further payment was made until September of that year. At a point, it asked the BPE to allow it to cede a further 24 per cent of NITEL’s equity that was voided following its (Transcorp’s) inability to pay the entire 75 per cent equity. The equity was later reduced to 51 per cent, rather than outright cancellation as has been the precedent. This favour which Transcorp enjoyed in the NITEL deal greatly fuelled public suspicion that former President Olusegun Obasanjo has vested interest in the conglomerate.
As the NITEL take-over recorded series of delay, Mr. Adedayo Ojo, Vice President in charge of communications at Transcorp, explained that the initial timetable for the take-over was set aside to enable Transcorp position NITEL properly. Ojo disclosed that Transcorp has commenced an updated valuation of assets of NITEL and MTEL, as its focus is to improve the quality of services of the two telecom firms.
Tom Iseghohi, Group Managing Director/Chief Executive Officer of Transcorp recognised that NITEL is bedevilled with some problems, but he has always remained optimistic it would be turned around shortly. He expressed optimism that with the structure being put in place and the resources now available to the company and its subsidiaries, the total fixed assets and investment of the group is expected to grow to N89.05 billion by December this year.
His optimism stemmed from the progress it was claimed that NITEL recorded in the efforts to revive it. He said while NITEL was 17 per cent operational in early July last year, the performance rose to 70 per cent six weeks later. He added that Mtel, which was almost dead by July last year, was functioning efficiently in 16 cities of the federation.
Sunny Nwosu, national co-ordinator of the Independent Shareholders Association of Nigeria, feared that a reversal of the sale of NITEL to Transcorp, which is now a quoted company and no longer under the purview of the federal government, may not necessarily solve the problems of the nation’s foremost telecommunications company.
Despite the negative perception of the company in some quarters, Iseghohi said Transcorp has a positive perception abroad with several investors seeking to do business with it.
Before the government pronouncement on review, Transcorp was seeking a buy-out arrangement under which it intended to dilute a 51 per cent stake, about 25.51 per cent of its existing 51 per cent shareholding in NITEL. Determined to turn around NITEL, Transcorp, in September last year, signed a technical agreement with two international telecommunication companies – CISCO System Incorporated of USA and Dimension Data Service – to boost its technical efficiency. It also signed a memorandum of understanding with Ericsson to provide technical assistance on Mtel.
The pact involves the repair and restoration of the fragmented NITEL fibre optic cable and the activation of SATZ. The SATZ is expected to provide high-shaped broadband connectivity that would shift the main telecom backbone from satellite to fibre optic support. Aside improving the quality of service, the shift in the backbone from satellite to fibre optic will reduce cost of telephone calls. Unfortunately, the ownership of SATZ was not affirmed in the NITEL deal during the privatisation exercise.
Transcorp had earlier disclosed plans to make NITEL the biggest Code Division Multiple Access, CDMA, network in the country that could get Mtel two million GSM lines. But this is yet to materialise. The corporation has been lampooned by critics who accused it of not exploring its partnership deal with the Middle-East communications giant, Etisalat, which has turned to Mubadala to provide GSM services in Nigeria.
Also contributing to Transcorp’s woes was the aborted technical agreement with British Telecom, BT, which pulled out of the deal citing unavailability of working capital to turn around NITEL and its Mtel subsidiary, as well as the lack of strict adherence to corporate governance principles. Despite its numerous problems, analysts believe Transcorp could still weather the storm. They hinge their argument on the fact that the company is a conglomerate that is engaged in diversified businesses and possesses the potential to emerge strong in the medium to long run.
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