Transcorp may lose 41 per cent of NITEL
Guardian
By Sonny Aragba-Akpore (Deputy Communications Editor)
Tuesday 6 May
A NEW ownership structure being packaged for the Nigeria Telecommunications Limited (NITEL) and its sister company Mtel, may reduce Transnational Corporation (Transcorp) Plc equity in the nation's erstwhile telecom giant to only 10 per cent.
Transcorp, the core investor, which now holds 51 per cent shares in NITEL, will under the arrangement cede 41 per cent equity to the new owners. The government will also lose 24 per cent of its current 49 per cent shares to the core investor.
With the arrangement, the new core investor will have 65 per cent shares in NITEL/Mtel. This may be one of the rare cases of the Federal Government allowing a single firm to exceed its 51 per cent maximum equity in public firms since the privatisation scheme gained momentum under the administration of former President Olusegun Obasanjo.
The government reportedly refrained from stripping Transcorp of its entire stake in NITEL because of its avowed commitment to local participation in the key sector.
For a smooth take-off of the strategic plan the Ministry of Information and Communications has presented a working paper to President Umaru Musa Yar'Adua, detailing the areas Transcorp had failed and the options left to the government in revamping the moribund firm.
Presidency sources confirmed the new efforts to revive NITEL to The Guardian.
It was learnt that the 25 per cent shares to be held by the government on behalf of Nigerians would later be sold at the Nigerian Stock Exchange (NSE) to the public.
Without any hitches, the proposed concessioning of NITEL will be completed within 90 days once the plan is approved by the government.
The ceding of 65 per cent to the potential investor, among others, is to give the new operator unfettered hands in the management of NITEL.
Transcorp has reportedly attributed part of the problems in running NITEL to undue interference by the government.
It also accused the government of not investing any resources in NITEL since the firm was sold to it, adding that bills owed by ministries and agencies were equally hindering its performance.
The ministry said that contrary to the Share Purchase Agreement (SPA) entered into by the government with Transcorp, the latter had failed in several aspects to turn around the ailing NITEL/Mtel.
The paper to the President titled: "Status report on the post-sale situation of NITEL/Mtel to Transcorp" and signed by Minister of State, for Information and Communications, Ibrahim Dasuki Nakande, stated in part that Transcorp had failed in several respects in line with the SPA.
The memo explained that Transcorp failed in the infusion of N8.9 billion working capital loan upon take-over of NITEL; return revenue generation to fourth quarter (Q4) 2005 based on network operational improvement and revenue assurance led by British Telecom (BT) specialists on generated bills to date and service period are consistently charged collection of N60 billion owed NITEL.
Nakande said Transcorp did not also fare well in managing $300 million commercial liabilities with the Bureau for Public Enterprises (BPE), payment of N15 billion inter-connect debts to network operators - local and international - to allow NITEL to grow traffic, defray balance debt using SAT-3 in lieu of cash within 90 days, and implement process to keep up to date with current interconnect bills, reconcile on monthly basis within 90 days.
Transcorp, he added, did not ensure effective performance in the restructuring of diesel procurement and supply procedures for continuous power supply and high network availability, payment of vendors and restoration of network services agreed upon with vendors to resolve outstanding and new network failure.
According to the memo to President Yar'Adua, the Lagos 250,000 lines implementation programme was abandoned while the one million-line Code Division Multiple Access (CDMA) wireless local loop implementation of the country's six zones also failed.
Even the optic fibre backbone expansion was not spared.
He added that the infusion of N6.3 billion for direct cost, current and outstanding operational expenses as working loan in Mtel post-acquisition also failed.
The immediate payment of balance to GSM providers of up to 10 per cent within 30 days of take-over by Transcorp/Mtel was also not fulfilled, he said.
Similarly, the restoration of full service from current 230 sites to 500 sites and increase from current 200,000 subscribers to 1.2 million as at fourth quarter 2005 also not achieved by the core investor.
The minister's memo stated that there were also noticeable failures in short message (SMS) delivery performance, including busy hour congestion, payment of vendors and restoration of service and provision of effective means of transportation.
It added: "It is obvious from the above, that there is a failure of implementation by Transcorp in the compulsory NITEL/Mtel post-acquisition plan signed by Transcorp. Consequent upon Transcorp's failure to implement Schedule 3 of the Share Sales and Purchase Agreement encompassing the compulsory NITEL/Mtel post-acquisition plan, the following became manifest in Transcorp ownership of NITEL/Mtel:
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* Withdrawal of British Telecom (BT) from the technical service agreement it had with Transcorp quoting a lack of working capital and issues with corporate governance.
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* Incessant changes in Transcorp's board members and top management in both NITEL and Transcorp leading to instability in strategy and programme implementation.
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* Disagreements between board members over the network expansion programme for Mtel. The effect was Transcorp's inability to raise money from the Capital Market due to poor subscription during its recent Initial Public Offer (IPO), which was only 36.2 per cent subscribed," Nakande said.
The minister further said that Transcorp's mounting debt to the banking syndicate that lent it $500 million for the acquisition of NITEL was compounded by poor management.
"These, along with a plethora of other debts owed by NITEL and Mtel to suppliers, banks and other telecom operators, held down progress in NITEL/Mtel," he said.
Transcorp in addition to sacking thousands of employees, the minister said, consistently failed in making regular payments of salaries to the remaining 4,000 workers.
"Therefore, NITEL's sale to Transcorp has failed to achieve most of the objectives of the privatisation and commercialisation programme (as contained in the privatisation guidelines)," Nakande declared
He continued: "From the foregoing, Transcorp on its own cannot be considered as strategic core investor as it lacks focus, technical expertise, management experience and financial capacity to make NITEL viable."
The memo alleged that the failures had led to NITEL/Mtel losing subscribers and being unable to attract new investments to build up and maintain the network that would result in increased market shares.
"Consequent upon this, what is now prevalent is a demoralised workforce," it added.
Nakande explained that the ministry held a stakeholders' meeting with Transcorp top officials where it was resolved that there was a need for a new core operator that is an industry player with the requisite focus, technical expertise, managerial experience and financial capacity to turn around NITEL/Mtel.
Some companies have approached the ministry and BPE expressing interest in NITEL/Mtel should the government decide to review its position in the company. Notable among them are Telkom South Africa, Orascom of Egypt, Vodacom, United Kingdom (UK) and France Telecom.
The President, it was learnt, may set up a Technical Board to be headed by the minister of Information and Communications to oversee the concessioning of the diluted shares to the new core investor/operator on a selective tendering basis.
"This option is informed by the need to speedily address the sale within 90 days in order to avoid the imminent collapse of NITEL, whose effect will affect the entire Telecommunications industry in Nigeria," the minister submitted.
But Transcorp officials who reacted to the minister's allegation said: "While it is true that Transcorp has its own challenges regarding NITEL, it is at best uncharitable to ascribe the failures of the previous 30 years in NITEL to Transcorp."
Its Head Corporate Relations, Mr. Adedayo Ojo, in a statement said, among others, that "Transcorp's problems in NITEL have been mostly political in nature, not technical or financial."
He explained that "to transform a 30-year legacy, there is need to review issues, develop a strategy, fund and aggressively implement it."
"Transcorp has invested about N5 billion in NITEL/Mtel since November 2006 for operating expenses while developing a turn around plan; Transcorp has not taken a kobo from NITEL till date. There was no attempt whatsoever to sell SAT-3. Transcorp was at the final stages of sealing a new technical agreement when the government announced a reversal in February 2008."
He continued: "Transcorp has finalised an interim revitalisation plan that will inject N18 billion into NITEL; the plan is awaiting approval from NITEL board in which the Federal Ministry of Information and Communications is represented and is the proper venue for debate."
