Decline into Oblivion

Fri, Jan 11, 2013

By publisher

7 MIN READ

Nigerian Telecommunications Limited and its Mobile subsidiary depreciate steadily as efforts to privatise them continue to fail

|  By Pita Ochai  |  Jan. 21, 2013 @ 01:00 GMT

THE fate of the Nigerian Telecommunication Limited, NITEL, and MTEL, its mobile subsidiary, are still uncertain. After several unsuccessful attempts to privatise the company, its facilities in different parts of the country have continued to deteriorate. The worse are its telephone exchanges across the country, which are rotting away because of neglect. Much of the exchanges have been out of use since 2001, when the federal government took the step to privatise the company.

Before the liberalisation of the telecom sector in Nigeria, which brought in new operators, NITEL had a monopoly of the industry and succeeded in penetrating most towns and cities in the country with investments worth millions of dollars. The value of these investments has continued to depreciate in their different locations daily.  In Port Harcourt, it is estimated that more than N1 billion would be needed to rehabilitate the 10 moribund exchanges in the territory due to years of disuse.

According to Awoala Atuboinoma, NITEL Port Harcourt territorial manager, the exchange in the territory has an installed capacity of 24,000 telephone lines, which could still be viable if adequately reactivated. To him, the reactivation would entail the replacement of some damaged cables; purchase of 500KVA generator as well as replacement of the air conditioning system. Most of the cables were damaged during road construction within and outside the city of Port Harcourt. The NITEL exchanges on Aba Road and in the Rumuibekwe community are among those vandalised. They have an installed capacity of 10,000 and 4,000 lines, respectively.

The situation is not different in Delta state, where the 18 exchanges with an installed capacity of 32, 500 telephone lines had remained comatose since 2006. In Asaba, Agbor, Ogwashi-Ukwu, Warri, Sapele and Ughelli, weeds have taken over the exchanges with little or no presence of security agents to check the activities of vandals.  The facilities in the state are still being managed by TRANSCORP, since the federal government is yet to appoint a competent investor. The state of NITEL facilities in other towns and cities of the federation are not different. This has made Nigerians to wonder whether NITEL can be rehabilitated.

The first attempt to privatise NITEL was in 2001 when Investors International of London Limited, IILL, emerged the preferred bidder. IILL bid for $1.317 billion to acquire 51 per cent stake in NITEL and M-Tel on November 28, 2001. It proceeded to pay a 10 per cent deposit of the bid sum amounting to $131.7 million to the Bureau for Public Enterprises, BPE. However, it could not complete the payment of the money when it was due in February 2002. This prompted the federal government to seize the $131.7 million deposit.

In 2003, Pentascope, a Dutch firm, took over NITEL and the company generated N51.43 billion as revenue in one year from 555,055 connected lines. But 23 months after the takeover, the connected lines dropped to 440,000 and the firm incurred a debt of more than N40 billion. The federal government’s deal with Pentascope was later revoked.

In 2005, Orascom, an Egyptian telecoms giant, also failed to buy the company because its 257 million dollars bid was below the price of NITEL. The takeover of NITEL by Transscorp in 2006 was celebrated in the country but the excitement was short-lived after the 500 million-dollar deal failed to turn around the fortunes of the company. Also, the last attempt to sell the company to New Generation Telecommunication Consortium of China at the price of 2.5 billion dollars for 75 per cent stake in NITEL/MTEL was terminated due to failure of the Chinese consortium to pay the bid price.

Thereafter, every move to save the moribund company has failed. In February, 2012, the National Council on Privatisation, NCP, approved guided liquidation as the strategy for disposing the beleaguered telecommunication company and MTEL, but a claim by the Assets Management Company of Nigeria, AMCON, that NITEL is heavily indebted to some banks has stalled the planned liquidation of the company. AMCON claimed that NITEL/MTEL’s indebtedness to the banks amount to N52 billion. The debts are part of banks’ liabilities which AMCON had taken over and consequently laid claim to the assets of NITEL/MTEL. AMCON’s claim has thereby stalled the planned liquidation. As a result of AMCON’s claim, the NCP has commissioned an audit of the assets and liabilities of the company to determine what can be sold and what cannot be sold.

One of such properties was the 37-storey building in central Lagos known as NECOM House which was sold to West African Aluminum Products Plc, a company owned by Suarau Olayiwola Alani Bankole, father of the former Speaker of the House of Representatives, Dimeji Bankole. NECOM House and several other properties belonging to the company have been sold in controversial circumstances.

Even with the moribund state of NITEL, it is still generating revenue from its portion of the continental submarine cable popularly known as SAT-3. During one of its sittings in 2011, the NCP had directed one of its committees to probe the management of NITEL for failing to account for revenues which it had been generating from the SAT-3. The council had observed from the presentation by the management of NITEL that the company has been receiving revenues from SAT-3 which were not fully accounted for or audited for several years. In spite of the revenues it generates from SAT-3, the management of NITEL still gets funds from the federal government to pay the staff salaries of NITEL. Currently, the staff are being owed seven month salary arrears.

According to Everest Amaefule, a telecom analyst, the attempts to privatise NITEL were marred by insincerity of purpose and manipulation of the process by government officials and private sector operators. According to him, while the federal government refused to make fresh investments in the company when the sector was witnessing massive fresh investments, Pentascope International was depleting the accounts of the telecommunications firm.

“At the end of Pentascope’s mission in Nigeria, NITEL was worse off which led to another round of privatisation circle in 2005,” he said. Amaefule regretted that even at the worst of times before the takeover by Transcorp, NITEL/MTEL had maintained a minimum of 15 per cent of the Nigerian telecom market while under Transcorp the market share of both companies dwindled to zero per cent.

Chukwuma Nwokoh, head of public communication, BPE, said there are no new developments on the guided privatisation of NITEL/MTEL. According to him, the NCP is working hard to ensure that NITEL/MTEL works again. While Nwokoh assured Nigerians that NITEL/MTEL would be resuscitated by the government, Mansur Elakam, a telecom engineer, fears that NITEL’s technology might become obsolete by the time it is resuscitated. “NITEL is in a technology business and the risk of technological obsolescence is very high,” he said.

To him, the fact remains that NITEL/MTEL (assets and liabilities considered) is today nowhere near as valuable as recent bid amounts and reserve prices have seemed to indicate. In particular, bidders will be reluctant to assume liabilities particularly as government entities account for most of the corresponding receivables. Can NITEL/MTEL pay all its own debt when debts owed to it remain unpaid? “The economics of the deal must make sense, and concessions and forbearances are important if NITEL is going to end its steady decline into oblivion. Whoever will reposition NITEL has a huge investment commitment to make and yet can hardly catch up with ferocious competitors who have already gone miles ahead,” he said.