16 Oct 04

The Nigerian Government is on course to privatise and list part of its troubled Telco, Nigeria Telecommunications Limited (NITEL) after a recent failed attempt, says Leon Perlman

The process is framed by troubles in NITEL’s mobile division, a net loss of fixed lines despite huge investment, heavy competition from SNO Globecom, internal strife, poor credit management, and a prospect of its crucial interconnect arrangement with its competitors being suspended because of non-payment.

Nigeria's privatisation agency, the Bureau of Public Enterprises (BPE) is managing the process, seen as key to reviving NITEL's flagging fortunes. NITEL is currently 100% owned by the federal government, which has been pressured by the IMF to speed up the privatisation process. Plans include placement of 20% of NITEL on the Nigerian Stock Exchange for public subscription before the end of the year and selling 51% of the company to a strategic investor.

The process began in 2001 but was halted in 2002 when the then winner of the tender failed to pay some US$ 1.12 billion it bid. The government, repositioning itself in an attempt to attract new bidders, in March 2003 controversially appointed the Dutch-based Pentascope to run NITEL and its GSM division, M-Tel under a 3 year management contract.

NITEL has continually been bedevilled by inefficiency, with a resulting fixed line penetration of only 0.6%. Government figures show that as of June 2004 there were 800,000 fixed lines installed, of which less than 500,000 are active. SNO Globecom, which began operations in 2003, has around 100,000 of the fixed line users. NITEL says it has had to disconnect lines because of non-payment, prompting a reply from the regulator that it believed the cause of the payment problem is that NITEL customers have to go to NITEL offices to collect their bills.

Government relations with Pentascope have deteriorated, with the communications minister criticizing it for being "too independent" and not correctly auditing its accounts. NITEL says that it has now completed preparation of its management accounts and that the updated accounts will be reviewed by the BPE as a prelude to the listing. The top management of the GSM division, M-Tel, was recently fired after poor performance reviews. M-Tel only has 500,000 out of 4m mobile users.

Despite the sclerosis in NITEL’s fortunes, Nigeria's massive success in the GSM arena has spurred on a number of foreign companies to express an interest in bidding. Nigerian press reports indicate that they may include BT, a group headed by Virgin mobile, a Singaporean telco and a consortium including Vodafone. Some 20 billion NITEL shares will be available in the parallel IPO process.