Buyers scramble to make Nitel deal

International service providers are scrambling to buy the financially troubled Nigerian incumbent telecommunication operator Nitel a week after the country's president, Umaru Musa Yar'Adua, directed that the company be sold to a new investor within 60 days.

The Nigerian president's intervention follows years of bickering, corruption charges and mistrust among government officials and board members over the sale of the company.

The international service providers scrambling to buy the company include Mobile Telecommunication Network (MTN) in South Africa; Ericsson Consortium; Telefonica Consortium in Spain; Mahanagar Telephone Nigra in India; and Omen International (BVI) in the U.K.

The Nigerian government said prospective investors should acquire either 75 percent equity in the entire Nitel conglomerate or a stake in one or several of its components including SAT-3 fiber optic, Mtel (GSM), domestic fixed-line telephone, national fiber-optic transmission backbone and its analog system.

However, the Nigerian government said preference would be given to service providers that want to acquire Nitel's fixed lines, transmission backbone, Mtel and SAT-3 components together. Service providers bidding separately for Mtel, Nitel's GSM (Global System for Mobile Communications) subsidiary, must be ready to make necessary investments to detach Mtel from Nitel networks, according to a statement from the Bureau of Public Enterprises (BPE).

An evaluation committee has been set up to independently assess the submissions of each service provider or consortium in line with the pre-qualifying criteria. Service providers or consortia that are pre-qualified for the next stage are expected to pay a nonrefundable fee of US$25,000 for bidding documents and execute the confidentiality and nondisclosure agreement.

Attempts to sell Nitel have over the years proved difficult, with many international service providers including Investor International London and Orascom of Egypt failing to pay the bid price.

Transnational Corporation of Nigeria (Transcorp) took over management of the company in 2006. But in June of this year, the Nigerian government, through BPE, revoked the company's 51 percent equity stake in Nitel, citing a breach of the share sale purchase agreement.

Transcorp had also failed to put together a plan for a technical operator for the company, one of the conditions for the sale. Following the revocation of the Transcorp equity stake in the company, fresh bids were called for by BPE and submitted by service providers, but the Nigerian Communications Commission (NCC), the country's telecom service provider, canceled the bids.

The cancellation follows accusations that BPE had not been transparent in selecting a capable company to buy Nitel. This was after the organization was accused of favoring Globacom, the country's second national carrier. But this time, NCC said it has taken charge and assured the bidding process will be very transparent.

The problems surrounding the sale of Nitel underline the difficulties that African governments face in privatizing incumbent telecom companies. Generally, corruption and lack of transparency among senior government officials have been at the root of problems surrounding the privatization of African telecom companies.

In Zambia, the sale of incumbent telecom operator Zambia Telecommunication (Zamtel) is also being challenged by organizations, opposition politicians and Zambians who claim the Zambian government is not being transparent with the privatization process of the company. The Zambian government is accused of favoring a Chinese telecom company.

The privatization of Ghana Telecom (GT) by the Ghanaian government to Vodafone of the U.K. was also marred with similar accusations, and the matter ended up in court.

Nigeria is Africa's biggest telecom market in terms of investment and subscribers, due to its large and fast-growing population. The country's continued telecommunication growth is expected to trigger more intense competition among a growing number of operators.