Nigeria gets approval to try to sell Nitel, but success is not guaranteed

A Nigerian court last week gave the green light to the privatization of state-owned Nigeria Telecommunications (Nitel) and its mobile arm, Mobile Telecommunications (Mtel), but there are no guarantees this latest effort to sell the company will succeed.

In October last year, Nigerias lawmakers passed a motion in the House of Representatives to block a planned liquidation of the company, insisting that that Nitel was still viable and able to compete with private operators. The lawmakers asked the Nigerian government to establish a public-private partnership for the company.

After months of political infighting, the motion was overruled, and the Nigerian government moved forward with a plan to privatize Nitel.

The Bureau of Public Enterprise (BPE) launched a tender for bids in June, though last week’s approval by the Federal High Court was needed for the bidding process to move forward. BPE said it was looking for bidders with at least five years of telecom experience and a net worth of at least $200 million.

Nitels problems started after Nigeria started liberalizing the telecom sector to allow for private investment in 1992.

The coming of privately owned, technologically advanced and financially strong GSM operators—including Africas largest operator, MTN, and the regions second largest operator, Airtel—ended Nitels monopoly and the company started losing business.

Corruption by senior government officials involved in the privatization process as well as lack of transparency and bickering among lawmakers and politicians are blamed for unsuccessful previous attempts to sale the companies.

In 2011, Omen International Consortium failed to pay a $105 million security bid to the BPE for Nitel. Just four months before that, the New Generation Consortium, led by China Unicom, backed out after failing to pay the bid price of $2.5 billion for a 75 percent stake in Nitel.

Investor International Londons bid to acquire the company also failed, after it defaulted in paying a bid price of $1.3 billion.

Corruption allegations in the bidding process forced the countrys President Goodluck Jonathan to set up a panel to probe the sale of Nitel and Mtel. The findings of the panel were not made public but the head of BPE was suspended by Jonathan and later removed from his position.

This week, BPE Director General Benjamin Dikki said, “although the operator has lost its relevance in the scheme of things with the liberalization of the telecom sector in Nigeria, the Nigerian government still has a duty to the people to avoid the operator being sold as scrap.”

He said Nitel currently has over $2.5 billion in debt and that if the Nigerian government were to run the company, it would have to come up with the money.

The decision by the Nigerian government to privatize Nitel means that the Sat-3 submarine cable as well as various exchanges, transmission stations and cabling networks are up for grabs.

Edith Mwale, telecom analyst at Africa Center for ICT Development, said however that “there is no guarantee that this time around the sale will succeed because the BPE lacks transparency in the manner it has been handling the sale of the company.