Wednesday, February 17, 2010

Chinese firm buys Nitel for $2.5 Billion

New Generation Telecommunications Limited, a consortium led by China's second largest telecoms firm China Unicom (Hong Kong) Ltd was yesterday declared the preferred bidder of the Nigeria Telecommunications Limited (NITEL) after it bided $2.5 billion (N373 billion) during the second round of the bid opening in Abuja.

In the first round, the firm had bided $333 million (N50 billion), but drastically upped it in the second round. Apart from China Unicom, New Generation Consortium is made up of an indigenous telecoms firm, GiCell Wireless Limited, as well as Minerva Group based in the United Arab Emirates.

The bid was for 75% of the old state telephone monopoly, which has however been left moribund for many years since the coming of mobile phone companies into Nigeria in 2001. New Generation's bid also came with a bank draft of 30% of the bid price. The acquisition does not include NITEL's debt obligations, estimated to be in billions of naira. Director General of the Bureau of Public Enterprises (BPE), which organized the bid, Dr Christopher Anyanwu, announced federal government's commitment to pay the debts from the transaction's proceeds.

The nearest bid to the preferred bidder's was $956 million (N142.4 billion) by Omen International Limited (BVI), which earned for it the position of reserve bidder. The result was announced by the acting chairman of the Technical Committee of the National Council on Privatisation, Prof. Taiwo Osupitan.

The bid opening, which was broadcast live by the Federal Radio Corporation of Nigeria and the Nigeria Television Authority (NTA), featured five companies after Globacom was declared disqualified for not following the rules specified by BPE.

Following the advice of the Nigerian Telecommunications Commission (NCC), BPE had announced at a pre-sale conference of NITEL held last month that all existing telecom operators in Nigeria with GSM license wouldn't be allowed to buy M-TEL alongside NITEL, as that would cripple competition in the industry. Glo didn't adhere to this rule, the NCP ruled.

The transaction is now awaiting final approval of the NCP, which is chaired by the Vice President.

An elated team leader of the New Generation Telecoms Consortium, Usman Abubakar Gumi, said Nigerians should prepare for a new dawn in the Nigeria telecoms industry. He said his technical partner Unicom China has an estimated 250 million subscriber base with over 500,000 base stations. He said NITEL's 600 base stations is mere child's play compared to Unicom China's. He said, "We are committed and are going to pay within the stipulated time set aside by the BPE. Our bid was not hypothetical but real. We know NITEL is worth more than that."

Telecom giant MTN Nigeria had bided $25 million (N4billion) for SAT-3. It refused to alter the bid in the second round, which made it to eventually lose out to the bid by New Gen Consortium for the whole of NITEL and its components. Other bidders were Brymedia Consortium ($551million) and AFZI/Spectrum Consortium ($376 million).

This effort marks the fifth time the federal government is trying to sell NITEL. After a botched sale under controversial circumstances during the Obasanjo administration, NITEL was sold to Transcorp Plc for $500million (N63 billion) with a commitment to the federal government to turn its fortunes around within a year or face revocation. NITEL's fortunes however after Transcorp's takeover.

Following the non performance of Transcorp after one year, the federal government invoked the Share Sale and Purchase Agreement (SSPA), calling on the company to step down as core investor for a new one to be selected. The 51% shares to be given to the new core investor would be contributed by the federal government and Transcorp. This took place in December, 2007.

n July of 2008, the BPE, with the approval of the National Council on Privatisation (NCP) appointed BNP Paribas to provide advisory services towards the search for a new core investor. According to the BPE, the transaction was to be completed in February, 2009. But that was not to happen. A consortium of banks including UBA, Union bank, Intercontinental and Wema Bank, among others, had claimed ownership of NITEL upon hearing of plans to sell it to out to a new owner. The group said Transcorp borrowed about N75 billion from it to finance the NITEL purchase, which was yet to be paid back. The federal government last year paid back the loan after a final revocation of Transcorp's holding.

The staff of NITEL and MTEL are currently owed salaries of over 20 months but the BPE boss promised they would be paid from the proceeds.

The journey to privatise NITEL has been a long and arduous one. It started in 2000. It was stopped in 2002 when IILL, the core investor failed to pay the $1.317 billion it offered. In 2003, Pentascope was appointed by government to run a three year contract to prepare the sleeping giant for sale but this failed following alleged embezzlement and incompetence. In 2006, Orascom of Egypt offered $256.53 million but this was rejected by the federal government on the grounds that it was far below NITEL's market value, before the coming of Transcorp on November 14, 2006.

Daily Trust

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