USA Africa Dialogue Series - More Questions Over Sale Of NITEL

More Questions Over Sale Of NITEL - The Guardian Nigeria

• Why This $252bn'Midnight' Sale Can't Stand, By Ewegbara


FOR a paltry $252.251 million, the Bureau of Public Enterprises (BPE), two weeks ago, succeeded in (finally) liquidating NITEL — Nigeria's one-time telecommunication monopoly —and its mobile subsidiary, the M-TEL, to NATCOM consortium. 

   Also sold off in that package were NITEL's core and non-core assets. The deal amount ($252.251m) is considered barely enough to pay off the Group's remaining liabilities of over N300 billion. The sale, therefore, raised questions as to whether, or not, NITEL was really a 'bad product' to have resisted all known marketing and privatisation strategies by the BPE to sell the Enterprise profitably.  In the last 12 years or so, the Federal Government, through the BPE, had used not a few approaches to effect the sale. They include the core-investor sale approach, the willing-seller-willing-buyer sale approach and the negotiated sale approach. Even the management contract approach did not yield expected results; hence, the resort to the guided liquidation option, which finally saw the country's supposed cash cow given away as scrap two weeks ago.  

    And, as if the NITEL Enterprise privatisation was jinxed, the offer price has consistently remained on the southward trajectory —from the  $2.5 billion bid price offer in 2010, to another separate consortium offer of  $959m. Then, there was the Nigeria Transnational Corporation's (TransCorp's) offer of $750 million. They all failed, as the bidders missed payment deadlines. Put together, the efforts ended in the ridiculous $252.251 million   offer by the NATCOM Consortium.

  The new investor on the block had earlier offered to acquire the NITEL entities for $221million, prompting the Chairman of the National Council on Privatisation (NPC) Technical Committee, Mr. Atedo Peterside to protest and reject the offer because it was a far cry from the reserved price. 

    The Federal Government opted to wind up NITEL in March this year after almost a decade of futile efforts to sell it due to what investors claim was the shambolic state of its fixed lines and high levels of debt. The liquidator, appointed by the NCP and the BPE, Otunba Olutola Senbore, said in an advert that it wanted bidders with five years of telecoms experience and a net worth of at least $200m. He requested that bids must be submitted on June 30, adding that the assets would be handed over to the preferred bidder in December.

     The BPE, as privatisation agency, explained that it opted for "guided liquidation" because it wanted to protect government from future claims and liabilities, as proceeds of the sale might be less than the value of the debt.

   But in a swift reaction to the development, a development economist and social commentator, Mr. Odilim Enwegbara, raised queries over the NITEL transaction, saying there was more to it than meets the eye and called on Nigerians to demand more explanation from the BPE on the reason for the adoption of a guided liquidation, given the high asset value of NITEL spread across Nigeria.

     Enwegbara is also picking holes in the timing of the transaction which is close to the terminal date of the current administration and strongly believes that it must have been carefully contrived to cherry pick a public owned enterprise by some powerful people in government at the expense of the people. He, therefore, advocated a review of the transaction by any new government, just the same way the late former President Umaru Musa Yar'Adua did with the privatisation of refineries undertaken by former President Olusegun Obasanjo at the twilight of his Administration.

     According to him: "When you sell off such important public asset at a time like this when an administration is nearing its end and elections are around the corner, without giving plausible reason(s) why the urgency to dispose off such an asset, ulterior motives and narrow interests shouldn't be far from being the drivers. It is even more curious when you undersell the asset in question below the prices offered by earlier bidders without sufficiently explaining why the earlier bidders failed to pay. The only likely reasons could be for national interest reason, security reason and the ability to add value to the asset going forward, or that those in power are using the current buyer as front." 

   Enweagbara continued: "Unfortunately, if this government wanted to be transparent and credible with the sale of this asset, they would have postponed the selling of the asset until the elections are over so that the new government will be able to address the conflicts and disputes that the sale of this asset has attracted. It doesn't make sense to sell something below it's actual price, especially when the earlier bidders priced it higher and have never demonstrated the inability to pay. This midnight sale remains questionable especially without explaining why it should be sold below its market value because such asset rather than depreciate will continue to appreciate. 

  "This is because most of the assets are landed assets mostly in major cities in Nigeria. So, there's a need to suspend this sale. From all indication, BPE never acted professionally and neutrally in pursuit of promoting and protecting our common wealth. Whether it is sold or not, the next government should reverse it the same way Yar'Adua reversed Obasanjo's midnight sale of the country's refineries as he was about leaving office.

    "Those, who offered higher fee and have the technical competence to manage and add value to the asset as a private asset and do so in overall national interest, should go to court and ask the court to nullify the sales giving enough reason to demonstrate that they were shortchanged by BPE management team who might have personal interest in the new buyer. It is possible that the buyer has friends in government whose interests have been carried along to the extent of selling such important and sensitive public asset. It is unfortunate that NITEL, the country's telecommunication flagship with landed assets alone close to half a billion dollars, could be so cheaply sold to such an unknown player in the industry. This raises more questions than answers," he posited.

But Chairman of the NCP Technical Committee, Mr. Peterside Atedo, at the ceremony to unveil the new investor, gave explanation why it settled for a guided liquidation approach to privatized NITEL: "As part of the reform of the Nigerian telecommunications sector, a new National Telecommunications Policy was adopted in August 2000 and a new Nigerian Communications Act was passed into law in 2003. The new legal framework provided the basis upon which the process of privatising NITEL commenced in 2001. Since then, there have been four different unsuccessful attempts to privatise NITEL to private operators and one failed management contract, all aimed at re-positioning the company to play a significant role in the Nigeria economy. " 

   He then listed the previous unsuccessful privatisation transactions of NITEL to include:

 • The strategic core investor sale of 51 percent shareholding of NITEL to Investors International London limited (IILL) in 2001. 

• The failed Management Contract by Pentascope in 2005;

• The aborted Orascom Telecoms bid in 2005;

• The strategic core investor sale, through negotiated sale strategy, to Transcorp, cancelled in 2009, and

• The strategic core investor sale in 2011, where New Generation Communications Limited and Omen International Limited emerged as preferred and reserved bidders, respectively.

   Mr. Peterside then explained why the NCP settled for the Guided Liquidation and how the liquidation affects the assets of NITEL and its subsidiaries: "After a review of the checkered history of the privatisation transactions of NITEL, the National Council on Privatisation (NCP), at its meeting of February 27, 2012, approved the privatisation of NITEL Plc and the Nigerian Mobile Telecommunication (MTEL) through "guided liquidation." This strategy was adopted by the Council after due consideration of other options and in the light of the previous failed attempts to privatise NITEL and MTEL through Strategic Core Investor Sale and Negotiated Sale strategies and the huge liabilities of creditors to the tune of over N300 billion. 

    Under the guided liquidation strategy, all the core assets and business undertaking of NITEL and MTEL will be sold as a single or multiple lots to a qualified bidder by the Liquidator under the general guidance of the National Council on Privatisation.  

   "Thus, the bidder that acquires the assets of NITEL and MTEL will pledge to continue to operate the assets to provide telecoms services. This is as against the traditional liquidation of an enterprise by assets stripping." 

   He took time to reel out the procedure under the adopted transaction strategy, declaring that the NCP had fulfilled all the conditions precedent. 

   The NCP Technical Committee Chairman announced that unfortunately, one of the two pre-qualified bidders, NETTAG Consortium, was disqualified for failure to enclose a bid bond as clearly stipulated in the  (Request for Proposal (RFP). 

  He explained further: "The relevant provisions of RFP are as follows:  Section 10.3.1 of the RFP requires that: Each bidder shall furnish, as part of its proposal a bid bond in the form of a Bank Guarantee or a Letter of Credit in the sum of US$10m (Ten Million US Dollars). The bid bond must be enclosed with the Technical Proposal. The Bank Guarantee or Letter of Credit shall be from a reputable bank acceptable to BPE and the Liquidator and be valid for 120 days from the deadline for submission of proposals. Provision must be made for extension of the term of the bid bond if the validity period is extended."

 Section 10.3.2 of the RFP further specifies that "Any Technical Proposal not accompanied by the bid bond will be disqualified."

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