Nitel's sale closes chapter on scandal-plagued privatization

The decision this week of Nigerian President Goodluck Jonathan to approve the sale of Nitel to the New Generation Telecommunications Consortium ends a chapter in one of Africa's scandal-plagued efforts at privatizing the telecom sector.

As in many countries in Africa, the sale of the incumbent opeartor has been embroiled in corruption allegations. The controversy In Nigeria forced Jonathan to suspend the head of the Bureau of Public Enterprises (BPE), an organization responsible for the sale of government institutions in Nigeria.

Jonathan has directed that the New Generation Telecommunication Consortium pay a bidding security of US$370 million as a precondition for the issuance of an offer letter for the sale of the company. China's Untel is part of the consortium that is buying Nitel and its mobile unit M-tel.

The sale of Nitel became bogged down in confusion, centering on financial backers for a US$2.5 billion preferred bid approved by the privatization body.

Questions over the bids also surrounded the mysterious identity of a Dubai company, Minerwa, which the bidding consortium said would provide much of the financing for an offer that was five times higher than the company was valued by most analysts.

Even after setting up an evaluation committee to independently assess the submissions of each service provider or consortium in line with qualifying criteria, the sale of the company was halted as corruption charges among government officials continued. In March last year, the National Council on Privatization (NCP) set up an ad-hoc committee to review the sale of the company.

As in many African countries including Zambia and Ghana, attempts to sell Nitel have over the years proved difficult and faced massive criticism, with many international service providers, including Investor International London and Orascom of Egypt withdrawing their bids.

In Zambia, the sale of incumbent operator Zamtel to LAP Green of Libya had been challenged by organizations, opposition politicians and Zambian who claimed that the Zambian government was not being transparent in the sale of the company.

"People will always criticize. But despite the massive criticism in the privatization of Zamtel, the company has set new standards in the telecommunications company," said Zambian minister of Finance Situmbeko Musokotwane in Lusaka, Zambia, this week.

After international operators failed to buy Nitel, Transnational Corporation of Nigeria (Transcorp) took over the management of the company in 2006. But in June 2009, the Nigerian government, through BPE, revoked the company's 51 percent equity stake in Nitel, citing a breach of the share sale purchase agreement.

Following the revocation of the Transcorp equity stake in the company, fresh bids were called for by BPE and submissions were made by international and regional service providers including MTN, Ericsson consortium, Telefonica Consortium in Spain, Mahanagar Telephone Nigra in India and Omen International (BVI) in the U.K.

But the Nigerian Communication Commission (NCC) later cancelled the bids. The cancellation followed 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.

Later, the NCC said it had taken charge and assured the bidding process would be transparent. Despite the assurance, Nitel's privatization problems continued while workers went for months without salaries, prompting Jonathan to direct that the company be sold to New Generation.

The problems surrounding the sale of Nitel however, underline difficulties facing African countries in privatizing incumbent telecom companies.

Nigeria is Africa's largest telecom market by investment and subscription, 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.

"The benefits of privatization is that operators introduce new technologies and high communication cost comes down as a result of competition," Zambian Minister of Communications and Transport Geoffrey Lungwangwa told lawmakers Friday.