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Nigerian lawmakers block sale of incumbent operator Nitel

Michael Malakata | Oct. 10, 2013
Legislators want a public private partnership deal

Nigerian lawmakers have successfully blocked the liquidation of Nitel, ending a decade of bickering and accusations of corruption in the sale of the company.

The lawmakers have asked the Nigerian government for a Public Private Partnership (PPP) deal instead. The Nigerian government planned to liquidate the fixed line telecom company and its mobile arm, Mtel, after a series of unsuccessful efforts to sell the company over the last 10 years.

But the country's lawmakers have passed a motion in the House of Representative to block the liquidation of the company, insisting that it is still viable and ready to compete with private operators.

Nitel used to be a monopoly but became marginalized a decade ago with the growth of privately owned and technologically and financially strong GSM companies, including Africa's largest operator, MTN, and the region's second largest operator, Airtel. The combined active subscribers for MTN and Airtel stand at close to 90 million. At most Nitel and Mtel have 600,00 subscribers.

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

The decision by the Nigerian government to liquidate the company could have scared off international telecom investors from the market and could also have put the SAT-3 submarine cable as well as various exchanges, transmission stations and cabling networks up for grab. The debt for Nitel and Mtel has steadily been increasing and now stands at over $1.6 billion, including months of unpaid salaries.

National Union of Postal and Telecommunication Employees (NUPTE) president Sunday Alhassan said, "the National Assembly should now intensify efforts at resuscitating the national carrier for optimum performance as a commercial enterprise which will take many unemployed Nigerians off the streets."

The problems facing the sale of Nitel underlines the difficulties that African governments face in privatizing incumbent telecom operators. Generally, corruption and lack of transparency among senior government officials has been at the root cause of the problems.

"What has happened to Nitel provides governments in the region an opportunity for introspection that privatization of incumbent operators should be handled with open minds and not folded and corrupt hearts," Amos Kalungu, telecom analyst at Computer Society of Zambia told Computerworld Zambia.

In 2011, Omen International Consortium failed to pay a $105 million bid security to the Bureau of Public Enterprise (BPE) for Nitel. Omen was the second bidder to back out of a bid in less than four months.

Another consortium, the New Generation Consortium -- led by China Unicom, China's second largest carrier -- backed out after failing to pay the bid price of $2.5 billion for a 75 percent stake in Nitel.

Investor International London's bid to acquire the company failed after it defaulted in paying a bid price of $1.3 billion

 

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