TMCnet - World's Largest Communications and Technology Community



Obasanjo Wades Into Transcorp-Nitel Crisis
[April 25, 2007]

Obasanjo Wades Into Transcorp-Nitel Crisis

(This Day (Nigeria) Via Thomson Dialog NewsEdge) Concerned over the worsening situation in the Nigerian Telecommunications Limited (NITEL) and it's mobile subsidiary, Mobile Telecommunications Limited (MTel), President Olusegun Obasanjo yesterday in Abuja presided over a meeting between Transnational Corporation of Nigeria Plc (Transcorp) and the Bureau of Public Enterprises (BPE).

Also, the concession of the Nnamdi Azikiwe International Airport in Abuja by the BPE to Abuja Gateway Consortium (AGC), under a 25-year lease agreement, has hit the rocks over disagreements among consortium members.

THISDAY gathered that the President summoned the meeting out of concern that ever since NITEL was handed over to Transcorp in November last year, the fortunes of the telecom firm and its mobile subsidiary have taken a turn for the worse.

Some of the issues that were tabled include the consideration of a number of options on how best to save NITEL from outright liquidation.

According to information, these include a request by Transcorp to sell 27 per cent of its stake in NITEL to a third party with the hope that BPE will sell the 24 per cent not taken up by Transcorp to the same investor, thus transferring controlling stake of 51 per cent in NITEL to the new investor.

Another option that may have been considered could entail Transcorp entering into a strategic partnership with a telecom firm that will inject funds into NITEL and MTel, following which the loan will be converted into equity at a future date.

This arrangement takes into consideration the 60-month holding period imposed on Transcorp that bars it from transferring its shares to a third party without BPE's consent.

The third option would require the demerger of MTel from NITEL, and the subsequent sale of MTel's shares to either a strategic core investor or to the investing public through an initial public offer (IPO).

The president is said to have waded into the problems stifling NITEL in view of the fact that the Privatisation and Commercialisation Act, 1999 empowers the BPE to monitor and have an oversight role in enterprises for at least 12 months after their privatisation.

Along with its oversight responsibilities, the BPE on behalf of the Ministry of Finance Incorporated (MOFI) still has the power of attorney on 49 per cent of the equity stake held in NITEL.

However, it is uncertain if the BPE at yesterday's meeting was favourably disposed to the sale of part of Trasncorp's shares to a third party. According to a source, BPE this week formally wrote to Transcorp drawing its attention to a clause in the Share Purchase Agreement which imposes a 60-month holding period on the transfer of shares to a third party.

BPE was said to have taken this course of action when it got wind of the fact that Transcorp has been holding discussions with a number of interested parties to take up a stake in NITEL.

Some of the parties that have approached Transcorp are South Africa 's Vodacom, Tata Teleservices owned by the Tata Group of India and Alheri Engineering, which is fronted by Aliko Dangote and was recently awarded a 3G licence by the Nigerian Communications Commission (NCC).

NITEL and MTel have been plagued by several problems since their take over by Transcorp last November. The withdrawal of British Telecom's consulting arm, BT Telconsult, from the technical service agreement it had with Transcorp due to the unavailability of working capital and corporate governance issues have not helped matters either.

In addition, disagreements between boards members over the network expansion programme for MTEL; the possibility of withdrawal of Internet Protocol (IP) services to NITEL's SAT-3 undersea optical cable network by US service providers over non-payment of outstanding fees; Transcorp's inability to raise money from the capital market due to poor subscription during its IPO; and Transcorp's mounting indebtedness to the banking syndicate that lent it $500 million for the acquisition of NITEL, have made the situation quite critical.

These along with a plethora of debts owed by NITEL and MTel to suppliers, banks, other telecom operators and poor network quality have cost both firms considerable market share.

Currently, NITEL is said to have some 120,000 fixed lines subscribers, while MTel is down to less than 200,000 subscribers most of whom are inactive.

Meanwhile, the concession of the Nnamdi Azikiwe International Airport in Abuja by the Bureau of Public Enterprises (BPE) to Abuja Gateway Consortium (AGC) under a 25-year lease agreement has hit the rocks over disagreements among consortium members.

Under the airport's concession agreement, the concessionaire is expected to pay $10 million after the execution of the lease agreement with BPE and the Ministry of Transport (Aviation), as well as pay 18.1 per cent of gross revenues annually to the Federal Government over duration of the lease period.

AGC, which changed its name from the Naira Net Consortium, had emerged as the preferred bidder last November from a competitive tender held by BPE to select a concessionaire for the management and operation of the international airport in Abuja.

However since its selection, its local and international partners have been squabbling over control of the consortium, thus making it impossible to present a united front for final negotiations and execution of the concession agreement with the BPE and Ministry of Transport.

When it was selected preferred bidder, the consortium comprised the Airport Authority of India; Gitto Construzioni Generali, the Nigerian subsidiary of an Italian construction firm handling multi-billion naira infrastructure development in the country; the Austrian-based Airport Consulting of Vienna, Naira Net Technologies, a Nigerian IT solutions company; and A.G. Ferrero, a Nigerian construction and civil engineering company owned by former Nigerian envoy to Brazil, Ambassador Patrick Dele Cole.

But as the consortium fell apart, it was expanded to include Airline Services Limited (ASL), a local flight catering services providers operating out of the Abuja and Lagos international airports that is owned by Mr. Richard Akerele.

A source told THISDAY that Gitto, which previously held 75 per cent of shares in the consortium and has strong links in the presidency, has been giving other members of the group problems.

According to the source "when they were required to pay for their advisors who assisted them in securing the concession contract, Gitto refused to make its contributions in proportion to its equity stake in the group. Gitto was recalcitrant and refused to pay its own portion, which has been delaying the negotiations with the BPE."

Gitto's stance is said to have drawn the ire of other members of the consortium, which went ahead to pay for the advisory services and proceeded to dilute the shareholding of Gitto since it was not playing its role as the majority stakeholder.

They subsequently wrote to Gitto, a letter conveying their decision to reduce its shareholding to 10 per cent, and giving it two weeks notice to consent to the new terms. Gitto, however, ignored the letter and insisted that it still holds 75 per cent shares in the consortium.

It went further to caution BPE against proceeding with negotiations with other members of the consortium on the grounds that it will be contravening the memorandum of understanding signed by members when they were bidding for the airport.

Given the situation, BPE is in a dilemma as to what to do. The source revealed that, the consortium has not been able to make any progress and get to the negotiations table with the BPE since November 2006 when it was announced the preferred bidder and this has prevented the Bureau from closing the transaction.

The net present value of total concession fees paid to the Nigerian government is estimated to be $101 million over the concession term.

The consortium's winning proposal included a plan to develop Abuja international airport into a West African hub. Key elements of this plan included the construction of new passenger terminal facilities, and growth in domestic, regional, and international traffic, including cargo activities and the development of commercial and retail activities at the airport.

AGC is expected to provide efficient and reliable airport services that are competitively priced and focused on customer satisfaction. AGC intends to invest $59 million over the next five years and $371 million in developing the airport over the life of the concession. Of this investment, $228 million will be allocated for the construction of new facilities and the remodeling of existing terminal facilities.

The International Finance Corporation, the private sector arm of the World Bank Group, implemented the advisory mandate that mobilized private management expertise and capital for improved operation of the international airport.

IFC advised the BPE on the selection of a concessionaire to operate and manage the airport for the next 25 years.

In concluding the transaction, IFC benefited from the donor support of DevCo, a multi-donor program affiliated with the Private Infrastructure Devel-opment Group and supported by the UK 's Department for International Development (DFID), the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency, and the Austrian Development Agency.

Distributed by AllAfrica Global Media. (

Copyright 2007 Accra Mail. Distributed by Allafrica Global Media.

[ Back To's Homepage ]

Technology Marketing Corporation

35 Nutmeg Drive Suite 340, Trumbull, Connecticut 06611 USA
Ph: 800-243-6002, 203-852-6800
Fx: 203-866-3326

General comments:
Comments about this site:


© 2019 Technology Marketing Corporation. All rights reserved | Privacy Policy