Nigerian government cancels Nitel sale to Transcorp

After 30 months of failed investments and deterioration of services at Nigeria Telecommunications (Nitel), the government has canceled the sale of the company to Transnational Corporation of Nigeria (Transcorp), sparking renewed interest from international investors.

The federal government has revoked the sale of a 51 percent stake in the national telecom company and its GSM (Global System for Mobile Communications) subsidiary M-Tel and appointed a technical board to manage the affairs of the company until a new buyer is identified.

"Transcorp has opted out of the Nitel/M-Tel [sale] because it has failed to meet the condition .... that it must have a technical operator," said Christopher Anyanwu, director-general of Nigeria's Bureau of Public Enterprises (BPE) and a member of the National Council on Privatisation (NCP).

"Accordingly, the federal government has stopped the further sale of all assets of the two companies, whether core or noncore," he added. "All sold assets will be reviewed and action will be taken."

When the deal to sell Nitel was finalized in 2006, the company was billed as Africa's next telecom giant, given that more than 100 million of the total population of 150 million people are potential customers. In addition, Transcorp promised huge investments.

Under the Post-Acquisition Plan (PAP) signed in 2006, Transcorp agreed to inject capital and turn around the fortunes of the company, which had a workforce of 13,000. Today, there are 1,000 employees.

Some of the grievances cited by the government included the exit of BT as the technical operator for the company and Transcorp's failure to inject 8.9 billion Nigerian Naira (US$129 million) into Nitel within 100 days of its takeover to address the immediate liquidity problem facing Nitel.

Other problems include failure to pay interconnectivity debt to other operators, totalling about 17 billion Naira; the inability to pay workers' salaries in the past 11 months; and a drop in market share from 15 percent to 0.03 percent.

In response to the cancellation, Transcorp expressed shock.

"Transcorp fears that the purported revocation of the sale of Nitel may prompt a chain of events that could ultimately jeopardize the sale of Nitel to a new core investor," said Ezedi Udom, head of corporate relations at Transcorp.

Nitel has been facing leadership wrangles, a workers strike and a debt of $500 million. The government has promised to work with banks and other creditors to recover their money.

The collapse of Nitel paints a grim picture for local acquisitions and has led to debates about whether large investments can only succeed if backed by global companies.