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Cablegate: Nigeria: Telecommunications Roundup

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 LAGOS 000617

SIPDIS

STATE PLEASE PASS TO FCC, EX-IM, AND OPIC

E.O. 12958: N/A
TAGS: ECPS ECON NI
SUBJECT: NIGERIA: TELECOMMUNICATIONS ROUNDUP

REF: (A) LAGOS 524, (B) 03 LAGOS 2565

1. (U) Summary: Recent conversations suggest the
Nigerian telecommunications industry is evolving
rapidly. Officials at Nigeria's Bureau of Public
Enterprises (BPE) say they hope to take NITEL public in
June; M-Tel executives say they expect to complete the
installation of a 1.2 million line mobile network in
August; and executives at Nigeria's largest fixed
wireless operator, Odua Telecommunications, say they
hope to complete the construction of a five-state
network in December. End summary.

---------------------------
NITEL: Plans for a June IPO
---------------------------

2. (U) BPE officials say they hope to sell 20 percent
of the GON's shares in Nigeria's national operator,
Nigerian Telecommunications Limited (NITEL), in an
initial public offering in June. The company's shares
have not been valued, but the BPE's Director of
Infrastructure and Networks, Irene Chigbue, says she
expects the opening price to fall between N0.80 and N1
per share. If domestic investors snap up the 20
billion shares on offer as rapidly as some observers
expect, NITEL may raise as much as $150 million.

3. (U) BPE officials delayed the sale of an initial
tranche of shares twice before (Ref A), but Chigbue
believes NITEL is better prepared this time. The
company's board recently approved a business plan and
accepted an audit of the 2002 accounts, and BPE
officials say the board will consider the firm's 2003
results within the next few weeks. With these, BPE and
NITEL will be able to move ahead with an initial public
offering, but only after selecting an issuing house,
naming the various parties to the issue, winning
Nigerian Securities and Exchange Commission approval,
and preparing a prospectus.

4. (U) Chigbue added that two foreign firms, one from
Singapore and the other from China, have expressed
interest in purchasing the 51 percent controlling
interest the GON hopes to sell to a core investor. If
either firm submits a proposal to the BPE and initiates
the competitive bidding process and subsequent sale,
the GON will likely compensate NITEL's managers,
Pentascope International, for the early termination of
their three-year contract and turn the firm over to new
parties. Chigbue says the GON would like nothing
better than to see NITEL successfully privatized,
particularly after a botched attempt in 2002. The
firm's privatization, she says, remains one of the
GON's top priorities.

--------------------------------------------- ---
M-Tel: A Slow Rollout, but a Rollout Nonetheless
--------------------------------------------- ---

5. (U) M-Tel executives admit having experienced delays
rolling out their 1.2 million line mobile network, but
CEO Aad Loois expects to complete 90 to 95 percent of
the network within the next three months, with the
remaining 5 or 10 percent coming online in August.
Lines are selling rapidly, with total subscriptions
sometimes doubling in two-week periods. Loois hopes to
respond to that demand by beginning the installation of
several hundred thousand additional lines in the fourth
quarter.

6. (U) M-Tel awarded $50 million contracts for the
installation of its mobile network last March. Each of
the three contractors, Motorola, Ericsson, and ZT of
China, were expected to install 400,000 lines within
four and a half months of the signing of letters of
credit. These were signed last August, but
difficulties clearing equipment through customs delayed
construction until mid-November. Motorola's Country
Manager, Raphael Udeogu, expects to complete the
network's rollout in late March or early April, but he
says only 30 or 40 percent of the network will be used,
mostly because it lacks sufficient connections to
NITEL's transmission backbone. Promised repairs and
extensions never materialized, so like other mobile
service providers, Motorola has had to fill in the
gaps. Udeogu hopes to win a multi-million dollar
contract to supply much-needed connecting points later
this year.

------------------------------------
Odua: A Powerhouse Enters the Market
------------------------------------
7. (U) Executives at Nigeria's leading fixed wireless
operator, Odua Telecommunications, say they hope to
complete the construction of a 1.1 million line fixed
wireless network by the end of the year. The company's
backbone is more than two-thirds complete, and it
recently rolled out in two of the five southwestern
states included in its 3.5GHz license (Ref B). Odua's
Chief Technical Officer, Olusegun Owolabi, expects to
introduce services in the remaining three within the
next few months.
8. (U) Odua is well ahead of its competitors. Of the
twenty-six firms that won 3.5GHz licenses in June 2002,
only Odua has started operating. It bills itself as
customers' "sure link" and emphasizes the reliability
and affordability of its services. Calls cost as
little as N4 ($0.03) per minute, and customers can
purchase pre-paid calling cards for as little as N200
($1.48). Subscribers have responded positively, and
Owolabi expects to sell lines easily. Like other
Nigerian operators, Odua will likely find that demand
far exceeds supply.

9. (U) Comment: Despite privatization snags, rollout
delays, and poor basic infrastructure, the Nigerian
telecommunications sector is evolving rapidly. It
continues to attract foreign investment, and it remains
one of the fastest growing sectors of the Nigerian
economy. Given Nigerians' insatiable demand for
telecommunications services, the sheer size of the
market, and operators' desire to profit, the
telecommunications sector will likely remain one of the
economy's strongest engines of growth. The sector's
expansion should create lucrative business
opportunities, particularly for U.S. firms. Motorola
and Harris (Ref B) have already profited, and others
would do well to follow their lead. End comment.

HINSON-JONES

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