Search

 

Cablegate: Nigeria's Sale of Nitel Completes Largest Privatization

VZCZCXRO5372
PP RUEHMA RUEHPA
DE RUEHUJA #1773/01 1921239
ZNR UUUUU ZZH
P 111239Z JUL 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 6420
INFO RUEHOS/AMCONSUL LAGOS 4564
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 ABUJA 001773

SIPDIS

SENSITIVE
SIPDIS

PASS STATE PASS TO USTR
TREASURY FOR DPETERS
DOL FOR ANN ZOLLNER
USDOC FOR 3317/ITA/OA/KBURRESS
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS

E.O. 12958: N/A
TAGS: ECPS EINV EIND PGOV NI
SUBJECT: NIGERIA'S SALE OF NITEL COMPLETES LARGEST PRIVATIZATION

REF: LAGOS 867

1. (SBU) Summary. Nigeria's Bureau of Public Enterprises (BPE)
sold on July 3 a 75% stake in the state-owned Nigerian
Telecommunications (NITEL) Limited and its M-Tel subsidiary to
Nigeria's Transcorp for $750 million in a negotiated sales
process. This is Nigeria's biggest privatization deal so far,
but it is subject to final approval by the National Council on
Privatization. British Telecom acted as technical adviser to the
investors, while Etisalat was an additional technical and
financial partner. Less than 24 hours after NITEL's sale, eight
of the company's top managers resigned following allegations of
financial crimes involving NITEL's pension fund. Much Nigerian
press reaction to the NITEL deal was negative, for a variety of
reasons. The suddenness of NITEL's sale supports the perception
by the Nigerian public that the sale was an inside deal. End
summary.

2. (U) Nigeria's BPE sold on July 3 a 75% stake in the state-
owned Nigerian Telecommunications (NITEL) Limited and its M-Tel
mobile-telephone subsidiary to the Transnational Corporation
(Transcorp) of Nigeria for $750 million (96 billion naira)
through a negotiated sales process. This is Nigeria's biggest
privatization deal so far, but it is still subject to final
approval by the National Council on Privatization. The
Government of Nigeria (GON) decided to adopt the negotiated sales
process after years of unsuccessful attempts to sell NITEL. This
process took into account the company's declining value due to
its growing technical obsolescence and revenue losses from
NITEL's recent strikes. Transcorp was aided in its successful
effort by technical adviser British Telecom and technical and
financial partner Etisalat of the United Arab Emirates.
Transcorp said it secured a 1 billion euro loan from the European
Union Development Council at a 4% interest rate, which it will
use to make NITEL more competitive.

3. (U) Transcorp was incorporated in 2004 and is a wholly
Nigerian-owned conglomerate. The company's chairwoman, Ndi
Okereke-Onyiuke, told the press on July 3, "We are out to build a
mega-corporation like what exists among the Asian tigers."
Transcorp will in August make an initial public offering.
Okereke-Onyiuke said the GON would offer for sale to the public
by the end of 2006 the remaining 25% of the GON's share of NITEL.

The Distribution of NITEL's Liabilities
---------------------------------------

4. (U) BPE Director General Irene Chigbue said Transcorp had
seven working days to pay an initial deposit of $500 million, and
60 working days to pay the balance of $250 million -- otherwise,
the deal was off. NITEL would retain all its liabilities and
debts, while the GON would assume all human-resources costs such
as pension liabilities for NITEL employees and costs associated
with downsizing. The GON had approved about 25 billion naira
($195.3 million) as a severance package for 7,000 employees of
NITEL and its M-Tel subsidiary. This amount would cover
outstanding salaries and allowances, as well as all termination
benefits not to be borne by Transcorp. The 25 billion naira
payment would be made within six weeks, but would not cover
employees' pension liabilities, and NITEL's non-core assets would
be sold separately to fund the pension program.

Allegations of pension-fund looting
-----------------------------------

5. (U) Less than 24 hours after NITEL's sale, eight of the
company's top corporate managers resigned after the release of a
report alleging financial crimes running into the billions of
naira, the press reported. In response to agitation by NITEL
employees, an investigative committee set up to examine the NITEL
Staff Pension Fund (NSPF) identified severe mismanagement of the
5.5 billion naira ($43 million) fund. The committee's report
identified 11 managers who helped themselves to various amounts
and who will face the Economic and Financial Crimes Commission.
The managers allegedly used at least 63 banks and discount houses
in their fraudulent transactions involving the NSPF. The
committee's report concluded that as of December 2005, the fund
invested 4.9 billion naira in various banks of which 1.49 billion
naira ($11.6 million) were trapped in distressed banks, while
another 372.1 million naira ($2.9 million) could not be accounted
for. Also, a 117.14 million naira ($914,000) investment could
not be traced.

Press reaction to NITEL's sale
------------------------------

ABUJA 00001773 002 OF 002

6. (U) Most Nigerian press reaction to the NITEL deal was sharply
critical. The headline of a July 6 editorial in Abuja's DAILY
TRUST declared, "Obasanjo's Cronies Finally Grab NITEL" after
more than six years of "well-rehearsed rigmarole" with the
Nigerian people "already assigned a role as the losers." An
editorial on July 9 in the Lagos DAILY CHAMPION congratulated the
BPE on selling a "badly run, non-profitable organization seething
with corruption, administrative inefficiency and technical
deficiency." The paper also, however, noted the "desperate,
hasty" bidding process, criticized the "lack of full disclosure"
concerning NITEL's true worth, and charged that the company was
"sold for a penny" -- because in 2001, Investment International
London, Ltd., valued 51 percent of the company at $1.25 billion.
The newspaper additionally warned, "[W]e expect more transparency
and openness on the part of the BPE" when the remaining 25% of
NITEL is sold to the public. The SUNDAY TRIBUNE on July 9 was
concerned about the sale's lack of transparency and cautioned,
"Nigerians might be on the way of being treated to another orgy
of massive official corruption."

Comment
-------

7. (SBU) The suddenness of NITEL's sale was surprising, at least
to the Nigerian general public, after years of unsuccessful
efforts to sell the company. While the GON was correct to sell
the rapidly declining NITEL, the deal was not handled with the
kind of transparency that supports public confidence in the
transaction. Instead, it has supported the public perception
that the sale was an inside deal -- given that Transcorp
represents the political and economic allies of President
Obasanjo. The U.S. Mission Abuja will report septel on further
issues suggesting impropriety in NITEL's offer conditions.
FUREY

© Scoop Media

 
 
 
World Headlines

 

UN News: UN Strongly Condemns Knife Attack Inside Nice Church Which Left Three Dead

The UN Secretary-General on Thursday strongly condemned a knife attack inside a French church in the southern French city of Nice, which reportedly left three worshippers dead. In a statement released by his Spokesperson, António Guterres extended his ... More>>

ALRANZ: Denounces US Senate Confirmation Of Judge Barrett

ALRANZ Abortion Rights Aotearoa denounces the US Senate’s confirmation of Judge Amy Coney Barrett to the Supreme Court seat formerly held by Justice Ruth Bader Ginsberg. “This action demonstrates the rank hypocrisy of the once-respected upper chamber ... More>>

UN News: Millions Affected As Devastating Typhoon Strikes Viet Nam

A major typhoon has struck central Viet Nam, affecting millions of people – including about 2.5 million children – in a region already reeling from the effects of severe floods, according to UN agencies in the country. There are also reports that 174 ... More>>

Reporters Without Borders: Julian Assange’s Extradition Hearing Marred By Barriers To Open Justice

After monitoring four weeks of evidence in the US extradition proceedings against Wikileaks publisher Julian Assange, Reporters Without Borders (RSF) reiterates concern regarding the targeting of Assange for his contributions to journalism, and calls ... More>>