IHS Global Insight Perspective | |
Significance | The privatisation process has dragged on for six months since bids were opened in February, following controversy over whether different partners were part of different bids. |
Implications | The government set up a committee to review the sale, which has reported that the process followed due process and that the winning bid should stand. |
Outlook | The New Generation consortium is now obliged to pay US$750 million within 10 days, and risks forfeiting this if it does not pay the balance of US$1.75 billion within 60 days. |
The government yesterday approved the US$2.5-billion sale of fixed-line incumbent NITEL and its mobile subsidiary M-Tel to the New Generation consortium. The Bureau of Public Enterprises (BPE) issued a statement yesterday saying that the New Generation consortium is required to pay the bid security of US$750 million within 10 days, Reuters reports, upon which a formal offer letter will be issued and the balance of US$1.75 billion should be paid within 60 days.
The New Generation Telecommunications Consortium submitted the highest bid of US$2.5 billion for a 75% stake in the operator, more than 2.5 times the second placed bid of US$956 million, but the process was mired in controversy as different partners of different bids first denied, then confirmed that they were part of bids (see Nigeria: 17 February 2010: New Generation Telecommunications Selected as Preferred Bidder for NITEL).
The BPE announced on 8 February that six companies had submitted technical and financial proposals for the sale of a 75% stake in fixed-line incumbent NITEL: AF21/Spectrum Consortium; Brymedia (WA) Ltd; Globacom Nigeria Ltd; MTN Nigeria Communication Ltd; Omen International Ltd (BVI); and New Generation Telecommunications Ltd (see Nigeria: 9 February 2010: Six Companies Chosen for Final Round of Bidding for NITEL). The New Generation Telecommunications consortium reportedly included China Unicom (Hong Kong) Limited, Minerva Group of Dubai, and Nigerian operator GiCell Wireless Limited.
The New Generation Telecommunications Consortium submitted an extremely high offer of US$2.5 billion for the operator; the second placed bid submitted by Omen International was US$956 million and the third placed bid submitted by the Brymedia Consortium was US$551 million. According to the Vanguard newspaper, the AF2I/Spectrum consortium offered $375.5 million, and MTN Nigeria offered US$25 million for the operation of the SAT-3 submarine cable within Nigeria only.
Outlook and Implications
The government set up a committee to carry out further due diligence on the prospective bidders because of the controversy, which submitted its report in June (see Nigeria: 15 March 2010: Nigerian Government to Investigate NITEL Bidding and Nigeria: 15 June 2010: NCP Submits Due Diligence Report on NITEL Privatisation). Xinhua reports that the committee found that the transaction complied strictly with the due process and that all necessary approvals were obtained.
This is the fifth attempt to privatise NITEL. In this latest attempt, the National Council on Privatisation (NCP) published an advert on 20 July 2009 inviting expressions of interest from prospective strategic investors in the acquisition of at least 75% in NITEL or one of its six core assets (see Nigeria: 22 July 2009: Nigerian Government Invites Bids for 75% of NITEL or its Core Assets).
- 2001: Investors International Ltd (IIL) won a 51% stake in NITEL in November 2001 with a bid of US$1.317 billion, but although it paid the non-refundable 10% deposit of US$131.7 million, it was unable to source the remaining finance despite having its deadline extended. The privatisation was cancelled and IIL forfeited its deposit, but it has since mounted legal action in an attempt to recover the funds, arguing among other things that the government itself undermined investor confidence at a critical period during the closure of the transaction.
- 2005: In December 2005, Orascom Telecom submitted a bid of US$256.5 million for a 51% stake in NITEL (see Nigeria: 30 December 2005: Orascom Telecom Wins NITEL Privatisation with Bid of US$256.5 mil.). However, the amount offered by Orascom fell well below the government's expectations, and indeed below the (undisclosed) reserve price, and in January 2006 the government cancelled the sale (see Nigeria: 24 January 2006: BPE Cancels NITEL Privatisation, Calls for Fresh Bids).
- 2006: The government succeeded in privatising NITEL on the fourth attempt in July 2006 when Transnational Corporation of Nigeria (Transcorp) was announced as the winner of a 75% stake for US$750 million. Transcorp finally took a 51% stake in NITEL and paid US$500 million for these shares. The firms that had been short-listed by the BPE were Celtel; Telkom South Africa; Investcom Holdings; Transcorp and BT Group; Globacom, Afro Telecommunications, and Korean Telecoms; and Etisalat of the United Arab Emirates.
- 2008: In February 2008 after a performance review, the government said that it was cancelling the privatisation of NITEL to Transcorp and would search for a new core investor. During December 2007 a new rescue plan had been agreed between the government and Transcorp for the struggling operator. It was decided that both the government and Transcorp would sell part of their equity stakes in NITEL to secure a new core investor. In June 2009 the government cancelled the previous privatisation of NITEL and its mobile arm, M-Tel, after the NCP found Transcorp "in serious breach of the terms and conditions of the agreement in respect of both companies" (see Nigeria: 2 June 2009: Nigeria's National Council on Privatisation Revokes Sale of NITEL to Transcorp).