IHS Global Insight Perspective | |
Significance | New Generation Telecommunications, formerly the Telefónica consortium, submitted an extremely high offer of US$2.5 billion for the operator. |
Implications | New Generation Telecommunications' bid was more than 2.5 times the amount of the second-placed bid (US$956 million submitted by Omen International) and 4.5 times the third bid (US$551 million submitted by the Brymedia Consortium). |
Outlook | Omen International, with the second-placed bid of US$956 million, is the reserve bidder and will be obliged to make good on their offer should New Generation Telecommunications fail to pay its stake within the allotted timeframe. |
The Bureau of Public Enterprises (BPE) yesterday announced the New Generation Telecommunications consortium as the preferred bidder for fixed-line incumbent NITEL after opening financial bids from the six short-listed bidders. The offer is subject to final approval by the National Council on Privatisation (NCP), which is headed by Acting President Goodluck Jonathan, before the New Generation Telecommunications consortium is formally announced as the winning bidder (source: Reuters/Vanguard newspaper).
Once the offer has been approved by the NCP, the New Generation Telecommunications consortium will have 10 days to pay 30% of the purchase price (US$750 million) and a further 50 days to pay the remainder (US$1.75 billion). In the event that the winning consortium fails to pay within the allotted timeframe, the reserve bidder, Omen International, will be obliged to pay.
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 (formerly Telefónica Consortium; see Nigeria: 9 February 2009: Six Companies Chosen for Final Round of Bidding for NITEL). The New Generation Telecommunications consortium includes China Unicom (Hong Kong) Limited, Minerva Group of Dubai, and Nigerian operator GiCell Wireless Limited.
According to the Vanguard newspaper, the Brymedia Consortium submitted a bid of US$551 million for the whole of NITEL, the AF2I/Spectrum consortium offered $375.5million, and MTN Nigeria offered US$25million for the operation of the SAT-3 submarine cable within Nigeria only.
Outlook and Implications
This is the fifth attempt to privatise NITEL. In this latest attempt, the 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). This time round, the government was willing to break NITEL into its core assets to secure a sale.
The core assets listed are NITEL's ownership of capacity on the SAT-3 submarine cable, landline network, M-Tel mobile network, fibre-optic transmission backbone, CDMA network, and analogue TACS network. A total of 14 prospective investors have been undertaking due diligence on NITEL (see Nigeria: 2 September 2009: Nigerian Government Receives 13 Expressions of Interest for NITEL).
- 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.
- 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).
- 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 Bureau of Public Enterprises were Celtel; Telkom South Africa; Investcom Holdings; Transcorp and BT Group; Globacom, Afro Telecommunications, and Korean Telecoms; and Etisalat of the United Arab Emirates.
- 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. Under this resolution, the government would sell 24% of its 49% stake and Transcorp would sell up to 27% of its 51% stake, giving the new core investor a 51% shareholding and thus majority ownership. However, in February 2008 the government announced that it was cancelling the privatisation altogether.