IHS Global Insight Perspective | |
Significance | This decision brings to an end a dispute between the government and the Dataport consortium regarding the performance of the investors since Sonitel was privatised eight years ago. |
Implications | The market has now been liberalised with the Nigerien government awardinga second "global" licence to France Telecom in 2007. |
Outlook | The government has said that the contract will be terminated with effect from 19 February 2009 and that it might look to resell the stake to another foreign investor in the future. |
Sonitel (Société Nigérienne des Télécommunications) was privatised in 2001 when the government sold a 51% stake in both Sonitel and its mobile subsidiary, Sahel Com, to the Dataport consortium, which comprises Chinese equipment vendor ZTE and the Libyan Arab African Investment Company (LAAICO), a subsidiary of the state-owned Libyan Arab Foreign Investment Company (LAFICO). The consortium beat three other bidders for the 51% stake, including a consortium of France Telecom and Sonatel, the Senegalese operator and part of the FT Group (see Niger: 9 November 2001: ZTE Submits Highest Bid in Privatisation of Sonitel). At the time, the Economy Ministry said that ZTE had bid 11.8 billion CFA francs (US$16.1 million) for the 51% stake, although Reuters reports that the stake was sold for 17.5 billion CFA francs.
Speaking last week on national television, Nigerien Communications Minister Mohamed Ben Omar said that Sonitel's privatisation had been a failure and that the Dataport consortium had breached contractual obligations, according to Reuters. “Therefore … on 19 February Dataport will no longer be a shareholder in Sonitel or Sahel Com, [which] will come back into public ownership and maybe in a few months we will have another buyer.”
According to the report, the Dataport consortium breached a number of contractual obligations, including failing to meet a roll-out target of 45,000 fixed lines, failure to pay staff wages and accumulating debts of some 39 billion CFA francs (US$77 million). The cards were on the table in 2007 when problems between the government and investors and the Minister criticised the private operators for high prices, going so far as to say that "it is clear that operators do not fully live up to terms and conditions contained in their contracts" (see Nigeria: 17 October 2007: Nigerien Government Minister Says Telecoms Operators Fail to Observe Contractual Obligations).
Sonitel’s fixed-line monopoly expired on 1 January 2005 and the government liberalised the market, awarding a "global fixed, mobile and internet" licence to France Telecom in November 2007 for 48 million euro (see Sub-Saharan Africa: 14 February 2005: Liberalisation Advances Across Sahelian Countries and Niger: 23 November 2007: France Telecom Wins Fixed, Mobile and Internet Licence in Niger). The scope of the licence includes mobile, international voice and data services, local loop and long-distance inter-urban links, pre-paid cards for local, long-distance and international services, and internet services. France Telecom also launched mobile services under the Orange brand last year (see Niger: 1 July 2008: France Telecom Launches Network in Niger Under Orange Brand).
Outlook and Implications
It appears that the government could well attempt to resell a stake in Sonitel at some time in the future, according to the Minister’s statement. However, before that can happen, there will inevitably be a legal process undertaken by the foreign companies to protect their investments. Even afterwards, potential investors will inevitably be very cautious of such an opportunity.
Unfortunately, this case is not especially unusual and comes at a time when a number of other African fixed-line operators have been privatised and governments are under pressure to deliver on universal access plans. There are several other cases where foreign investors or management contractors that have taken control of fixed-line operators have had their contracts cancelled because performance has fallen short of government expectations. Where this has happened and foreign companies have lost or risk losing their investments in the process, it has resulted in some cases in protracted legal action. What stands out in this case is that the government has said that it will actually re-nationalise the operator and take back the stake it had sold.
In Nigeria, the government cancelled a three-year management contract awarded to Pentascope in 2005 to run fixed-line incumbent NITEL (see Nigeria: 3 February 2005: Nigerian Government Reportedly Terminates NITEL Management Contract). After selling a 51% stake in NITEL to Transcorp for US$500 million in 2006, the government subsequently reviewed investor performance and decided to cancel the sale with a view to selling to a new foreign investor (see Nigeria: 19 February 2008: Nigerian Government Cancels Sale of NITEL, Seeks New Investor).
In Ghana, a long-running dispute between the government and Telekom Malaysia, which took a 30% stake in Ghana Telecom in 1997, went to international arbitration (see Ghana: 16 August 2005: Telekom Malaysia's 30% Stake in GT Valued at US$52 mil.). Management of the operator was then transferred to Pentascope prior to the operator being prepared for privatisation (see Ghana: 11 December 2006: Government Ends Telenor Management Contract Of Ghana Telecom).Telekom Malaysia also exited its investment in Guinea, writing down an initial investment of US$45 million for a 60% stake in fixed-line incumbent Sotelgui to US$1 last year (see Guinea: 12 August 2008: Telekom Malaysia Agrees to Sell Controlling Sotelgui Stake Back to Guinean Government).