Thursday, June 18, 2009

Revocation of NITEL sale

THE other week, the National Council on Privatization revoked the November 2006 sale of the Federal Government's 51 per cent equity stake in NITEL/M-Tel to the Transnational Corporation Limited (TRANSCORP). We are sure that no one would shed a tear for this most welcome development. We are even more certain that TRANSCORP is indeed happy to be relieved of the burden of managing NITEL/M-Tel as a core investor, a role it was clearly ill-suited to play.

The grounds for the revocation are as damning as they are cogent. Contrary to the terms and conditions of the sale, TRANSCORP failed to inject N8.9 billion cash into NITEL within 100 days of its take-over, in order to remedy the acute liquidity crisis of the telecommunications outfit. The core investor also failed to pay interconnectivity debts of N17 billion, and for the past 11 months it had been unable to pay workers' salaries. In fact, 30 months after TRANSCORP took over NITEL/M-Tel, the workforce of the telecommunications operator shrank dramatically from 13,000 to fewer than 1,000. Its telephone exchanges, switches and other immovable assets are now virtually decrepit.

The woeful performance of the core investor is indicated by the fact that NITEL/M-Tel's market share plummeted from 15 per cent to around 0.03 per cent. The core investor also left a debt overhang of $500 million owed various banks. These breaches, including the exit of British Telecommunications as a technical operator, were serious enough to have voided the privatization contract.

Just how an incompetent organisation like TRANSCORP came to acquire majority stake in NITEL, a prime national carrier, raises questions about the fidelity of some of the transactions in the privatization exercise during former President Olusegun Obasanjo's administration. TRANSCORP has no track record either in telecommunications operations, or in general enterprise management. It was obviously a special purpose vehicle contrived by the power of political incumbency to corner NITEL with an eye on its vast assets spread throughout the country.

TRANSCORP, in which Obasanjo had substantial interests, even though described as a blind trust, had no real capacity to manage NITEL/M-Tel. The former Director-General of the Bureau of Public Enterprises, Dr. Irene Chigbue, whose organisation supervised the sale, was either being economical with the truth, or was plain ignorant when she declared in November 2006 that the privatization of NITEL/M-Tel was a huge success and a model in Africa. Thirty months later, it has all unravelled.

The sale was not competitive, as TRANSCORP was the sole bidder. Yet, it beggars belief that the NCP indulged TRANSCORP for 30 agonising months while the fortunes of NITEL/M-Tel deteriorated in clear violation of the advertised benefit of privatization, which is to make for more efficient management and profitability. The Federal Government was too slow in putting an end to the rot. Almost 18 months ago, in January 2008, the then Minister of State for Communications, Alhaji Ibrahim Nakande, had recommended to President Umaru Yar'Adua that, owing to TRANSCORP's failure to revive NITEL/M-Tel, another core investor should be sourced, together with other measures which the government only last week cranked into effect.

Subsequent steps to be taken by the Federal Government/NCP are critical. We endorse the move to stop forthwith further, or any attempt at, asset-stripping. In the same vein, no one will bat an eyelid over the NCP's position that it would recover any assets that were arbitrarily sold during the pendency of the ill-fated acquisition. But there should be concern about the proposed appointment of a technical board to oversee the affairs of NITEL/M-Tel before it is again sold to another core investor. The concern centres on the terms of reference of the technical board, which have not been publicly disclosed.

There are a few suggestions in that regard. The role of the technical board should be to recover and secure all assets of the telecommunications outfit. That will involve a proper audit and maintenance of records, including the extent of its financial ill-health. It should not be the business of the technical board to embark on any new investments on the pretext of preparing NITEL/M-Tel for another round of privatization.

The country has lost enough money already, and it is pointless pouring more funds into a sink-hole. The task therefore of the technical board should be to present NITEL/M-Tel "as is" for sale, with the necessary implications of caveat emptor. The earlier this is done, the better. The technical board must not entrench itself and then become another source of patronage and squabble.