The federal government through announced last week the revocation of Shares Sales Purchase Agreement (SSPA) it entered with Transnational Corporation of Nigeria (Transcorp) and subsequently appointed a new technical board that will manage the company.
Government claimed that that Transcorp had breached the condition precedent on which the investment deal in Nitel/M-Tel was consummated, the implication being that Transcorp had walked away from the deal on its own.
Christopher Anyanwu, director general, Bureau of Public Enterprise (BPE) and member National Council on Privatization (NCP) said that the NCP is of the opinion that Transcorp has opted out of the Nitel/M-Tel because it has failed to meet the condition precedent, and that it has been withdrawn. He noted that it is void because it never existed in the first place due to their failure to keep with the terms of the transaction agreement.
He said Transcorp is aware of this fact and that they have already given us the power of attorney (waves the paper) for their equity in the investment.
"Accordingly, the Federal Government has stopped the further sale of all assets of the two companies, whether core or non-core. In the same vein, all sold assets are to be reviewed and any found to have been arbitrarily and unjustifiably sold are to be recovered.
He added that the government was desirous of having the two companies and other privatized non-performing enterprises back on stream and would not leave any stone unturned in this direction.
The BPE boss explained that Transcorp might have sourced their investment funds from banks and other entities, government may open up discussions with the affected institutions to assist them claim their investments.
Before the recent action of government, Transcorp had left Nitel with a debt overhang of $500 million owed a consortium of banks.
By a Shares Sales and Purchase Agreement (SSPA) signed between the Bureau of Public Enterprises (BPE) and Transcorp on November 14, 2006, 51 per cent equity of Nitel was transferred to Transcorp while the government retained 49 per cent.
Under the Post-Acquisition Plan (PAP), Transcorp agreed to inject a minimum of N8 billion new funds into Nitel to prepare it for competition within 30 days and 100 days after the take-over. The PAP was to start the transition of Nitel and its mobile subsidiary, M-Tel, to a profitable and strategic telecommunications operator.
But 30 months after, Nitel’s fortunes have nose-dived with its workforce reduced from 13,000 at take-over to less than 1,000 and telephone exchanges and other immovable assets such as switches in comatose.
NCP under the chairmanship of Vice President Goodluck Jonathan approved the constitution of a technical board to manage the affairs of Nitel/M-Tel until a new core investor emerges.
Alhaji Ikra Bilbis, Minister of State for Information and Communications, who read the resolution of the NCP meeting, said the revocation was arrived at after discussing "the outstanding issues in Transcorp’s management of Nitel/M-Tel and other issues contained in the Shares Sales Purchase Agreement (SSPA)."
According to him, the decision was based on "serious breaches of the terms and conditions of the SSPA, particularly: exiting of British Telecommunications (BT) as the technical operator, which is condition precedent in the SSPA; failure of Transcorp to inject N8.9 billion cash into Nitel within 100 days of its take-over to address the immediate liquidity problem facing Nitel.
Others include, failure to pay interconnectivity debt totaling about N17 billion; inability to pay workers’ salaries in the past 11 months; and failure of Transcorp to maintain Nitel/M-Tel as a going concern, resulting in complete loss of market share from 15 per cent to 0.03 per cent.
Bilbis said it is clear that "Transcorp has deviated and voided the contract in its entirety."
This decision of government sounded good as an effort to revive the ailing used to be telecommunications giant in the country, but there still remain issues that demands explanation which put this effort in doubt. Why is it that whenever serious effort is made to get a technical partner or core investor to revive Nitel that government will come up with revocation of its agreement with Transcorp on Nitel sale? It would be recalled that in 2008 Transcorp had concluded arrangement to sign an agreement with a new investors who were already in the country for the signing ceremony when government suddenly revoked the sale to Transcorp on a Saturday, a non working day. Again in line with federal government and Transcorp the two owners of Nitel agreement to relinquish some percentage of their share holding to a would be core investor, BPE commenced process towards finding a core investor which has been schedule to be completed in September this year, another revocation of agreement was announced.
Transcorp also initiated effort that would have gone a long way in putting Nitel back on its feet with the signing of a project agreement Cisco which was truncated. Under the project deal, Cisco, a leading global information technology firm, agreed to raise $10million to rehabilitate and transform Nitel’s fibre optic cable that is lay waste to ensure that Nigerians get speedy and reliable connection to the super highway. The project would also expand Nitel’s capacity by six times and create huge volumes of bandwidth in commercial quantity for corporate organizations in telecoms, oil and gas and other multinational firms in the country.
The first phase of the project would have generated between $100milliom and $150million to Nitel every year once it is completed. Government as well directed Transcorp in a letter to stop the contract for no stated reason.
Industry watchers are of the view that, with all these revocation and interference by government it will be very difficult to get foreign core investor for Nitel aside skepticism shown by some foreign investors in investing in a country with poor infrastructure and other business challenges.
 The fact that Transcorp has not shown enough seriousness in bringing Nitel to life once again in terms of technical and financial ability is not in doubt. The Federal government of Nigeria’s attitude to the whole arrangement also left much to be desired. Although it claimed to have 49 percent of Nitel, investigations show that since the coming on board of Transcorp, it has not invested a dime in its operations. This is definitely contrary to the dictates of the industry which demands constant investment to be able to catch up with the competition. Nigeria CommunicationsWeek investigations show that the politics and interest of some people in government had contributed immensely to frustrate all effort to revive the company by Transcorp. Government said that Transcorp did not inject N8 billion into Nitel within 100 days of its take over, but it was gathered that Transcorp took firm control of Nitel in 2008 two year after it acquired 51 percent share of the company.
It is important to note that the Federal Government which owes 49 percent equity has not made any investment since 2006. The last time an investment was committed to Nitel by government was in 2005 when it disbursed about N60billion into Nitel’s operation, the fund which was said to have disappeared into private pockets immediately Nitel’s account was credited.
According to Tom Iseghohi, group managing director, Transcorp, Transcorp invested over N5 billion in Nitel within the first year of its take over. This means that going by the share structure, government supposed to have brought in a commensurate investment of over N4 billion.
Mr. Bayo Banjo, vice president, Association of Telecommunications Company of Nigeria (Atcon), said Transcorp has found itself in this sorry state because it is ignorant of the fact that any dealing with government is very difficult because of inherent political interests.
An industry analyst said the entire scenario is a reflection of the fact that government has no business in business. He questioned how government is going to reconcile invest made by Transcorp in the payment of staff salaries when the company is not generating near what is use in running it.
Engr. Gbenga Adebayo, chairman, Association of Licensed Telecommunications Operators of Nigeria (Alton) agreed that enough has not been by both parties in Nitel deal which is responsible for Nitel that controls about 25 percent of market share five years now controls 0.003 percent.
He urged for a complete re-engineering of Nitel before any other effort at reviving the company, especially maintenance of its network facilities that have not been maintained for the past five years.
He noted that, there is not going to be a smooth sale of Nitel going by the events that have happened, and that position of government in respite of the percentage of share to be sold will determine the direction and willingness of any core investor to invest in Nitel.
Adebayo suggested a 100 percent sale of Nitel as government does not have what it take to run business, adding that the current state of affairs in Nitel be made public.
Industry watchers have argued that the position of government to guide the revival process in Nitel is a mere effort to cover up huge debt owe Nitel by people in government as well as their interest.