“Not Party Time Yet”: Nigeria grapples with Telecommunications Reform
9
privatizing NITEL). The government resisted this pressure and decided to follow through
with privatization.
Eventually, the government through the Bureau for Public Enterprises (BPE) and
its consultant the Pricewaterhouse Coopers (PWC) consortium called on interested
investors to bid for 51% share of NITEL. At the beginning of the privatization exercise in
the 1990s, the government had planned to sell 40% share to a core investor, retain 40%,
and sell the balance of 20% to the public. In any case, there were 16 bidders for the 51%
share but amazingly none of them was one of the reputable global telecommunications
companies that Nigeria had hoped to attract. There were those who believed that the
unreliable valuation of NITEL, lack of stable market control by an independent regulator,
and the poor state of NITEL equipment which required $1.5 billion to modernize may
have contributed to the absence of major investors.
In any case, Investors International (London) Limited (IIL), Telnet Consortium,
and Newtel Consortium emerged finalists based on submitted technical proposals. In the
end, IIL bid of $1.317 billion won the day. IIL is a wholly Nigeria-owned company led
by influential individuals and a group of local banks but it had an operating/management
partner Technologia das Communicacoes (TDC) of Portugal. IIL promptly paid 10% of
the total bid ($131.7 million) as required by the deadline of December 2001. However,
this began to unravel when IIL could not come up with the rest of the money. The BPE
then contacted Telnet (backed by Korea Telecom and Swedish Telia), that had finished
second in the bidding, to take over. Telnet, perhaps concerned with the bidding prices of
NITEL, declined to take over. IIL’s offer price of $1.317 billion for the 51% equity
represents “a cost of $1,881 per line which is higher than the $1,000 per line paid by
Thintana Communications Consortium for 30% of Telkom South Africa or $1,470 per
line at which British Telecommunications (BT) was valued” (BMI-TechKnowledge,
2001). After Telnet declined, BPE was left with no alternative taker. The BPE then
approved a six-week extension for IIL, which also fell through. At that point BPE pulled
the plug.
The fall-out from this botched attempt to sell NITEL was numerous. First, two
officials of IIL financier – First Bank of Nigeria - lost their jobs. They had disbursed a
loan of $111.7 million to IIL without prior First Bank board approval for the total sum.
Convention