Telecommunications analysts are giving a mixed forecast for the Nigerian telecommunications sector as Transnational Corporation of Nigeria PLC (TransCorp) takes control of the national incumbent telecommunications provider, Nigerian Telecommunications Ltd. (Nitel).
TransCorp on Aug. 31 paid US$500 million, the final installment of its $750 million bid to acquire majority shares in Nitel.
According to Nigeria’s Bureau of Public Enterprises (BPE), the state agency responsible for divesting public companies, the key objective of the sale was to make Nitel efficient and profitable. BPE officials reasoned that achieving this goal would generate jobs and expand the tax base.
Although pundits welcome the transfer of Nitel from government control, they are guarded in their analysis.
Some industry insiders applauded the move to sell Nitel to a local company. Foreign companies would be unfamiliar with Nigeria’s terrain and might have implemented policies not suited for the market, said Sylvester Okonkwo, with consultancy Compumetrics Solutions Ltd.
And the privatization was a positive move, said Fola Odufuwa, chief executive of research company eShekels Ltd.
“Leaving the hands of government is a positive signal depending on how it is viewed. It is theoretically good; competition I believe is good for everyone,” Odufuwa said. But Transcorp has to prove it can drive growth, he said.
This is not the first attempt at selling off Nitel, or trying to find management entities to run it efficiently.
In March 2003, Nigeria signed a three-year management contract with the Netherlands company Pentascope to manage Nitel after an attempt at privatizing the telecom failed in April 2002. That contract was subsequently terminated, with the government claiming that Pentascope did not meet growth targets. Earlier this year Nigeria rejected a bid from Orascom Telecom Holding to take up majority shares in Nitel, saying the bid price was too low.
Analysts agree, however, that Nitel is in a good position — it can ride on its existing infrastructure to beat the competition.
“None of the operators have the backbone infrastructure that Nitel has. It can be utilized to put in place newer technologies to serve cities and towns across the country,” Odufuwa said.
Nitel has an expansive landline network across the country in addition to a mobile subsidiary, SAT-3, which is the trans-Atlantic fiber-optic cable that is the backbone of Nigeria’s telecom infrastructure, and real estate scattered all over the country.
While industry insiders agree that a rejuvenated Nitel will positively impact telecom and business in Nigeria, they are divided on its potential effect on the rest of Africa.
Nitel’s new owners will have their hands full for a while, Odufuwa said.
“They will be grappling with taking Nitel out of the woods that they would not look elsewhere for a while,” Odufuwa.
