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New owners of Nitel, Mtel, face a tough road to success

Michael Malakata | Dec. 9, 2014
It's been a long road to the NATCOM consortium's $252 million acquisition of Nitel and Mtel, but there's also a long path ahead as the group tries win back public confidence and compete with private operators that have dominated Nigeria's telecom market.

As is the case in many African countries, the Nigerian government failed to recapitalize the company, hence the decision to sell it. Corruption allegations in the bidding process forced the President Goodluck Jonathan to set up a panel to probe the sale of Nitel. Although the findings of the panel were not made public, the head of BPE was suspended by Jonathan and later removed from his position.

In 2011, Omen International Consortium failed to pay a $105 million security bid to BPE for Nitel. A few months before that, the New Generation Consortium, led by China Unicom, backed out after failing to pay the bid price of $2.5 million for a 75 percent stake in Nitel.

Investor International London's bid to acquire the company also failed after it defaulted in paying the bid price of $1.3 billion.

In 2003, Pentascope, a Dutch company took over Nitel in a bid to revamp it and the company generated about N52 billion ($289 million). About two years later, the number of connected lines managed by the company dropped and Nitel incurred debt of more than $220 million. Later the Nigerian government revoked the deal with Pentascope to manage the company.

There is general pessimism about whether the new owners can revive the company. The Nigerian telecom market has over 11 operators competing for customers, raising fears that the market might soon become saturated.

The Nigerian telcom market has 125 million subscribers and a market penetration of around 75 percent, according to a recent report by telecom research firm Buddecomm. The country only has 67 million Internet users.

Since NATCOM will also an ownership share in the SAT-3 international submarine cable system, it is expected that the new buyers will offer enhanced broadband data service. This might attract customers, owing to the challenges facing other operators in the provision of data services.

 

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