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What Is NITEL Worth?

Posted by Daily Independent on 2006/06/28 | Views: 571 |

What Is NITEL Worth?


To many discerning, independent observers a position is built up in which the nation's pioneer national carrier is being portrayed as.....

To many discerning, independent observers a position is built up in which the nation's pioneer national carrier is being portrayed as a totally dysfunctional organisation to be sold or perhaps given away as scrap.

This goes against the grain of recent contemporary experience, where in most cases the privatisation of a country's national carrier has brought mouth watering revenues to the nation's exchequer, odd, is it not, that Nigeria appears to be going against an established world wide trend.

The contentions issue, which has to be answered is the worth of NITEL as a going concern. Curiously, the Bureau for Public Enterprises (BPE) the privatisation agency, responsible for the sale of NITEL appears to be at the forefront of those that canvass the position that the company is not worth much; The thinking is that the company has been badly managed, has lost a lot of grounds and should be seen as scrap. As in Alice in Wonderland, it gets curiouser and curiouser. In a transparent transaction, it is the duty of the seller not to devalue his product in the eye of the potential buyer. This commonsensical position appears to be at variance with BPE's attitude as the seller of NITEL.

Those who, correctly in our considered view, disagree with the position of BPE, argue that the value of NITEL should not be determined by its present market position but by its dormant assets. There is nothing new in this. Pentascope which had earlier mishandled its watch over NITEL had in 2004 projected a business plan based on reawakening NITEL's formidable assets, indicating that the company could win back 50 per cent of lost market share from the Private Telecommunication Operators (PTOs) in 2007. It also indicated that the company could handle 50 per cent of Nigeria's traffic by 2007. Pentascope's projections were based on the effective deployment of a number of NITEL's infrastructure. Not the least of this is the jewel in NITEL's crown, the SAT-3 deep sea communication signal carrier, which is responsible for carrying international traffic. As a major investor in the SAT-3 infrastructure, NITEL is in a superb position to leverage the asset. Other mouth-watering assets including the national switching network which consists of three parallel networks for telephone, telex switching and cellular services. In addition Integrated Services Digital Network (ISDN) services have been introduced in new exchanges. There are 16 telex transit exchanges, 3 voice/teleplagh terminals, 21 installed capacity, 14,916 connected lines, 6,483 transmission network: The transmission network consists of terrestrial microwave, optical fibre, cable and satellite systems. NITEL has huge assets in the form of real estates in various parts of the country.

NITEL's wealth of infrastructure has been recently underlined by the estimated $1.2 billion which experts reckon would be needed to take a second carrier off the ground. Going by the $1.5 billion paid for 65 per cent of Vmobile with five million lines, M-tel alone with a fifth of the Vmobile capacity should attract about $500 million. MTN, the South African Telecom company, which has a well regarded subsidiary in Nigeria, recently bought the Middle-East telecom company, Investcom, which operates with 5 million lines for $5.5 billion, translating to $1.1 billion for l million lines. Going by that rate M-tel's over 1.2 million lines should attract about $1 billion.

It is clear that with a little effort NITEL will become a solid going concern once again. The new owner of NITEL in their turn around efforts will evolve major switch upgrades to improve data collection, new billing platform to guarantee accurate billing and the introduction of a prepaid platform to guarantee accurate bill collection. Going by the Pentascope figures, which have never been disputed, NITEL's debt profile is manageable. As of 2004 creditors owed the company N27 billion while the company is indebted to the tune of N14.8 billion. They would also have to pay attention to market segmentation to include wholesale, retail, carrier and internet services. The infrastructure is there. It requires appropriate channelling and maximum deployment and effective operational management, pricing and revenue collection. In addition, Nigeria has an environment that has the highest return on investment and Average Revenue Per User (ARPU) in Africa and indeed the world.

In this way our patriotic instincts, common sense and the need for transparency clearly dictate that the privatisation of a vital national resource built up on the sweat of Nigerian shareholders should be treated with circumspection. NITEL cannot and must not be solid as scrap. The guiding principle of its privatisation should be to extract the best financial deal possible for the Nigerian exchequer. The process must be open and transparent and should evolve only bidders who have an internationally acceptable track record in telecommunications. In this way, a revitalised national carrier will deepen the competition as well as the penetration of the Nigerian market. Indeed the revitalised company will soon beg-in to spread its tentacles abroad.

There is a clear duty of obligation on the part of the government and its privatising agencies not to discredit the general acceptability of the privatisation programme by the quick and under hand sale of the public patrimony. Such moves inevitably lead to the general populace beginning to question the shift towards liberalisation. The current leftward shift in Latin America is a clear testimony as to what happens when disillusionment sets in. NITEL is not scrap and must not be sold as such.

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