Who Is Scared Of Transcorp’s Purchase Of NITEL?By Ajayi Olatunji Olowo
With the payment of the first (but substantial) part of the purchase price of the majority stakeholding in Nigeria Telecommunications Limited (NITEL) by Transcorp, it is fast becoming a fait accompli that NITEL (which is the singular largest entity slated for full privatisation so far under the complex economic reform programme of the Nigerian Government) would be a success story after all. This would pave way for full and complete restructuring of the Nigerian telecommunications industry and particularly save the company from going the inglorious way of Nigerian Airways, which had to be liquidated in the end.
It is on record that after two major unsuccessful attempts via daunting, long, competitive bidding process of attracting prospective core investors, the adoption, by Bureau of Public Enterprises (BPE), of a different strategy of “willing-seller-willing-buyer” threw up the Transcorp’s preferred bid price of $750 million for the 75% stakeholding of NITEL. In accordance with the rules of the transaction, Transcorp successfully paid a sum of $500 million on Thursday, 31 August 2006 with the balance of $250 million due within 90 days to enable Transcorp resume full control of NITEL. Thereafter, the Federal Government of Nigeria (FGN), nay the BPE/National Council on Privatisation (NCP) would announce the fate of the remaining 25% Government’s stakeholding in NITEL.
The change in strategy by BPE, which resulted in a successful divestment of government’s stakeholding in NITEL, came as a surprise and has caught lots of pessimists and antagonists of the privatisation programme napping. It is not surprising therefore that there have been an avalanche of criticism on the process and the status of the prospective core investor – Transcorp. In a column entitled “Transcorp, still embroiled in controversies”, the leadership Nigeria newsprint of 20 September 2006, has criticised the sale of the 75% stakeholding of NITEL to Transcorp. The news medium had alluded to a controversial position held by the embattled Senior Staff Association of Utilities, Statutory Corporations and Government Companies (SSAUSCGOC), which had reportedly contended that the sale process was “fraudulent and unacceptable”. Nothing could be farther from the truth. Within the purview of the “willing-seller-willing-buyer” strategy adopted by the BPE – the sale is completely transparent and honestly done in accordance with the stated criteria. What the strategy entails is for the prospective core investors to come forth with their plans, strategies of turning the enterprise around and proposed price for whichever portion of the stakeholding for a direct negotiation. This could be contrasted with the conventional long winding approach of submitting expressions of interest, with an unopened bid price, followed by a public bid opening with possibly more than one round of bidding. The “willing-seller-willing-buyer” process (which is nothing extraordinary but part of the accepted global privatisation strategies) enables the BPE and the prospective investors to lay all the cards on the table for comprehensive negotiations in one fell swoop. And it is this process that facilitated the tilting of the core investment size from the initial 51% to 75% now being acquired by Transcorp. Except anyone making comments out of absolute ignorance, there is nothing unusual or which smacks of undue influence in the process that produced Transcorp as the prospective core investor in NITEL. It is in appreciation of the transparency of the process that the National Association of Telecommunications Employees (NATE), on 21 September 2006 lauded efforts of the BPE, on the successful privatisation of Nigeria Telecommunications Limited (NITEL), and urged Transcorp, its new core investors, to commence a gradual but systematic takeover of key operations of the carrier (see: Thisday newspaper, 22 September 2006).
Although there are fears expressed in some quarters about the reported intention of the prospective owners of NITEL to sack about 7,000 of the existing 10,391 employees of the company with some negative speculations on the fate of their severance/pension packages. Most of the comments in the media in that regard equally depict ignorance on the details involved in the privatisation process. Enterprises are not just thrown up for sale without appropriate restructuring that captures the existing and contingent liabilities of the entities slated for privatisation. The relevant milestones, which include the debt profile of NITEL and the severance packages of would-be lay-offs, are conceptually covered in the process. Irrespective of what anybody feels, the new owners of NITEL (after the majority stakeholding must have gone to Transcorp) reserves the right to reposition the entity in the most effective and efficient manner, thus the anticipated downsizing of the (present over bloated, ineffectual and inefficient) workforce towards the maximisation of the organisational goal in a liberalised, competitive telecommunications market.
Those that are not attacking the strategy of the latest sale of NITEL are at war with the ownership structure of the prospective core investor – Transcorp. The House of Representatives started the onslaught, purportedly under its oversight function as enshrined in section 88 of the Nigerian 1999 constitution, when it invited the Chairman of the Board of Transcorp – Dr. Ndi Okereke Onyiuke, the Director General of the Nigerian Stock Exchange (NSE). The concern of the House reflected on the propriety or otherwise of Dr. Onyiuke’s holding of the Board’s chairmanship and her simultaneous functionality as DG, NSE. As explained by the affected officer before the House, the simultaneous holding of the two positions does not amount to any conflict of interest.
As per the ownership structure of NITEL, post-privatisation, there was much concern about the information that Obasanjo Holdings Limited (OHL) had reportedly held 200 million shares in Transcorp. It is important to reflect on the reported clarifications of Dr. Onyiuke before the House (as recorded in leadershipnigeria of 20 September 2006) that she had been under instruction to dispose off the shares. It is important to note that if there had been such instruction, it might be that OHL is frantically trying to display to the public that it is needless to ascribe any innuendo to Transcorp’s emergence as the prospective core investor of NITEL and or any of its other business activities. While it is not the focus of this article to defend Transcorp or its shareholding structure, it must be noted that BPE/NCP do not go out of their way to compromise transparency and due process. It would also interest the public to note that since 1999, BPE/NCP have never been under any pressure or undue influence in determining who qualifies to purchase an enterprise. The guidelines are clear and form the basis of evaluations and negotiations that lead to emergence of a preferred bidder, whichever privatisation strategies adopted.
Even if OHL owned and still owns a fraction of the enormous share capital of Transcorp, such does not justify the positions canvassed by Chief Gani Fawehinmi, SAN, the erudite Lagos lawyer and human rights activist who held onto a rebuttable presumption of a conflict of interest (see: Thisday newspaper issue of 18 September 2006). The simple basic tenets of the Law of Trusts cover whichever portion of Transcorp’s shares owned by OHL as long as there is no issue of undue influence or under dealing involved in its business activities, particularly the buying into NITEL. If President Obasanjo had ceded his legal title in OHL to Messieurs Daniel Atsu and Lucky Egede as Trustees, prior to his assumption of office, it would make no negative impact on Transcorp and its proposed ownership of NITEL except it could be proved that rules guiding the sale of NITEL have in anyway been breached or compromised. It is noteworthy that some Nigerians are apt to point at moral values but morality is not necessarily legality. There is nothing in law, which prescribes that the life of the Nigerian President prior to assuming office must be left dormant or dead. What should interest Nigerians is whether the life of the President before assuming office (as reflected in OHL) has in any way run into conflict with his life and status as a sitting President. So far and as far as the sale of NITEL to Transcorp is concerned there is no such evidence.
While section 39 of the Nigerian 1999 Constitution guarantees freedom of speech, the fundamental human right carries with it a responsibility to act within the purview of the law without in any way sabotaging the government and its policies at repositioning the country. It is strange to see someone like Mr. Jimoh Ibrahim, the group Chairman, NICON Insurance Group, who has participated and benefited in the transparent execution of the privatisation programme to lack the ability to balance his fundamental right of freedom of speech with the responsibility not to sabotage the economic reform programme of the government. It was widely reported in the Daily Trust newspaper issue of 21 September 2006, that Mr. Jimoh Ibrahim castigated Transcorp for buying the controlling interest in NITEL and Transcorp Hilton Hotel at “too exorbitant” prices that might not yield fruitful dividends in the near future. One wonders when Jimoh Ibrahim became the unsolicited counsellor of a bidder in an on-going privatisation process. As someone who had participated in the process when his organisation bought the majority stakeholding in NICON Insurance, courtesy of which he is the chairman of the group today, his utterance on an independent on-going transaction is not only in bad faith but reckless. Rather than blur his vision by wondering aloud what the prospective owners of NITEL would do to restructure it to make it profitable and serve Nigeria (as expected) it is believed Mr. Jimoh Ibrahim (who being a lawyer should know better) should remain focused on his continual repositioning of NICON Insurance.
The rhetoric of Mr. Jimoh Ibrahim has however reawaken the contentious issue of what the correct market value of NITEL is. What constitutes the right price for NITEL, an unquoted public monopoly that has existed for years with assets all over the country and the major gateway, which other operators rely? This has remained contentious. Applying the best financial management techniques requires various (not a single) techniques for valuing a company like NITEL at the point of sale as a going concern. The BPE has done what is practically possible in a process where the price must be allowed to evolve through the mechanism of bargaining between the Seller and the buyers (the would-be prospective core investors). What BPE can guarantee and guard jealously is the reserved price (that is the least tolerable price) and not the highest attainable price for any enterprise put up for divestment. It would be recalled that prior to the bidding process of 2001 in which IILL emerged the preferred bidder with a bid price of $1.317 billion (which it could not pay eventually), what constituted an appropriate price for the 51% stakeholding of NITEL had remained a subject of debate. While some people thought it was adequate, others thought it was overvalued while others were of the view that it was even low. Now that Transcorp has offered $750 million after a due diligence and thorough negotiations, it would be foolhardy for anyone oblivious of the details of index involved to make a judgment all in the name of criticising the privatisation programme; or blowing whatever ego.
Some people have even argued that Transcorp does not have the technical know-how to run a company of NITEL’s calibre and specialty. But that argument cannot be sustained as the Transcorp’s consortium that is buying into NITEL includes the British Telecom and Etisalat of Abu Dhabi.
People like one Jide Ayobolu in his article “the sale of Nitel: A rape of a nation” (posted to the Gamji website in July 2006) would want the public to believe that the NITEL transaction was improperly executed. A thorough review of the article shows no substance as the writer merely engaged in whipping up subjective emotive feelings that have nothing to do with the propriety, economic rationale and legality of the sale of NITEL to Transcorp. His view that the attempt by the Federal Government of Nigeria (FGN) to defray liabilities of NITEL prior to handing it over to its new owners as a ‘fraud of unimaginable proportion’ further deepens his lack of knowledge of the specifics the restructuring process within the privatisation programme entails. To the Ayobolus of this world, they would prefer the moribund public monopolies like NITEL to remain a glut on the public treasury, in an already liberalised telecom sector, rather than being privatised and run competitively by private investors (and the public subscribers) who can best reposition the company. What an irony? Defraying the debt of a privatised public enterprise, including outstanding staff emoluments, at the point of sale, is part of the mechanism to cushion the short term effect of the privatisation programme whether in a core investment sale like NITEL or outright liquidation as in the case of Savannah Sugar Company, Yola.
Rather than engage in the ‘pull-it-down’ syndrome which some elites opposed to the economic reform agenda of the FGN have engaged in since 1999, it is necessary for the good work of the Irene Chigbue-led BPE to be commended for not only privatising NITEL but divesting it to a Nigerian based company. This would and should assuage the feelings of those critics who have the wrong perception that the entire privatisation programme is all about selling off the moribund public enterprises to foreigners for ‘peanuts’. Those who could not muster enough capability to bid as majority stakeholders in NITEL would yet have another opportunity to participate whenever the remaining 25% stakeholding still owned by the FGN is eventually placed on the floor of Nigerian Stock Exchange for public subscription. Better still, they could buy into Transcorp whenever the opportunity arises.
Ajayi Olatunji Olowo writes from the School of Law, University of Buckingham in England.
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