Nigeria’s Federal Government Revokes Nitel/Mtel Sale to Transcorp
Barely two years after the Federal Government forced Transcorp plc to shed 29 percent of its 51 percent shares in Nitel, the government last week revoked the sale of the national telecommunications carrier to the company.
Transcorp, owned by ex-president Olusegun Obasanjo and some Nigerian business moguls, had bought 51% of Federal Government holding in the telecommunication companies for $750 million, under the Obasanjo administration.
The Minister of State for Information and Communication, Alhaji Ikra Bilbis announced the revocation in Abuja after the National Council on Privatisation (NCP) meeting chaired by Vice President, Dr. Goodluck Ebele Jonathan at the State House.
Alhaji Bilbis said Transcorp breached the Shares Sales Purchase Agreement (SSPA) it signed with the government. He listed the breaches as follows:
* Exiting of BT contract as technical operator, which was a pre-condition of the sale,
* Failure of Transcorp to inject the sum of N8.9bn cash into Nitel within 100 days of its takeover to address the immediate liquidity problem facing Nitel.
* Failure to pay interconnectivity debt totaling about N17bn,
* Inability to pay staff salaries in the past 11 months,
* Failure of Transcorp to maintain Nitelas a going concern, resulting in complete loss of market share from 15 per cent to 0.03 percent.
In view of the breaches, he said, "council therefore agreed that Transcorp has vitiated and voided the contract in its entirety."
Consequently, the NCP approved the immediate revocation of the sale of Nitel to Transcorp and the constitution of a technical board to manage the companies until a new core investor is engaged by the government. The council also ordered the immediate stoppage of further sale of Nitel's assets to prevent any further asset-stripping.
Before last week’s outright revocation of the sale, the Yar'adua administration had in December 2007 had sought to take control again following complaints that Nitel was undervalued before its sale to Transcorp. But the government later reversed itself shortly after the revocation and reached a share reduction agreement with Transcorp. Under the agreement, Transcorp gave up 29 per cent of its 51% shares while the Federal Government parted with 22%. This is to allow the new core investor to be sourced to have a controlling share of 51per cent.