Nigerian government nixes telecoms privatisation and will look for new strategic shareholder
The government of Nigeria has moved to annul the sale of Nitel, the country's incumbent and formerly state-owned telco to a consortium of private buyers headed by the country's ex-president, Olusegun Obasanjo. It is now looking for a new strategic shareholder who will be give a majority stake in the company taken from both Transcorp and the Government.
The repudiation and reversal of the deal was ordered by Obasanjo's successor, the current president Umara Yar'Adua. A government spokesman said the purchase had been cancelled because the new owners had failed to fulfil its pledge to improve the management and running of the national operator.
Obasanjo effectively took control of the carrier in 2006 Transcorp was formed. Transcorp comprises an agglomeration of the former president's business associates and cronies and, whilst Obasanjo was still in power in Nigeria, the group bought a swathe of state-owned assets including the incumbent telecoms carrier and an oil refinery.
Transcorp’s then financial backer Etisalat fell out of the deal before it was completed and Transcorp efforts to raise the required investment capital in London and Lagos failed miserably. For many weeks Nigeria was in the embarrassing position of having no new operational capacity on SAT3 because it was unable to clear Nitel’s unpaid bills with the consortium. Both Celtel and MTN also gave a massive vote of ‘no confidence’ in the company by signalling hat they would make major investments in national fibre infrastructure.
Last week, the government announced that the search is on to find new controlling stakeholders for both businesses. The Information Minister, John Odey, says the administration has already started looking for new investors with "sufficient resources to improve Nitel". He added that the government has "for some time had concerns about the running of Nitel and Mtel by Transcorp" and pointed out that whilst the consortium had been given plenty of chances and considerable legal leeway to improve both Nitel and Mtel both businesses had declined under the group's tutelage.
For its part, Transcorp responded by claiming that the government had pulled the rug out from under it just as the consortium was about to perform a miraculous turn-around in Nitel's fortunes.
On the other hand Transcorp may initiate legal action against the government over the reversal. Transcorp said later in a statement that since the Federal Government placed premium on due process and rule of law, it too intended to follow that path. The organisation's statement was signed by its Vice-President, Communications, Adedayo Ojo.
Later last week, shares in Transcorp were suspended by the Nigerian Stock Exchange at NGN4.42 (USD0.04) each. They may still be traded, but the price will not change. Transcorp is thought to have around 250,000 mainly Nigerian investors.
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