NITEL: 'PENTASCOPE SQUANDERED N105BN IN 20 MONTHS,' ACCORDING TO EX-NITEL MANAGER

Mergers, Acquisitions and Financial Results

The account below of a parliamentary committee hearing in Nigeria is a masterful attempt to shift all the blame for Nitel's current financial position on to the now-sacked Pentascope. Nevertheless it contains significant revelations about the incumbent telco's present financial position. Readers with good memories will remember that 30-40% of Nitel's revenues are lost to internal fraud.

Pentascope International within 20 months of the management of the Nigerian Telecommunication (NITEL) spent about N105 billion without installing even a single line, either fixed or mobile.

Davis Daramola, former Executive Director Mobile Communication, NITEL disclosed this yesterday while giving evidence at the public hearing organised by the House of Representatives Committee on Communication probing the contract management agreement between the Bureau of Public Enterprises (BPE) and Pentascope.

The committee, however, threatened to issue a warrant of arrest on FCT Minister, Mallam Nasir el-Rufai, BPE Director General at the time of the management agreement terminated early this month for not personally appearing at the hearing.

Daramola revealed that the Dutch firm deliberately deposited NITEL's over N1.4 billion in sick banks that later ended up in distress. Daramola said he refused to sign the ill-fated contract and was retired thereafter for disobeying the orders of the Vice President. He said his action delayed the effective date of the agreement from February to March.

He said he refused to sign because Pentascope and BPE did not show the management of NITEL a copy of the agreement. He further disclosed that their trip to Amsterdam showed that Pentascope was neither quoted on the country's stock exchange nor did it have any technical knowledge and competence to handle the management of NITEL.

He said that it was no surprise that the fortunes of NITEL plummeted immediately after, throwing the formerly viable organisation into huge debts, notwithstanding over N50 billion was in the coffers of NITEL the time he was retired.

The former Executive Director said that prior to the entrance of Pentascope, NITEL never borrowed either for investment or payment of salaries but that few months after the Dutch company took over, the fortunes of the national carrier changed and it started borrowing to pay.

He said Pentascope may not have acted alone as there were indications that some powerful Nigerians collaborated with them. He advised against the privatization of NITEL now because the new buyers will buy it as scrap.

Daramola observed that although there was a Due Process office within the Board of NITEL, payments were made without passing through audit department, hence the spending of N75 billion on recurrent and another N73.5 billion on infrastructure without any changes or improvement.

"The National Assembly should look more critically into circumstances and how Pentascope International inherited over N50 billion in NITEL account (excluding MTEL), generated and collected over N60 billion, expended over N100 billion within 20 months, left a debt of over N10billion in commitments without any or addition of any one line into the system", he said.

Also giving evidence, Dr. Edwin Omorogbe said money was paid out from the domiciliary account of NITEL with Central Bank without the approval and knowledge of the board such that from April 2003 to December 2004, Pentascope expended N1, 045,175,991.87 and even took over payment for local expenses where they made NITEL to bear the cost of N21, 551,991.87.

According to Omoregbe, Pentascope paid itself $21,000, an equivalent of N2, 789,640.00 as penalty against NITEL for the alleged late payment of third quarter fees, which was stopped during pre-payment audit.

He said that Pentascope was yet to refund N12, 085,605.00 being money used to buy cars from mobilization fees in contravention of the use of such fees. He said the Dutch firm should be made to account for $2 million and called for the recovery of $1,650,000.00 unaccounted sum from the money.

He said that Pentascope, contrary to the practice in taxation, refused to remit withholding tax of $135,000.00 or N17, 309,700.00 and asked that it should be deducted from payments to them in 2005.

He gave a graphic account of how cash position, FGN Treasury Bills and letters of credit suffered a steady decline.

Omoregbe said that despite the lodgment of N549 million in a distressed bank, another N520, 947,232.55 realised from revenue drafts from various collecting banks was lodged in Afex Bank, with the company forced to borrow money to pay salaries subsequently.

As at December 2004, NITEL had overdrawn its account with Zenith International Bank Plc, Abuja by N1, 908,507,678.77, Guaranty Trust Bank N864, 684,197.22 and Platinum Bank Limited by N46, 797,529.79.

He further complained that foreign payments and some local payments were not passed through the Audit

Department including N108, 112,186 to Messers Dare Omosebi & Co, N1, 410,000.00 to DNC business center and mobilisation fee of $2 million to Pentascope. He called for recovery of the sums.

Others are the payment of N37, 026,075.00 to KPN which has dissociated itself from the NITEL contract or any relationship with Pentascope, payment of N436, 933,456.36 customs duties said to have been inflated to the tune of N6 million and N18, 239,188.00 15 percent down-payment to telephone cable Nigeria Limited.

Local contracts awarded in foreign currencies include $166,000 for provision of consultancy support for the expansion of Multi-Exchange Area 250,000 lines plus $48,753.33 as reimbursable; $1,031,890.90 to Computer Warehouse Group for supply, installation, testing and commissioning of hardware for mediation and International Settlement Activation System, and another $241,941.97 to the same company for Interconnection billing system.

Messrs. Foundry Networks was paid $230,244.00 for supply of equipment for phase 1 of IP wholesale project, KPMG received $112,000.00 for forensic investigation while

Management Information System Co. Ltd received $10,784.29 to supply software for anti-virus programmes.

He reported duplicated payments, which were discovered and stopped valued at N1.2 billion.

Meanwhile, the committee threatened to order the arrest of Minister el-Rufai, for shunning the committee's earlier summons to appear before it to explain his role(s) in the management contract.

El-Rufai reportedly turned down the lawmakers' invitations because he had said all there was to be said on the issue. He, however, sent a representaive who was rejected by the committee.

However when the Committee Chairman, Hon Yemi Arokodare, heard that the minister attended the budget defence of FCT, a room away from the venue of the public hearing, he threatened sanctions on all who refused to appear.

Arokodare said that the House leadership has asked him to give El-Rufai another chance to appear before the Committee Thursday next week failure of which the entire House would issue a bench warrant on him.

Others affected by the order to appear next week or be arrested include Akintola Williams and Co., a firm of chartered accountants and auditors; Pentascope Chairman and PricewaterhouseCooper which advised advice the BPE to give the contract to Pentascope.

Also asked to appear that day are Anthony Achimogu and former Board Chairman of NITEL, Chief Vincent Maduka, who was described by members of the committee as "the Nigerian version of Pentascope in the deal."

When confronted by newsmen on his departure from the House, el-Rufai said, "I will come when there is time.

Well, as you can see, I just appeared before one Committee. Maybe I did not get the invitation. The way my office works, when there is an invitation and I cannot come somebody else would come", he said.

This Day