Mergers, Acquisitions and Financial Results

The Nigeria Telecommuni-cations Limited may have recorded a drop in profitability of about N39.9 billion and a 25 per cent decline in revenue if the 2003 audit report of the state-owned utility firm is anything to go by.

THISDAY gathered that the Engr. Vincent Maduka-led Board, which met Wednesday lat week in Abuja, ratified the 2003-audited report of the firm, but not after a number of issues, especially as it relates to fiduciary and management of the company had been raised by members of the Board.

Sources close to the Wednesday Board meeting informed that the audited report showed that NITEL's revenue since Pentascope had taken over management has decreased by about 25% while nearly N40 billion is reported as loss.

An insight into the company's books for 2003, showed that the utility firm already slated for privatization, had seen its modest profitability turn to a colossal loss, a trend which even the Board and the management could not explain. Available figures, for example, showed that from 2002 to 2003, turnover collapsed by almost a quarter, while costs, including staff emoluments rose by almost a fifth.

Whereas overheads increased between 2002 and 2003 by USD150m, the Pentascope contract, which predicted a rise of 50 per cent in lines, could not deliver on those targets within the corresponding period.

The Board was also said to have expressed reservations on why the company's net loss of N15bn should turn into N19bn with gross earnings falling by more than half.

Other queries raised on the performance of the company include why M-TEL even with its "very high margin cellular business" should be owing NITEL USD70m and the "disappearance" of USD100m under the heading of 'short-term investments.'

THISDAY gathered that the Board was worried about the cash squeeze in the firm, which was threatening to escalate into bankruptcy, a situation that was only averted by an emergency loan of N14bn (USD100m) out of a total USD290m package to cover operational costs like wages and debt service.

The Board was, however, appalled at the discovery that the management of the company had earlier claimed that the loan was for capital investment.

The Board also raised posers on the bonus position agreed with Pentascope, notwithstanding its poor performance and the continued payout of "unjustifiable" sums of money on consulting contracts.

The Board picked holes in the firm's 2005 capital budget of USD580m (about N77.1bn), its plans to expand by 50%, increased turnover and a 17% decrease in operational costs.

It was gathered that a majority of the members had contended that due to the rapidly depreciating financial position as dictated by 2002 and 2003 accounts, there is the need to fast track the sale of 51% stake of NITEL to core investors, as there is indication that the 2004 accounts may be worse.

They argued that even though there may have existed an expansion of lines throughout the country, the actual revenue since the management contract was signed has gradually been on the decline.

Apart from that, they noted that the nation's growth and investment strategy is reliant on the improvement in the communication sector.

Those canvassing the fast tracking of the sale of NITEL observed that the much sought for foreign investors would rely on effective communication, while some key target sectors in the nation's economic blueprint, the National Economic Empowerment and Development Strategy (NEEDS), are dependent on telecom.

They pointed out that Call Centres, a veritable source of FDI (with over USD9billion attracted annually into the Indian economy) cannot thrive if the infrastructure development in the telecom sector is allowed to deteriorate.

The pro-privatisation group warned of an imminent financial collapse of the utility firm, especially as it faces stiff competition in fixed lines.

The group said Vmobile Nigeria, one of the GSM service providers Tuesday commenced legal proceedings that could culminate in the winding up of NITEL over unpaid debts of N3,001,007,891.93.

The pro-privatisation group noted that with Globacom, the second national carrier's entry into the telecom sector and its seeming success so far, any further waste of time in disposing of NITEL may make the company unattractive to prospective investors.

Also, proponents of an early privatization of NITEL suggested that the firm has the capacity to employ more Nigerians if it is allowed to survive, adding the only way to achieve this, is for the private sector to be allowed to take over, as the government appointees are not doing much to ensure the profitability of the company.

This Day