A consortium led by China Unicom was declared preferred bidder in the auction of Nitel after offering US$2.5bn for 75% of the telecom incumbent – an incredible sum more than twice as high as the next-highest offer.
In contrast, three rival consortia that…
A consortium led by China Unicom was declared preferred bidder in the auction of Nitel after offering US$2.5bn for 75% of the telecom incumbent – an incredible sum more than twice as high as the next-highest offer.
In contrast, three rival consortia that included South Africa’s Telkom and Telecom New Zealand International offered between US$375.5m and US$956m.
As previously reported by TelecomFinance, the winning consortium, New Generation Telecommunications, also includes Dubai-based investment firm Minerva Group and local rural operator, GiCell Wireless. However, Telefonica denied any involvement with the consortium, contrary to previous comments by the BPE.
The bidders are advised by Nigerian investment bank BGL (formerly known as Banc Garanti Limited), while BNP and Eledas Capital Partners are advising the Bureau of Public Enterp ises (BPE) on the sell side.
The National Council of Privatization, which oversees the BPE, will now review the BPE’s decision. Once approved, the buyers will have 10 days to pay 30% of their purchase bid, and another 50 days to pay the rest.
A huge price to pay
The pricetag is astounding considering the notoriously shambolic state of Nitel and its assets that include the lossmaking mobile operator M-Tel, a fixed-line CDMA network, a link to the SAT-3 undersea cable and a national fibre optic backbone.
“We were pleasantly surprised,” BPE spokesman Chigbo Anichebe conceded.
If for some reason the winning bid does not go through, China Unicom is also represented in the second-highest bidding consortium, Omen International, in which it is listed as the technical partner. Omen, registered in the British Virgin Islands last August solely for the purpose of carrying out acquisitions, made a bid of US$956m. The BPE claims that China Unicom’s involvement with both groups does not represent a conflict of interest.
The third-highest offer, of US$551m, was put forward by Brymedia, the consortium led by former MTN Nigeria CEO Adrian Wood and including Telecom New Zealand International. Brymedia claims to include a number of former MTN Nigeria, Celtel (now Zain) and M-Tel executives and is backed by individual and institutional investors from Nigeria and abroad.
Telkom South Africa, which was allied with local operator Spectrum Wireless Communications, tabled the smallest bid with an offer of US$375.5m.
Finally, MTN Nigeria was banned from buying the mobile assets and had only bid for the SAT-3 undersea cable link, offering US$25m.
A challenging first for China Unicom
The bid would represent China Unicom’s first foray abroad and is the first sign that Chinese operators might follow in the footsteps of vendors ZTE and Huawei in expanding their reach across the continent.
The past years have seen increasing talk that Chinese operators may start making acquisitions abroad, but many have doubted their readiness to expand.
With Nitel, however, the new owners will have a challenging task ahead. The group’s previous backers, Transcorp, oversaw a huge decline in the company’s performance. In addition to a mushrooming debt, the group has been plagued by slumping subscriber figures and strikes that kept the country’s only international gateway link closed on numerous occasions.
Staff strikes were a permanent occurrences over the past year, with employees denouncing huge backlogs in the payment of salaries and pensions as well as massive layoffs -staff have reportedly been cut from 12,000 to less than 2,000 employees.
In the fixed-line sector, Nitel has less than 60,000 functional fixed lines, representing some 5% of the total fixed line market.
As for mobile subscribers, MTel lost roughly 72% of its users since 2005, ending with a market share of less than 0.37% in Q3 2009, or 258,000 subscribers.
And competition in the mobile sector is set to be tough: market leaders MTN, Globacom and Zain are experiencing steady growth and count some 60 milllion users between themselves.
