New Network Operator Raises Broadband Hope
Looking beyond the ugly experience of the past from a government-owned telecom company, which failed woefully to get Nigerians talking, Nigerians can now hope for the best in telecom services. Of course, with a formidable team of experts backed by deep pocket investors, there is no doubt that the new owners of NITEL/MTEL, now known as Ntel mean business in Nigeria. They have come with a big focus: Change the Nigerian telecommunications landscape with world-class telecom services. SAMSON AKINTARO reports.
There Was a Telco
It is often said that governments are not the best managers of business, though such argument may not hold sway in a core socialist economy. But in a capitalist system like Nigeria, experiences of the past years have shown that, indeed, government has no business doing business. The NITEL/MTEL saga easily comes to mind when talking about government’s failures in business.
It was a sad tale of enterprise gone awry. As at independence, the control of Nigeria’s telecommunications sector, was vested on the Nigerian Post and Telegraph (P&T) owned by the Federal Government. In the early 1980s, Nigerian External Telecommunications (NET) was formed to provide external communications services. Following increased demand for the commercialisation of telecommunications services, the Federal Government initiated the merger of NET with the telecommunications arm of P&T to form the Nigerian Telecommunications Limited (NITEL) in 1985.
From that period NITEL was saddled with the sole responsibility of meeting the telecommunications needs of the Nigeria. Regrettably, it was unable to meet the growing demand for telecommunications services by Nigerians. At independence, in 1960, the country had only 18,724 telephone lines. Up until 2001 when the sector was deregulated NITEL could not expand the installed capacity beyond 700,000 lines, thus limiting access to information and communications technology (ICT) in Nigeria.
While NITEL could not succeed in getting Nigerians talking, there was hope that MTEL, which was established in 1996 out of NITEL to provide cellular services, would be able to sustain the business of the National Carrier in the deregulated telecom sector.
Hence, at the time when private investors struggled to get GSM licence in Nigeria at a princely sum of $285 million, MTEL, as the mobile arm of the government owned NITEL got its own licence on a platter of gold as NITEL transferred the GSM licence it acquired when the Nigerian Communication Commission (NCC) first auctioned Digital Mobile Licences in February 2001. With such leverage, it was expected that MTEL would offer the best service and at most affordable cost to the consumers, as it had no need to build new infrastructures across the country, like the new GSM licensees were doing then.
But like the parent company, NITEL, which was already losing its relevance with the arrival of GSM operators, MTEL’s failure also crept in surreptitiously and it faded away. From that time, it became clear that the government could not run a telecom company successfully, especially, in the new competitive era where shrewd business men manage private telecom companies. While many would wonder while NITEL/MTEL, which had everything working for it in terms of infrastructure across the country could fail, the reality of government’s failure in managing business indicated that the only option to reviving the business is to privatise it.
The Privatisation Debacle
Incidentally, the failure of the National Carrier would turn out to be a child’s play compared to several botched attempts at privatising the company. It all began in 2001 when investors International London Limited (ILLL) made an attempt to acquire NITEL. The company appeared to have what it takes to turn around the fortunes of the sleeping giant. Besides its international clout, it also had local backing. But it did not take long before those who invested hope in the deal gnashed their teeth when it failed to sail through because ILL defaulted in paying up the bid price of $1.317 billion.
Thereafter, Pentascope of Netherlands was appointed the core investor to revamp the moribund telecoms firm. The attempt also failed. A management contract was signed with Pentascope, which cost the nation to lose money. Between April 2003 and March 2004, Pentascope had squandered a gain of N15 billion, which it inherited, to record a loss of N19.15 billion. Turnover also dropped to N41 billion from N53 billion.
Later, it was revealed that Pentascope, in the first instance, should not have been given such an assignment. The tender for the contract clearly stated that a telecoms firm, with international standard, was needed. It turned out that Pentascope was just a consultancy firm, which had not been in business for long. The sad part of the deal was that a reputable auditing firm was said to be among those that chose Pentascope for the job. Whatever led to the shoddy job in picking the incompetent firm may never be known.
However, it was clear that rather than move the company forward, it took NITEL several steps backward. A House of Representatives probe into the deal unravelled grisly details, which pointed out to the fact that due diligence was not followed in arriving at the decision to saddle Pentascope with such a big challenge. Another attempt pitched Orascom, which offered $256.5 million against TransCorp’s. TransCorp eventually acquired NITEL for $500 million in 2006. It acquired a 75 per cent stake in NITEL/M-Tel, which was later reduced to 51per cent, following some financial issues. The TransCorp acquisition did not revive NITEL and was revoked by the Federal Government.
The Federal Government later constituted a Technical Board of Management for the distressed telecoms giant. The board was responsible for the administration of NITEL and its subsidiary, M-Tel, pending the completion of the core investor sales process. Members of the board were drawn from the Federal Ministry of Information and Communications, the Bureau of Public Enterprises (BPE), Ministry of Finance, National Council on Privatisation and the Managing Director, NIGCOMSAT Ltd.
On February 16, 2010, New Generation consortium emerged the preferred bidder with an offer price of $2.5 billion. It was expected to pay $750 million, being the 30 per cent bid bond. The company failed to pay up after the BPE granted it several extensions. Then it was offered to Omen, with an offer price of $956,996,091. But again, this attempt failed.
Guided Liquidation
After a review of the chequered history of the privatisation transactions of NITEL, the National Council on Privatisation (NCP), at its meeting of February 27, 2012, approved the privatisation of Nigerian Telecommunications Plc (NITEL) and Nigerian Mobile Telecommunication (MTEL) through “guided liquidation.”
This strategy was adopted by the council after due consideration of other options and in the light of the previous failed attempts to privatise NITEL and MTEL through Strategic Core Investor Sale and Negotiated Sale strategies and the huge liabilities of creditors of over N300 billion. Under the guided liquidation strategy, it was decided that all the core assets and business undertaking of NITEL and MTEL would be sold as single or multiple lots to a qualified bidder by the liquidator under the general guidance of the National Council on Privatisation (NCP).
Bureau of Public Enterprises (BPE) received expressions of Interest from 17 organizations/consortia at the closing date of receipt of Expression of Interest (EOIs) on June 30, 2014. On September 18, the two successful applicants, NATCOM Consortium and NETTAG Consortium, that met the minimum pass mark of 75 per cent were pre-qualified and issued the Request for Proposals (RFP) and allowed to proceed to data room and physical due diligence stage prior to preparation and submission of their technical and financial proposals. On December 3, 2014, NATCOM emerged the preferred bidder with $252.5 million. Although there was also scepticism about the Consortium’s ability to meet the deadline for payment, NATCOM sealed the deal with complete payment of the $252.5 million by April this year, thus became the full owners of NITEL/MTEL, putting an end to 15 years of uncertainty over the moribund National Carrier.
All Eyes on NATCOM to Turn Things Around
With great advantage of solid infrastructure across the country which other operators would have jumped at to deliver best services, NITEL/MTEL until its eventual sale remained a sleeping giants. With years of neglect, most of the infrastructures belonging to the company have become dilapidated. But not now, all eyes are on NATCOM, the new owners of the company to breathe life into the moribund NITEL and its infrastructures.
The NITEL assets handed over to NATCOM include the licences and the spectrum, the nationwide fixed wired networks, the national right of way duct system, the fibre optic transmission backbone, and the CDMA network system. Others are international gateway earth stations, microwave transmission equipment/network and towers and other core assets. For Mtel, the assets sold to NATCOM are the licences and the spectrum, national right of way, the Mtel GSM network including mobile switching centres, base station controllers, base transceiver stations and the general packet radio services. Others are the analogue (TACs) system and other core assets. Also on offer is the SAT-3 international submarine cable in which NITEL has 6.32 per cent shareholding in the consortium.
With the licensees and other assets in the hand of NATCOM, it is now certain that the launch of a 5th GSM operator in the country is imminent. But it is not just about launching the service, NATCOM will be expected to break new grounds with all the assets at its disposal and the deliver best of services to Nigerians.
While handing over the assets, the liquidator of the NITEL, Otunba Olutola Senbore, had emphasised that the assets sold to the NATCOM Consortium would be used for generating telecommunication services, hoping that the NATCOM would create employment and add value to telecommunication services and products.
It is worthy of note that since inception, NITEL was only able to provide 450 subscriber lines for a population of 120 million until the arrival of the GSM communication system in 2001. But now in the hands of private managers, the highest level of efficiency is expected and of course, the company is expected to now recover all the lost grounds in market share.
At the handing over to NATCOM, former Vice President Namadi Sambo, who was the head of the National Council on Privatisation (NCP) had urged the new core investor to resuscitate the companies and ensure improved service delivery to Nigerian consumers, adding that the reform and privatization programme of government is focused on the economy and ultimately the greatest good for the greatest number of Nigerians.
Interestingly, the Chairman of NATCOM Consortium, Olatunde Ayeni, had also given a peek into what the consortium was up to when he noted that a new and strong brand has entered the Nigerian telecommunications market, adding that NATCOM is resolved to deliver a unique brand that would wow and delight the Nigerians customers and market. “We believe there is a vacuum in this market, and that vacuum is the space that this unique brand will fill. Its business proposition would be value and customer-driven,” he said.
With Ntel, Hope Rises for Broadband
It may not be wrong to say that the eventual successful privatisation of NITEL/MTEL came at the right time after all, considering that this time marks the beginning of a new revolution with broadband. And which telco or service provider has the much needed cross-country infrastructure to deliver this auspicious tool of economic growth? Definitely none for now, which is why the telecom regulator has come up with strategy of licensing Infrastructure companies (InfraCos) as separate entities to be supported by the government to build the much needed broadband infrastructure across the country.
But with NATCOM now bringing NITEL and its hitherto moribund facilities back to life, expectations are high that Nigeria can now achieve more in her quest for broadband. One of the biggest that Nigeria will be latching onto is the NITEL SAT-3 which was formerly relied upon for broadband in Nigeria, but eventually lost its relevance and became more of an abandoned gold mine in the course the NITEL privatisation impasse.
But Natcom’s Chief Executive officer, Mr. Kamar Abass, has recently disclosed that the company has revived SAT-3, adding that the revival would bring huge relief to Nigerians in the area of broadband capacity. This came as Natcom is reviving several others of the failed facilities of NITEL, in preparation for a massive rollout of its telecoms services in Nigeria, which will engender competition.
Industry stakeholders are already expressing optimism the re-activation of Nigeria’s SAT-3 submarine cable system, would improve value and choice in the telecoms market. According to them, the reactivation of SAT-3 would open up a new vista of opportunities for the telecoms industry and its customers who have been hoping for true broadband internet which would enable convergence in line with the Federal Government’s broadband policy.
SAT-3 submarine cable, which drives one of the lowest latency routes from Africa to Europe and is currently operated with full in-system protection, is the South Atlantic 3/West Africa submarine cable, with 16 landing points spread between Europe and Africa with stops along the West African sub-region from Nigeria to Senegal and south-ward to Angola and South Africa.
Now that it is reactivated, SAT-3 would provide access to global markets and enable seamless and diverse broadband connectivity to the rest of the world.
For now, Nigerians are still complaining about the slow broadband penetration in the country, which is currently put at 10 per cent, with a projected target of attaining 30 per cent penetration by 2018, as contained in the National Broadband Policy. But with the reactivation of SAT-3, industry stakeholders said they were optimistic that Nigeria would surpass the 30 per cent penetration by 2018. Their prediction is based on the premise that the old NITEL facilities cut across all parts of the country, and that since parts of the facilities have been revived, it would be easier to transmit the SAT-3 broadband capacities to all nooks and crannies of the country.
4G Roll out
As a sign of the good things coming with the resuscitation of NITEL, the Natcom Development and Investment Ltd., had recently disclosed that it would roll-out 4 Generation (4G) services in three cities in Nigeria before the end of 2015. The Managing Director of Natcom, Kamar Abass, said that the company will launch its services in Lagos, Abuja and Port-Harcourt simultaneously, and the firm would be known as NTEL. Abass said that the company would ride on the 4G network to show its relevance in the Nigerian telecommunications market; adding that there is still ample spaces in the nation’s marketplace for new SIMs; hence, Ntel as a new entrant had many opportunities.
“Nigeria is in extreme data hunger, with just 92.7 million active internet users, as at June, 2015; but the surprising issue is that only 27.6 million of the users access the internet on 3/4G networks,” he said. “It shows that more than 65 million go on the internet on 2G, which means that we are losing the broadband race by using 2G network, since 4G is the heart of broadband. Our story is that of pure 4G network, with high speed broadband and better technology. We see ourselves as offering Nigeria the key ingredient, with the deployment of 4G.”
Abass said that the assets acquired from NITEL included cellular spectrum/microwave frequencies, telecom operating licences, international submarine cable and cell towers. He said that the company also acquired fibre and duct network (including Right Of Way), prime buildings and satellite earth stations.
The Promises
Announcing the company’s debut at an interactive session with journalists in Lagos, NTEL’s CEO, Abass, said under the first phase ,NTEL would launch international bandwidth services over SAT-3 and a 4G mobile network covering Lagos, Abuja and Port Harcourt. According to him, NTEL would be offering three portfolio of telecoms services in the areas of business mobile network international, voice termination international bandwidth delivery and the metro bandwidth fixed services. All these services would be launched on the NTEL 4G LTE mobile service, which offers high speed data, high-definition voice and video. “The first phase network will begin with deploying up to 800 sites, and later increase to 2,000 sites,” Abass said.
He said NTEL had revived the old NITEL SAT 3 that carries broadband capacities from Europe to Lagos, connecting South Africa and Far East African countries, and would build the NTEL telecoms service on SAT3. Speaking on the benefits of SAT 3, Abass said: “SAT-3 partnerships enable direct exchange of international traffic, known as IDD, with 35 partners. Since July 2015, NTEL has delivered 10 million IDD minutes to Nigeria. With the SAT-3/WASC, NTEL provides connectivity from Lagos to Sesimbra, Portugal and Lagos towards Capetown and countries in between.
NTEL also provides international bandwidth/IP connectivity to carriers and major corporates between Nigeria and international destinations. With over 1,100km of ducts and over 4,000km of fibre route in almost all states in Nigeria, NTEL is enabled to offer fibre capacity services to all Nigerians. In future, NTEL will provide fixed network services to homes and businesses where extant infrastructure can be leveraged at minimal incremental cost.”
SAT-3 submarine cable stands for South Atlantic Telecommunications Cable number 3.