VZCZCXRO5372
PP RUEHMA RUEHPA
DE RUEHUJA #1773/01 1921239
ZNR UUUUU ZZH
P 111239Z JUL 06
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 6420
INFO RUEHOS/AMCONSUL LAGOS 4564
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 ABUJA 001773 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
PASS STATE PASS TO USTR 
TREASURY FOR DPETERS 
DOL FOR ANN ZOLLNER 
USDOC FOR 3317/ITA/OA/KBURRESS 
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS 
 
E.O. 12958: N/A 
TAGS: ECPS EINV EIND PGOV NI
SUBJECT: NIGERIA'S SALE OF NITEL COMPLETES LARGEST PRIVATIZATION 
 
REF:  LAGOS 867 
 
¶1. (SBU) Summary.  Nigeria's Bureau of Public Enterprises (BPE) 
sold on July 3 a 75% stake in the state-owned Nigerian 
Telecommunications (NITEL) Limited and its M-Tel subsidiary to 
Nigeria's Transcorp for $750 million in a negotiated sales 
process.  This is Nigeria's biggest privatization deal so far, 
but it is subject to final approval by the National Council on 
Privatization.  British Telecom acted as technical adviser to the 
investors, while Etisalat was an additional technical and 
financial partner.  Less than 24 hours after NITEL's sale, eight 
of the company's top managers resigned following allegations of 
financial crimes involving NITEL's pension fund.  Much Nigerian 
press reaction to the NITEL deal was negative, for a variety of 
reasons.  The suddenness of NITEL's sale supports the perception 
by the Nigerian public that the sale was an inside deal.  End 
summary. 
 
¶2. (U) Nigeria's BPE sold on July 3 a 75% stake in the state- 
owned Nigerian Telecommunications (NITEL) Limited and its M-Tel 
mobile-telephone subsidiary to the Transnational Corporation 
(Transcorp) of Nigeria for $750 million (96 billion naira) 
through a negotiated sales process.  This is Nigeria's biggest 
privatization deal so far, but it is still subject to final 
approval by the National Council on Privatization.  The 
Government of Nigeria (GON) decided to adopt the negotiated sales 
process after years of unsuccessful attempts to sell NITEL.  This 
process took into account the company's declining value due to 
its growing technical obsolescence and revenue losses from 
NITEL's recent strikes.  Transcorp was aided in its successful 
effort by technical adviser British Telecom and technical and 
financial partner Etisalat of the United Arab Emirates. 
Transcorp said it secured a 1 billion euro loan from the European 
Union Development Council at a 4% interest rate, which it will 
use to make NITEL more competitive. 
 
¶3. (U) Transcorp was incorporated in 2004 and is a wholly 
Nigerian-owned conglomerate.  The company's chairwoman, Ndi 
Okereke-Onyiuke, told the press on July 3, "We are out to build a 
mega-corporation like what exists among the Asian tigers." 
Transcorp will in August make an initial public offering. 
Okereke-Onyiuke said the GON would offer for sale to the public 
by the end of 2006 the remaining 25% of the GON's share of NITEL. 
 
The Distribution of NITEL's Liabilities 
--------------------------------------- 
 
¶4. (U) BPE Director General Irene Chigbue said Transcorp had 
seven working days to pay an initial deposit of $500 million, and 
60 working days to pay the balance of $250 million -- otherwise, 
the deal was off.  NITEL would retain all its liabilities and 
debts, while the GON would assume all human-resources costs such 
as pension liabilities for NITEL employees and costs associated 
with downsizing.  The GON had approved about 25 billion naira 
($195.3 million) as a severance package for 7,000 employees of 
NITEL and its M-Tel subsidiary.  This amount would cover 
outstanding salaries and allowances, as well as all termination 
benefits not to be borne by Transcorp.  The 25 billion naira 
payment would be made within six weeks, but would not cover 
employees' pension liabilities, and NITEL's non-core assets would 
be sold separately to fund the pension program. 
 
Allegations of pension-fund looting 
----------------------------------- 
 
¶5. (U) Less than 24 hours after NITEL's sale, eight of the 
company's top corporate managers resigned after the release of a 
report alleging financial crimes running into the billions of 
naira, the press reported.  In response to agitation by NITEL 
employees, an investigative committee set up to examine the NITEL 
Staff Pension Fund (NSPF) identified severe mismanagement of the 
5.5 billion naira ($43 million) fund.  The committee's report 
identified 11 managers who helped themselves to various amounts 
and who will face the Economic and Financial Crimes Commission. 
The managers allegedly used at least 63 banks and discount houses 
in their fraudulent transactions involving the NSPF.  The 
committee's report concluded that as of December 2005, the fund 
invested 4.9 billion naira in various banks of which 1.49 billion 
naira ($11.6 million) were trapped in distressed banks, while 
another 372.1 million naira ($2.9 million) could not be accounted 
for.  Also, a 117.14 million naira ($914,000) investment could 
not be traced. 
 
Press reaction to NITEL's sale 
------------------------------ 
 
ABUJA 00001773  002 OF 002 
 
 
 
¶6. (U) Most Nigerian press reaction to the NITEL deal was sharply 
critical.  The headline of a July 6 editorial in Abuja's DAILY 
TRUST declared, "Obasanjo's Cronies Finally Grab NITEL" after 
more than six years of "well-rehearsed rigmarole" with the 
Nigerian people "already assigned a role as the losers."  An 
editorial on July 9 in the Lagos DAILY CHAMPION congratulated the 
BPE on selling a "badly run, non-profitable organization seething 
with corruption, administrative inefficiency and technical 
deficiency."  The paper also, however, noted the "desperate, 
hasty" bidding process, criticized the "lack of full disclosure" 
concerning NITEL's true worth, and charged that the company was 
"sold for a penny" -- because in 2001, Investment International 
London, Ltd., valued 51 percent of the company at $1.25 billion. 
The newspaper additionally warned, "[W]e expect more transparency 
and openness on the part of the BPE" when the remaining 25% of 
NITEL is sold to the public.  The SUNDAY TRIBUNE on July 9 was 
concerned about the sale's lack of transparency and cautioned, 
"Nigerians might be on the way of being treated to another orgy 
of massive official corruption." 
 
Comment 
------- 
 
¶7. (SBU) The suddenness of NITEL's sale was surprising, at least 
to the Nigerian general public, after years of unsuccessful 
efforts to sell the company.  While the GON was correct to sell 
the rapidly declining NITEL, the deal was not handled with the 
kind of transparency that supports public confidence in the 
transaction.  Instead, it has supported the public perception 
that the sale was an inside deal -- given that Transcorp 
represents the political and economic allies of President 
Obasanjo.  The U.S. Mission Abuja will report septel on further 
issues suggesting impropriety in NITEL's offer conditions. 
FUREY