VZCZCXRO0148
RR RUEHMA RUEHPA
DE RUEHNM #0132 0750708
ZNR UUUUU ZZH
R 160708Z MAR 09
FM AMEMBASSY NIAMEY
TO RUEHC/SECSTATE WASHDC 4902
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHAS/AMEMBASSY ALGIERS 3486
RUEHBJ/AMEMBASSY BEIJING 0195
RUEHTRO/AMEMBASSY TRIPOLI
RUEHFR/AMEMBASSY PARIS 0786

UNCLAS NIAMEY 000132 
 
DEPT FOR AF/W, AF/EPS, AND EEB/CIP 
 
PARIS FOR AF WATCHER 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN ECPS KPRV ELAB EINV KMCA NG
SUBJECT:  NIGER EXPROPRIATES TELEPHONE UTILITY SONITEL 
 
¶1. SUMMARY:  On February 12, the Government of Niger (GON) 
unilaterally announced a decision to reduce the term of the 
operating license of the country's privatized telecoms provider 
SONITEL, effectively ending the management of Dataport LTD, the 
foreign-owned consortium that had purchased 51% ownership in 2001. 
The GON has not announced what compensation, if any, will be paid to 
Dataport shareholders.  End summary. 
 
¶2. In November 2001, the GON sold a controlling interest (51%) in 
Sonitel, the state-owned telephone company, to Dataport Ltd, a 
Chinese-Libyan joint venture.  The Chinese partner, ZTE, provided 
equipment and technology while the Libyan partner had managed the 
company since 2001. 
 
¶3. When privatized, the company had approximately 20,000 
subscribers, 25,000 lines, 2,500 cellular phone accounts, 1,500 
internet customers, 150 telex and 200 specialized lines.   The terms 
of the privatization granted SONITEL a monopoly on international 
communications, including both voice and data, in exchange for an 
aggressive capital investment program to improve quality and access. 
 The Dataport LTD consortium claims to have invested approximately 
USD 80 million in upgrading SONITEL systems but the number of new 
fixed lines is less than stipulated in the terms of reference.  The 
contract stipulated installation of 75,000 fixed lines by 2004, but 
only 70,000 were in service at the end of 2008.  (Comment:  Cellular 
service, an area in which SONITEL does not have a monopoly, has 
shown far more robust growth in Niger than fixed line service.  End 
comment.) 
 
¶4. SONITEL's union employees have never been happy with the 
privatization.  In a 2004 interview, the secretary general of the 
union claimed that the equipment provided by the Chinese partner was 
of poor quality.  Since then, the union has called several strikes 
to protest deterioration of working conditions and demand that the 
GON withdraw the license from Dataport.  The National Assembly 
conducted an inquiry into SONITEL operations and called on the GON 
to rescind Dataport's license.  The GON had given notice to the 
Chinese/Libyan Joint venture that they should come into compliance 
with the terms of reference.   According to the Minister of 
Communications, SONITEL and SahelCom (the mobile company) received 
seven formal notifications of non-performance from the Regulatory 
Multi-sectoral Authority (RMA) between 2004 and 2007. 
 
¶5. The exact terms of the privatization agreement are not clear, but 
the GON claims to have retained the right to withdraw the license if 
Dataport failed to hold its part of the bargain.  However, the GON 
had not initiated any legal process to regain majority ownership of 
SONITEL by February 12, when it unilaterally announced a decision to 
reduce Dataport LTD's license from the original 15-year term to 
seven years and two months.  From February 20, SONITEL and its 
subsidiary SahelCom would belong to the GON.  The GON announcement 
was silent on the issue of compensation for the joint venture 
partners. 
 
¶6. The GON has not yet announced whether it will reimburse the 
Dataport partners for the capital invested in SONITEL or will 
withdraw the license without any compensation.  Dataport has made no 
formal announcement, but is believed to be preparing a lawsuit 
challenging the GON actions.  Despite general appreciation that 
failure to provide compensation would have a negative effect on 
future efforts to attract foreign investment, Nigerien policy makers 
have yet to express concern about the lack of legal process in this 
case. 
 
¶7. Minimize considered. 
 
ALLEN