An Advice to The Nigerian Government and Transcorp on NITEL

by Akintokunbo A Adejumo

The moribund (as most government-owned concerns are in Nigeria today) Nigerian Telecommunications Limited or NITEL, is the principal telecommunications company in Nigeria, and was owned by the government of Nigeria, as part of its civil service, until it was sold to Transcorp by the Bureau of Public Enterprise (BPE) under the Obasanjo administration in 2006, after the company had been left virtually paralysed for years. NITEL is responsible for all wired or fixed-line, terrestrial telecommunications in Nigeria. The mobile telephone subsidiary of NITEL, MTel, was also sold to Transcorp at that time. (Have you ever heard of MTel?) On the face of it, the privatisation of such public service functions should be welcomed but as we know in Nigeria, nothing like this ever should be taken on face value. We, or rather, our leaders and governments, almost always make a hash of things as normally straightforward as this. But that is a story for another day.

However, after the sale to Transcorp which everybody hoped will be a new beginning for fixed-line telephony in Nigeria, the company had been mired in controversy and paralysis. This was not helped by the accusations of cronyism that Obasanjo sold the company to his business allies who created Transcorp. The sale itself was supposed to be a flagship measure of selling to a wholly-owned local Nigerian group, but knowing Nigeria and its unconventional methods of doing business underhand and in lackadaisical manner, the sale and all its good intentions, if any, has turned into a farce, if not a scandal.

Transcorp bought 51 percent shares of NITEL for US$500 million in 2006 amidst allegations that they got it on the cheap, and has since failed to revive the firm, with many of its line malfunctioning, its billings very erratic (my mother got a bill recently for over 500 thousand Naira for a phone that has not worked and she had not used for the past 5 years), while staff go for months without being paid. It was rumoured that other companies, local and foreign, had bid far more than this amount, but Obasanjo prevailed on BPE to sell it to Transcorp. Obasanjo himself later became mired in controversy for accepting, free of charge, some people said, over 200 million shares of Transcorp, whose Public Offer price on the Stock Market then was 7.50 Naira per share. Up till now, we don’t know whether he has returned those shares or he’s still keeping them, now slumped at less than four Naira per share. (Tell me about it, as a patriotic Nigerian, and wanting to make money in the process, I bought the Transcorp Public Offer two years ago at seven point five Naira per share. I dare not sell now).

Transcorp has also been at pains to refute allegations that it plans to sell its stake in the South Atlantic Telecom 3 (SAT-3) cable system, which acts as NITEL’s main and only international telecommunications gateway to undisclosed private parties. NITEL workers have also been alleging that Transcorp has mismanaged and neglected the company and they went on strike in April, closing down communications installations including the SAT-3, claiming Transcorp had reneged on previous agreements to pay wage arrears. However the strike was called off after eight days in the interest of the nation and telecommunications users, but they are still not agreed on what Transcorp owes the employees to date.

In February 2008, Transcorp admitted defeat in a round-about way and agreed with the Federal Government that a new investor needed to be found. And the Government, through the Minister of Information and Communications, Mr John Odey, announced recently that the government would soon get a new core investor before the end of the year. Meanwhile, the BPE is gearing up to receive technical and financial proposals from 11 short listed consortia from which one would be selected to provide advisory services which would lead to the sale of 51 percent equity to a new core investor.

However, there seems to be light at the end of the tunnel for both the Federal Government, Transcorp and NITEL. Last month, Transcorp announced that it is effecting a change in the board of NITEL, including changes in the membership of Transcorp’s representation on the NITEL board, and signing a contract with Hilton Hotels International, and as a result of this, the company had attracted an inflow of foreign investment valued at nearly US$5 billion. The company’s erstwhile Chairman is stepping down, and 18 billion Naira will be injected to revitalize NITEL in the next few months, depending on approval from the government.

This restructuring of NITEL seems to have started yielding gains evidenced by the keen interest shown by these foreign investors in Transcorp and its subsidiaries.

Nigeria was once a relatively progressive country, we have to remind ourselves, but today it is one of the few countries in the world that lacks a commercial wired telephone network, and with a population of 140 million and the sixth largest producer of petroleum in the world, has one of the most underdeveloped and archaic telecommunications networks in the world. Those who have fixed line phones – only very few businesses, the wealthy and the political elite – are faced with restrictions on their use because of the decrepit state of the telephone system.

My humble advice to Transcorp and NITEL, as well as the government, is that they should stick to revitalising the fixed-line telephony which has been the core operation of NITEL. MTel, the mobile arm of NITEL, which never really took off in the face of stiff business competition from mobile phone operators, should be discarded, at least for now, until NITEL is on its foot again, which it definitely will not be for many years to come, especially in light of the many operators of mobile telecommunications now fully entrenched in Nigeria. It is no use competing with these operators, who are growing stronger and getting more established on a daily basis, now in the current climate.

Fixed-line telephony or terrestrial or land line telecommunication should remain the core business of NITEL, as even with the rapid growth of mobile telephony in Nigeria and indeed all over the world, an attempt by NITEL to continue to get in onto the act, will result in operational and financial disaster for Transcorp and NITEL. Landline communication still remains a very lucrative and viable business in any country and every business and homes need it on a daily basis. Ironically, it was mainly because of the shortcomings of NITEL in the first place that allowed mobile telephony to gain prominence in Nigeria today, although I will admit that this technology would have caught up with, and leave them behind eventually. NITEL was simply not providing the service to the people of Nigeria, and all these were caused by government politics, insincerity and interference, corruption, internal mismanagement, lack of focus and negligence.

Fixed line telephones, if properly developed and concentrated on by NITEL and Transcorp, can also be expanded to provide services such as broadband internet provision, a money making venture in many forward-looking countries, and which currently, mobile telephony is severely limited in scope; digital telephony and Public Switched Telephone Network (PSTN) has gradually evolved towards digital telephony which has improved the capacity and quality of the network; Internet Protocol (IP) telephony (also known as Internet Telephony) is a service based on Voice over IP (VoIP), a disruptive technology that is rapidly gaining ground against traditional telephone network technologies (In addition to replacing POTS – plain old telephone service – IP telephony is also competing with mobile phone networks by offering free or lower cost connections via WiFi hotspots); and of course the existing satellite system to connect to the world.

In a country where electricity power supply is at best epileptic and emergency services also operate via individual mobile phones because they have no landlines, the need for an effective landline telephony cannot be overemphasised, because if we can call from landline to landline, electricity is not needed in the homes for landlines to operate, more lives could be saved in hospitals, during fire or other disaster outbreaks. During blackouts, mobile phones cannot be charged, so if you have a dead mobile phone without a charged spare, your line of communication is completely broken.

Currently, what technical support exists for Nigerians by the mobile operators and mobile phone manufacturers? Almost non, whereas, fixed-line operators like NITEL operatives can always go out to addresses to fix damaged lines, and provide other technical supports and services.

Over 95% of mobile phone owners in Nigeria today are on “Pay As You Go”, because –again an illustration of the complete chaos in our society – of residential address problems, which cannot specifically pinpoint any mobile owner to a specific address. This in itself is a certain loss of potential income to mobile operators, but is not ever going to be a problem to a fixed line operator like NITEL because they know where the line goes, usage can be monitored and telephone bills can always be delivered by hand at worst. If the addressee does not pay, they can always be disconnected at the telephone exchange, and the addressee will come running to the nearest NITEL Payment office to pay to get reconnected. The latter, of course applies to mobile phones on contract tariffs.

When people call a household from a landline, they expect to pay landline call rates. However, if you have no landline, and need to be called on a mobile phone number for example, the rate can be a lot more expensive to the caller.

One of our problems as a people is that we are always in a hurry to get results without actually working towards it. We want to take twenty steps at a time instead, when one would do and is the normal thing. We also never learn from history or past mistakes. NITEL, in whatever name it has been called over the decades had gone the way of its siblings like the Nigerian Railway Corporation, Nigerian National Shipping Company, National Electric Power Authority, NEPA (first, Electricity Corporation of Nigeria, ECN, and now the inappropriately-named Power Holding Company of Nigeria, PHCN); etc (NITEL was actually separated from the old Post Office, now called NIPOST, but changes of names have apparently had no effect on efficiency or indeed, survival of these dinosaurs)

NITEL is best placed to revive its own fortunes, with hard work, commitment, focus and sincerity by its owners, Transcorp, the Federal Government and the potential new core investor. All its old networks and equipment are there and only need to be overhauled or replaced with modern technology. It should not try to compete with the existing, well-established, well-focused and well-managed mobile phone operators by going into mobile telecommunications now. NITEL has its own niche market, a near monopoly which it should exploit to the fullest. In fact, it has no competitor at all for now in its own area of operation.

Transcorp and the Federal Government should concentrate all their energy on reviving NITEL, and not wasting our money, time, energy and other resources on going into mobile telephony. Others are already doing well in that area.

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1 comment

JPG April 24, 2009 - 3:29 pm

NITEL’s service is too bad. SAT3 link is down since the beginning of this year. And the NITEL staff is not taking any responsible or initiative to resolve the issue.


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