NITEL: FG to pay N350bn debt from liquidation proceeds

The Federal Government is counting on using the proceeds from the guided liquidation of the Nigerian Telecommunications Limited to repay the moribund national carrier’s N350bn liabilities, a source at the Bureau of Public Enterprises told our correspondent on Monday.

The BPE had last year said the Federal Government  was considering a new liquidation strategy to dispose of NITEL, should the reserve bidder, Omen International, fail to pay the $105m bid security by Friday, June 17, 2011.

Following the failure of Omen to pay the bid security fee, however, the Federal Government was left with no other option but to begin another process of solving the NITEL privatisation debacle by recently approving the guided liquidation strategy.

In view of this, the BPE source said the objective of the guided liquidation as recently approved by the Federal Government was to pay the company’s liabilities.

The source said, “The objective of the guided liquidation strategy is to use the proceeds to pay all debts owed by NITEL.

“The company’s exposure currently stands at about N350bn. The company will eventually be wound down after the liabilities are settled.”

Recalling the protracted issue surrounding NITEL’s privatisation, the source said, “That is why government should not run any business because it fail and will incur huge debts as it did with NITEL.”

The source stated that the government might sell the company in bits if it failed to attract a lump buyer, reiterating that the essence was to use the proceeds of the sale to settle the company’s outstanding liabilities.

The company’s total liabilities amounted to N73.8bn in 2003, but rose in October 2005 to about N130bn. It has since increased to about N350bn, according to the BPE source.

The President, Association of Licensed Telecommunications Operators of Nigeria, Mr. Gbenga Adebayo, advised the government to unbundle NITEL and make it more attractive to players in the industry.

“It may be difficult to find one buyer for NITEL as a single entity. No one wants to inherit NITEL, it is too big. We believe that if NITEL is unbundled, it will make it more attractive to players,” he said.

According to Adebayo, government should allow different buyers to acquire the mobile arm and other units such as the backbone, fixed line and international gateway, among others.

The President, Association of Telecommunications Companies of Nigeria, Mr. Titi Omo-Ettu, also advised the Federal Government to protect the First National Operator licence that NITEL holds in the process of the guided liquidation.

NITEL’s privatisation journey has been very long and tortuous. In 2001, Investors International London Limited attempted to acquire the company but defaulted in paying the bid price of $1.317bn and thereafter forfeited the opportunity.

This was followed by Pentascope of Netherlands, which was appointed to revamp NITEL but failed to do so.

Orascom also attempted to acquire NITEL with $256.5m, but lost the bid to Transcorp, which paid $500m for the troubled telecoms firm.

Transcorp’s acquisition of NITEL in 2006 appeared very successful in the beginning but later went awry.

The New Generation Consortium, which emerged the preferred bidder for the company, also failed to pay the $750m (30 per cent) security fee on its $2.5bn bid. It was eventually disqualified, paving the way for the reserve bidder, Omen International, to acquire the firm.

But Omen too failed to meet the financial obligation despite an extension of the payment schedule.