The Transcorp Story
By Reuben Abati
The sale of NITEL by the Federal Government is the story of the week. But it is a sordid story. Unable to find a buyer for the national telecommunication company after three attempts, and lacking the courage to go through a fourth, competitive bidding process, the Bureau for Public Enterprises adopted what it calls a "negotiated sales arrangement" which was concluded with the award of NITEL to Transcorp.
In my view, the negotiated sales arrangement is a by-word, in this context, for favouritism and desperation. It cannot stand the test of transparency. What happened to due process? BPE spin-doctors have been hailing the sale as a major breakthrough for Nigeria. The sale would have to be re-examined. BPE owes Nigerians clearer explanations than mere woolly rationalisations.
In 2002, the attempt to privatise NITEL had led to the emergence of IILL of Britain as the preferred bidder, but when that company could not raise the sum of $1. 317, the process was abandoned. This was followed by a contractual arrangement with Pentascope to help manage NITEL and prepare it for sale. This turned out to be a very controversial deal, resulting in accusations of gross mismanagement at all levels. Last year, Orascom of Egypt had offered $256.53 for NITEL but this was turned down by the Federal Government on the ground that the amount was "ridiculously low".
While all this was going on, the fate of NITEL became uncertain. Its infrastructures have since begun to decay. Mtel, its GSM subsidiary offers the worst service in the market. NITEL's liabilities have continued to increase; public confidence in it has been completely eroded; its market share is very low. Its workers are demoralised and angry. They are owed salary arrears, for them every negotiation of the privatisation of NITEL is a form of conspiracy against their future.
A fourth competitive bidding exercise for NITEL could take as long as 12 months, during which period the fortunes of NITEL would continue to worsen. There is no doubt that the Federal Government needed to do something about NITEL: to revive it, and turn it into a viable commercial enterprise. But what it has now done, that is the naming of Transnational Corporation Plc (Transcorp), in partnership with British Telecom and Etisalat of the United Arab Emirates as the preferred investor, raises many doubts. Transcorp is offering $750 million (N97. 5 billion) for 75 per cent equity.
The remaining 25 per cent will be sold to Nigerians through a public offer later in the year. Transcorp will bear the burden of NITEL's liabilities but this will exclude the payment of staff pension and costs associated with downsizing which will be borne by government. About 7, 000 out of the 10, 000 work force of NITEL will be then sacked under the new deal. BPE received 28 expressions of interest from willing buyers under the so-called negotiated sales process, and according to the BPE Director-General, Transcorp was found to be more "competent" than others. The Minister of Communications, Chief Cornelius Adebayo also spoke of the sale of NITEL to "competent and respectable buyers". Dr. Ndidi Okereke-Onyiuke, the Chairman of Transcorp says NITEL has now ended "in the hands of Nigerians."
Where does the competence of Transcorp lie in the telecommunications business? Did it acquire that competence by the fact of its ability to access capital or its association with British telecom and Etisalat? Transcorp was set up in 2004 as a government-backed initiative to jump- start the reform process and broaden the scope of competitiveness in the Nigerian economy. It is modelled after the chaebols of the South Asian economies, particularly the Korean example, but in the past two years, there is no evidence that the Nigerian authorities have learnt any useful lessons from the Korean model. In 2006, Transcorp has raised capital through the stock market in excess of N17 billion, with its directors promising at every turn, "massive return on investment" and the creation of "a new economic order."
But even when government favours this mega corporation, it should not do so in a manner that negates competitiveness in the business environment, or the interests of focussed players in the national economy. Transcorp is fast developing into a big monopoly, a replacement of government monopoly with a private monopoly. It is also being over-stretched. In two years, it has been pushed into virtually every major area of the economy, without any structured attempt to assess its true capacity. A mega corporation such as Transcorp should build capacity, confidence and competence before it begins to expand, what we have seen with Transcorp is an acquisitiveness made possible by access to power.
When the company was inaugurated in November 2004, it was immediately granted concessions to build a Lekki Free Port zone in Lagos, an Independent Power Plant and a Cassava processing facility. Transcorp also bought the Hilton in Abuja. It is into oil and gas; it is eyeing the power and agriculture sectors. Everywhere Transcorp shows up, other competitors are immediately placed at a disadvantage. There is also too much politics in the affairs and image of Transcorp. President Obasanjo has never hidden the fact that he has a special interest in this mega corporation; it is his baby, and by his own admission, he hopes to use Transcorp as a major catalyst for economic growth. But that is precisely where the problem lies.
Members of Transcorp by their personal conduct have given the impression that they are more interested in politics rather than the business of Transcorp. They include persons who under the umbrella of Corporate Nigeria donated money to the 2003 Presidential campaign, and later to the Presidential Library Project. They include persons who campaigned openly for the Third Term project. This is also a company that is run by Directors who are all otherwise committed within the economy, including employees of private and public companies who can be easily accused of conflict of interest. Dr Onyiuke-Okereke for example is the Director-General of the Nigerian Stock Exchange and yet on many occasions, she can be heard personally promoting Transcorp with potential stock buyers. Is this ethically proper? When Transcorp Directors are not busy in their other capacities, they can be seen competing for Presidential attention, thus creating the impression that Transcorp is more of a tool of access. The emphasis in the Korean model is national development not personal aggrandisement.
Back to the sale of NITEL, the bigger challenge that BPE faces is the credibility of the sale. The clear impression is that the entity is being handed to Transcorp as an admission of failure on the part of government. Dr Okereke-Onyiuke celebrates the fact that NITEL has been handed over to Nigerians. This sounds like a good idea except that in the present sale, NITEL has not really been handed over to Nigerians but to British Telecom and Etisalat. Both companies parade a track record of achievement in the telecommunications industry. The only thing that Transcorp is bringing to the table is its so-called Nigerianness and "aggressiveness".
Unfortunately, the over-subscription of Transcorp's private placement offer notwithstanding, the ordinary man is wont to see it not as a national economic empowerment initiative but as yet another centre of influence for the President's men! NITEL workers, for example, 7, 000 of who are now on their way to the unemployment queue cannot feel that their interest has been served. Their pension matters will be handled by government, and yet if the workers had been allowed to have a choice in the matter, they would have rejected placing their affairs in the hands of government in a country where the entitlements of retired or retrenched civil servants are usually the victim of excessive bureaucracy and delay.
The future of NITEL is important. A revitalised NITEL will deepen competition in the telecommunication industry and broaden the scope of telephony in the country. It will provide Nigerians with additional choice, create more jobs and opportunities within the economy and perhaps drive down the cost of services. To get to that level, NITEL would have to be overhauled from top to bottom. Its operations must be modernised, and it has to change its culture of operation from a civil service structure to become a result-oriented private sector player, and extend its investment scope. Nigerians would love to see a NITEL that works. They have sad memories of NITEL services from those days when the ownership of a telephone set was a luxury, and quality services could not be guaranteed. A different NITEL would be a useful success story and a good advertisement for the privatisation process.
Whether Transcorp will be able to do the needful is a matter of speculation, but if what Transcorp is doing with the Hilton hotel in Abuja is a measure of its ability, then I have my doubts. The bigger doubt is whether the politicisation of Transcorp will not create special problems for it after the Obasanjo administration. A future government may feel no obligation to sustain the Transcorp model and in the process of re-organising it, including getting rid of the Obasanjo loyalists, if not sabotaging the entire project, the institutions under Transcorp's control would be in jeopardy. Why place NITEL under such uncertain circumstances?
The hands of both the Bureau for the Privatisation of Public Enterprises as well as the National Council on Privatisation (NCP) may be tied seeing that Transcop is an Aso Rock company. But if Nigerians have waited for four years to find a buyer for NITEL, there can be no harm in taking another look at the present sale and the ethical questions that it raises. President Obasanjo is advised to cancel the sale to Transcorp as he did in the Orascom case, and look more carefully for a qualified buyer that is untainted by the Transcorp baggage!
Poor Fola Adeola
It appears to be raining heavily in the backyard of Mr Fola Adeola, former Managing Director of Transcorp who was relieved of his appointment a few days ago on, we are told Presidential orders. He was asked to leave Transcorp and the Pension Commission which he also headed, to enable him concentrate on his campaign for political office.
Fola Adeola is eyeing the Ogun Central Senatorial District ticket on the platform of the Peoples Democratic Party. Kicked out of Abuja by the President who doesn't want any distracted persons in his team, the interesting development is that the President's first daughter, Iyabo Obasanjo is also threatening to kick Fola Adeola out of Abeokuta and the Senatorial race. Adeola wants the same seat that the President's daughter wants! He is also eyeing the same political platform.
She told The Sun: "Fola Adeola is trying to intimidate me. I have been the one on ground. Fola Adeola is just trying to intimidate me with his money and with the influence of the elite.. I will beat him" (The Sun, July 6, p. 4). She added: "Here is somebody who has never contributed anything to his community...He has never contributed in any charitable way to Abeokuta and its environs. I don't know when he left Abeokuta but he dusted the sand from this place. He has his beautiful house and beautiful wife in Lagos, now he thinks he could come here and try to buy our people's votes. I can tell you we are going to fight it out. He is going to have me to deal with."
Iyabo is truly her father's daughter: Confident. Firm. Determined. In fairness to her, in the past four years, she has carved a niche for herself with her Iyaniwura Foundation and with her active engagement with politics in Ogun state. She says Fola Adeola was relieved of his position at the federal level because he wants to run for office. Well, Iyabo herself is a serving Commissioner for Health in Ogun state, and she combines her campaigns with that assignment. So, what is she saying? Anyhow, Fola Adeola needs to be advised. Hen, how dare he challenge the President's daughter? He is even intimidating the President's daughter with money. Doesn't he know that he cannot eye the same thing that the President's daughter wants? Would he have done that under military rule? What is that? This is the thing with democracy. Fola Adeola also ought to know that people who have a beautiful house and a beautiful wife do not have a right to eye political office! Okay?