The fortunes of Transnational Corporation an attempt by the Obasanjo government at creating a mega-corporation capable of driving industrial development in Nigeria, have collapsed dramatically as the Minister for Information and National Orientation, Mr. John Odey, announced on Saturday the reversal of the sale of NITEL and its mobile telephony subsidiary Mtel. The Minister attributed governments decision to the volume of complaints regarding the manner in which NITEL/Mtel was sold, and the “failure of Transcorp to achieve the objectives of the privatisation guidelines”. This decision is the fourth reversal of a privatisation exercise since the Yar’adua assumed office on May 29, 2007.
The minister explained that the details of the ‘revocation’ remained to be worked out but it appears that Transcorp will be compelled to sell-down its 51% holding to a maximum of 10% with the government also reducing its 41% stake. Once again the search for a transparent process and an experienced core investor for the failed telecoms company begins.
The sale of NITEL/Mtel to Transcorp came after three failed attempts by the Bureau of Public Enterprises (BPE) to sell of 75% of the governments shares in the under-performing telecoms company. In 2001, International Investors of London Limited (with the prescient acronym IILL) failed to make timely payment for its winning bid and thus forfeited its 10% deposit of $131m. The bid was largely funded by First Bank of Nigeria Plc. whose chairman at the time, Mr. Bernard Longe, paid the price of failure by being removed by the board. He was later to emerge briefly, as an executive of Transcorp Plc. In December 2005, the government rejected the highest bid to emerge for NITEL/Mtel made by Orascom Telecoms of Egypt to the tune of $256m. A 51% holding in the company was eventually sold to Transcorp Plc. by
negotiation for $750m in July, 2006.
Transcorp Plc. while publicly hailed as an attempt to stem the flow of
major enterprises into the hands of foreign interests, and a spark that
could ignite greater industrial development in Nigeria by virtue of its
breadth of interests and the collective strength of it founding members
with the cream of Nigerian Industry listed as participants and promoters.
Chief Olusegun Obasanjo (former President of Nigeria)
Prof. (Mrs) Ndi Okereke-Onyiuke (DG, Nigeria Stock Exchange/Chairman, Transcorp)
Mr Bernard Longe (Group Managing Director/CEO, Transcorp)
Mr Nicholas Okoye(Group Executive Director, Operations Transcorp)
Mr Chukwunoye Ofili (Executive Director, Finance Transcorp)
Mr Tony Elumelu (Managing Director, United Bank For Africa)
Mr Jim Ovia (Managing Director, Zenith Bank)
Mr Jacob Ajekigbe (Managing Director, First Bank of Nigeria Plc)
Jim Ovia – Zenith Bank Plc.
Mr. Fola Adeola – Former Chairman of the National Pension Commission and Group MD of Transcorp
Alhaji Aliko Dangote – Dangote Group of Companies
Mr. Femi Otedola – Zenon Oil
Mr. G.U Okeke
However the problem with Transcorp was that it was widely perceived to be a collective of disparate interests close to the former President with an interest in profiting from the disposal of government assets. The bulk of Transcorps assets are constituted by properties purchased from the federal government. It began with the acquisition of the of NICON Hilton Hotel, Abuja, for $105m in 2005, through NITEL/Mtel, and oil blocks. In all it acquisitions there were suspicions of government bending over backwards to
accommodate the company. After winning the bid for NITEL/Mtel, Transcorp was unable to meet the one week deadline for payment of 50% of the bid price, raising only 10% ($75m). In a seminal analysis of the company’s prospects, Ms. Ijeoma Nwogwugu of This Day newspaper wondered how the corporation was going to pay dividends and service the interest on the debt it had already raised to finance the refurbishment of the now renamed Transcorp Hilton, and the debt it would need to raise for the development of its oil blocks and the refurbishment and expansion of NITEL/Mtel (the latter two projects being long-term in nature) when it had only the hotel to produce cash flow, NITEL/Mtel being hardly able to cover its own costs.
Transcorp Plc. has transparently failed to effect any noticeable change at NITEL/Mtel, and instead stands accused of cannibalising the company, retrenching workers contrary to its agreement with the BPE, attempting to cede the SAT-3 service to third parties, scrapping medical facilities for NITEL staff and owing staff salary arrears of up to six months, this in spite of its having raised N20bn from the investing public in 2007. President General of the Senior Staff Association of Communication, Transportation and Communication (SSACTAC), Mr. Adetunji Adesunkanmi, said that without the right back-up, financially and technologically, Transcorp cannot manage the telecommunications outfits. The allegation is made that substantial portions of land belonging to NITEL/Mtel have been sold off and there is little evidence of the proceeds of the public offer being applied to revive the company. It is estimated that NITEL now has less than 80,000 functional lines and Mtel, 30,000.
There is little doubt that many of the initial investors had a timescale within which their investments in Transcorp were scaled back, and since the public offer, the share price of the company has languished leaving participants in the offering facing significant write-downs and outright losses. With the sale of NITEL/Mtel revoked and the purchase of the Transcorp Hilton now under investigation, it is uncertain what remains of the the corporation and what might be salvaged. It might be harsh to say
that Transcorp was a stock market bubble promoted by political interests for political reasons and not business reasons. With the head of the Nigerian Stock Exchange also acting as the chairperson of the company it remains to be seen if the internal processes of the company will be investigated effectively, or indeed if Mrs. Okereke-Onyiuke will do the honourable thing and resign her position at the Exchange.
NOTE: The original investors in Transcorp, including former President Olusegun Obasanjo who had 200 million shares in his so-called ‘blind-trust’, bought into the company at N1 per share. The failed public offer was priced at N7.50 per share with only 36% of the IPO taken up. The company’s shares which have traded as high as N12 and as low as N2.90, closed last Friday at N4.42.
