US embassy cable - 04LAGOS617

UNCLAS SECTION 01 OF 02 LAGOS 000617 
 
SIPDIS 
 
STATE PLEASE PASS TO FCC, EX-IM, AND OPIC 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, NI 
SUBJECT: NIGERIA: TELECOMMUNICATIONS ROUNDUP 
 
REF: (A) LAGOS 524, (B) 03 LAGOS 2565 
 
1. (U) Summary: Recent conversations suggest the 
Nigerian telecommunications industry is evolving 
rapidly.  Officials at Nigeria's Bureau of Public 
Enterprises (BPE) say they hope to take NITEL public in 
June; M-Tel executives say they expect to complete the 
installation of a 1.2 million line mobile network in 
August; and executives at Nigeria's largest fixed 
wireless operator, Odua Telecommunications, say they 
hope to complete the construction of a five-state 
network in December.  End summary. 
 
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NITEL: Plans for a June IPO 
--------------------------- 
 
2. (U) BPE officials say they hope to sell 20 percent 
of the GON's shares in Nigeria's national operator, 
Nigerian Telecommunications Limited (NITEL), in an 
initial public offering in June.  The company's shares 
have not been valued, but the BPE's Director of 
Infrastructure and Networks, Irene Chigbue, says she 
expects the opening price to fall between N0.80 and N1 
per share.  If domestic investors snap up the 20 
billion shares on offer as rapidly as some observers 
expect, NITEL may raise as much as $150 million. 
 
3. (U) BPE officials delayed the sale of an initial 
tranche of shares twice before (Ref A), but Chigbue 
believes NITEL is better prepared this time.  The 
company's board recently approved a business plan and 
accepted an audit of the 2002 accounts, and BPE 
officials say the board will consider the firm's 2003 
results within the next few weeks.  With these, BPE and 
NITEL will be able to move ahead with an initial public 
offering, but only after selecting an issuing house, 
naming the various parties to the issue, winning 
Nigerian Securities and Exchange Commission approval, 
and preparing a prospectus. 
 
4. (U) Chigbue added that two foreign firms, one from 
Singapore and the other from China, have expressed 
interest in purchasing the 51 percent controlling 
interest the GON hopes to sell to a core investor.  If 
either firm submits a proposal to the BPE and initiates 
the competitive bidding process and subsequent sale, 
the GON will likely compensate NITEL's managers, 
Pentascope International, for the early termination of 
their three-year contract and turn the firm over to new 
parties.  Chigbue says the GON would like nothing 
better than to see NITEL successfully privatized, 
particularly after a botched attempt in 2002.  The 
firm's privatization, she says, remains one of the 
GON's top priorities. 
 
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M-Tel: A Slow Rollout, but a Rollout Nonetheless 
--------------------------------------------- --- 
 
5. (U) M-Tel executives admit having experienced delays 
rolling out their 1.2 million line mobile network, but 
CEO Aad Loois expects to complete 90 to 95 percent of 
the network within the next three months, with the 
remaining 5 or 10 percent coming online in August. 
Lines are selling rapidly, with total subscriptions 
sometimes doubling in two-week periods.  Loois hopes to 
respond to that demand by beginning the installation of 
several hundred thousand additional lines in the fourth 
quarter. 
 
6. (U) M-Tel awarded $50 million contracts for the 
installation of its mobile network last March.  Each of 
the three contractors, Motorola, Ericsson, and ZT of 
China, were expected to install 400,000 lines within 
four and a half months of the signing of letters of 
credit.  These were signed last August, but 
difficulties clearing equipment through customs delayed 
construction until mid-November.  Motorola's Country 
Manager, Raphael Udeogu, expects to complete the 
network's rollout in late March or early April, but he 
says only 30 or 40 percent of the network will be used, 
mostly because it lacks sufficient connections to 
NITEL's transmission backbone.  Promised repairs and 
extensions never materialized, so like other mobile 
service providers, Motorola has had to fill in the 
gaps.  Udeogu hopes to win a multi-million dollar 
contract to supply much-needed connecting points later 
this year. 
 
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Odua: A Powerhouse Enters the Market 
------------------------------------ 
7. (U) Executives at Nigeria's leading fixed wireless 
operator, Odua Telecommunications, say they hope to 
complete the construction of a 1.1 million line fixed 
wireless network by the end of the year.  The company's 
backbone is more than two-thirds complete, and it 
recently rolled out in two of the five southwestern 
states included in its 3.5GHz license (Ref B).  Odua's 
Chief Technical Officer, Olusegun Owolabi, expects to 
introduce services in the remaining three within the 
next few months. 
8. (U) Odua is well ahead of its competitors.  Of the 
twenty-six firms that won 3.5GHz licenses in June 2002, 
only Odua has started operating.  It bills itself as 
customers' "sure link" and emphasizes the reliability 
and affordability of its services.  Calls cost as 
little as N4 ($0.03) per minute, and customers can 
purchase pre-paid calling cards for as little as N200 
($1.48).  Subscribers have responded positively, and 
Owolabi expects to sell lines easily.  Like other 
Nigerian operators, Odua will likely find that demand 
far exceeds supply. 
 
9. (U) Comment: Despite privatization snags, rollout 
delays, and poor basic infrastructure, the Nigerian 
telecommunications sector is evolving rapidly.  It 
continues to attract foreign investment, and it remains 
one of the fastest growing sectors of the Nigerian 
economy.  Given Nigerians' insatiable demand for 
telecommunications services, the sheer size of the 
market, and operators' desire to profit, the 
telecommunications sector will likely remain one of the 
economy's strongest engines of growth.  The sector's 
expansion should create lucrative business 
opportunities, particularly for U.S. firms.  Motorola 
and Harris (Ref B) have already profited, and others 
would do well to follow their lead.  End comment. 
 
HINSON-JONES