US embassy cable - 04LAGOS1467

UNCLAS LAGOS 001467 
 
SIPDIS 
 
STATE PLEASE PASS TO FCC, EX-IM, AND OPIC 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, NI 
SUBJECT: HARRIS CORPORATION DUKING IT OUT FOR A 
LUCRATIVE NIGERIAN TELECOMS CONTRACT 
 
REFTEL LAGOS 00676 
 
1. (SBU) Summary: Harris Communications, a U.S. firm, 
faces Japanese NEC for a multi-million dollar contract 
with Globacom for microwave telecommunications 
equipment.  Whether the playing field is level is an 
open question.  End summary. 
 
2. (SBU) Harris Communications Systems Nigeria Ltd. 
(Harris), a subsidiary of Harris Corporation of Redwood 
Shores, California, is pursuing a $30 million microwave 
communications equipment contract in Nigeria.  Harris 
is a large player in the local telecommunications 
equipment market, and counts as customers three of the 
four GSM service providers in Nigeria (South Africa's 
MTN, Zimbabwe's Econet Wireless International, and M- 
Tel, a subsidiary of state-run NITEL). 
 
3. (SBU) The Nigerian company Globacom, which Harris 
eyes as a potential customer, holds the fourth and 
final GSM license in the country.  While late to roll 
out its mobile network (reftel), Globacom has plans for 
a system that could eclipse Nigeria's largest mobile 
players, MTN and Econet.  Such a feat might be possible 
since MTN and Econet are oversubscribed and are having 
a hard time keeping up with Nigerian demand.  Harris 
Nigeria could raise its revenue in Nigeria in the near 
term thirty percent if it were to clinch the Globacom 
contract. 
 
The Competition 
 
4. (SBU) Globacom has narrowed its search to two 
microwave equipment suppliers: Harris and the Nippon 
Electric Company (NEC) of Japan.  Globacom initially 
courted a number of other firms including Alcatel and 
Siemens.  Harris Nigeria company executive told Econoff 
that Globacom is likely to choose a supplier within the 
next two weeks. 
 
5. (SBU) Comment.  Were Globacom to award the contract 
to NEC, the latter might gain more than just a large 
share of Nigeria's microwave communications equipment. 
It could also establish a foothold in an equipment 
market sector in which there has so far been only one 
player, Harris.  Harris is concerned that the NEC may 
be prepared to use whatever tactic is necessary to gain 
access to the Nigerian market. 
 
Downside of Doing Business in Nigeria 
 
6. (SBU) While Harris is engaged in negotiations with 
Globacom, Harris is preparing itself for what it did 
not expect when it came to Nigeria.  As a supplier to 
NITEL-owned M-Tel, Harris may soon be pressed to accept 
naira payment for some of its local business.  Payment 
in naira could reduce Harris's profit margin as a 
result of unfavorable foreign exchange rates, the 
effect of which could be magnified were Harris to be 
compelled to pay additional income taxes in Nigeria. 
 
7. (SBU) Nigeria's population numbers about 130 
million, but its fixed telephony rate is a mere four 
telephone landlines per 1,000 people.  GSM service is 
thus the only viable mid- to long-term connectivity 
resource in Nigeria. Since GSM services were introduced 
in August 2001, about four million subscribers have 
become hooked to mobile phones. 
 
Browne