US embassy cable - 05LAGOS416

C O N F I D E N T I A L LAGOS 000416 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY 
 
STATE FOR AF/W 
 
E.O. 12958: DECL: 03/16/2015 
TAGS: ECON, NI 
SUBJECT: MTS FIRST WIRELESS ROLLOUT SET BACK TWO MONTHS BY 
MANAGEMENT TAKEOVER ATTEMPT 
 
REF: LAGOS 167 
 
Classified By: CONSUL GENERAL BRIAN BROWNE FOR REASONS 1.4 (b) AND ( 
 
d) 
 
1. (SBU) As MTS First Wireless (MTS) tries to recoup from a 
very open and public feud between rival factions in the Board 
of Directors (reftel), its Senior Vice President, AMCIT 
Charles Kimbrough, estimated the company's rollout has been 
delayed at least two months.  Kimbrough recently returned to 
Nigeria after going to the US to avoid alleged police 
intimidation and arrest threats purportedly fueled by the 
rival faction of the MTS Board.  Nigeria's telecom market is 
extremely competitive and MTS has yet to prove itself a 
viable entrant in this demanding market.  However, MTS 
maintains it will be profitable once it has a foothold 
established. 
 
2. (U) MTS rollout, so far limited to Lagos, Abuja, and Port 
Harcourt, has been in aberance since the board of directors 
split into two factions due to requests by MTS's primary 
investors (chiefly banks) to scale back board membership and 
dissolve its management board.  Dismissed board members 
reportedly petitioned the Nigerian Economic and Financial 
Crimes Commission (EFCC) to investigate the company and 
allegedly encouraged the local police to harass the company, 
the remaining board members, and some key employees, 
according to Kimbrough and MTS corporate affairs manager. 
The EFCC investigation continutes into alleged improprieties 
such as: the company restructuring was not agreed upon by all 
board members; non-payment of import duties on telecom 
equipment; and share allocations between US investor, MTS 
Inc., and other investors were never agreed to by all board 
members.  Standing MTS board members maintain MTS innocence. 
 
3.  (SBU) Kimbrough speculates that dismissed board member, 
Obafemi Olapade, was the fillip behind the swift EFCC 
response.  Olapade is a friend of President Obasanjo. 
Olapade and several other directors were brough on to the MTS 
board because their political connections played a key role 
convincing the Nigerian Communications Commission in 2002 to 
reinstate MTS's fixed wireless license, revoked during the 
Abacha regime. 
 
4.  (SBU) Sensing that the public spate was damaging all of 
them financially, the two rival factions moved to pacify 
investors through tentative "peace agreements".  All members 
of the original board and management board have been 
reinstated for four months as a stabilizing move to quell 
customer and investor uncertainty. 
 
5. (C) Comment: MTS First Wireless is 44 percent owned by 
US-based MTS Inc.  MTS Inc. senior staff members have close 
ties to Nigeria, several hold dual citizenship.  MTS Inc. and 
other investors have, since 2002, sunk millions of dollars 
into MTS with little return.  Going against the stream of 
risk-aversion that keeps many US companies out of Nigeria, 
MTS Inc. investors want to succeed here.  MTS Inc. believes 
the Nigerian market can be profitable if you have the stomach 
for its ups and downs.  What the latest episode teaches is 
that Nigeria remains a rough and tumble business environment 
where much hinges on political connections often more than 
business acumen.  Here, the political connections may open 
the door, but if those connections go sour, they may also 
swing the door shut.  Thus, while the removal of some board 
members may have made business sense, the political realities 
have bucked against it.  To move forward, MTS will have to 
more skillfully balance its financial/business considerations 
against the potential fallout of alienating influential 
members of its board.  This is business Nigerian style.  End 
comment. 
BROWNE