US embassy cable - 03ABUJA682

C O N F I D E N T I A L SECTION 01 OF 03 ABUJA 000682 
 
SIPDIS 
 
 
STATE PASS USTR, TDA, EXIM 
STATE PASS OPIC 
 
 
E.O. 12598: DECL: 04/10/13 
TAGS: BEXP, EINV, ECPS, ETRD, ECON, PGOV, NI 
SUBJECT: NIGERIA: MOTOROLA'S SUCCESS MARKS MAJOR 
ADVOCACY VICTORY 
 
REFS: (A) ABUJA 3345, (B) ABUJA 1615, (C) LAGOS 1933, 
(D) LAGOS 2133 
 
 
Classified by Ambassador Howard F. Jeter.  Reasons 1.5 (B & D). 
 
 
SUMMARY 
------- 
1. (C) On March 31, the GON awarded Motorola a $49.9 
million contract to expand Nigerian 
Telecommunications' (NITEL) cellular telephone 
network. This award is a major advocacy victory for 
the Mission as well as an important landmark on 
Nigeria's road to greater transparency.  It is the 
most significant U.S. investment in the non-oil sector 
in recent years.  However, this achievement was not 
easy.  Some important players within the GON did not 
want Motorola to get this attractive slice of the 
cellular network. President Obasanjo had to reverse a 
late February decision by the Federal Executive 
Council (FEC) that awarded the lion's share of the 
network expansion to traditional non-U.S. telecom 
companies and he reopened bidding after complaints 
that the GON's bid tendering process had not been 
transparent.  Motorola believes it is now well 
positioned to take advantage of Nigeria's booming 
telecom sector.  END SUMMARY. 
 
 
OFFICE OF THE PRESIDENT MAKES THINGS RIGHT 
------------------------------------------ 
2. (C) On March 6, the GON retracted its February 
announcement awarding the three largest contracts for 
NITEL's Global System Mobile (GSM) expansion to 
Siemens, Alcatel and ZTE.  Losing bidders (Motorola, 
Ericsson) and diplomatic missions had expressed 
concern that the selection process was not 
transparent. Oronsaye admitted to the Ambassador that 
NITEL and Communications Ministry officials had 
brokered side deals favoring certain telecom 
companies, business-as-usual in the Nigerian telcom 
sector that had cost the country billions of dollars 
and deprived the consumer an expansive and efficient 
telcom network.  Oronsaye said President Obasanjo was 
unhappy with the situation and was determined to 
correct it. 
 
 
3. (SBU) On March 10, Oronsaye held a lengthy meeting 
at the Presidential Villa where all bidders 
technically pre-qualified by NITEL and the Ministry of 
Communications resubmitted their final offers. 
Oronsaye and his staff judged each bid solely on price 
and financing. Econoff, who attended the session, 
observed that Oronsaye made every attempt to clarify 
the process and ensure each bidder was treated 
equally. 
 
 
MOTOROLA WINS $49.9 MILLION CONTRACT 
------------------------------------ 
4. (SBU) At the end of the meeting, Oronsaye released 
spreadsheets to the participants indicating Motorola, 
Ericsson, and ZTE were the low-bidders for each part 
of the three-phase expansion. The GON awarded Motorola 
a $49.9 million contract to implement Phase II of 
NITEL's $155.5 million GSM three-phase infrastructure 
expansion. Motorola will also supply an additional $7 
million in equipment to NITEL's other partners. 
Motorola, Ericsson (Phase I), and ZTE (Phase III) won 
almost equal shares in the expansion which will add an 
additional 1.2 million mobile lines over the next six 
months to NITEL's present 118,500 GSM line network. 
 
 
5. (SBU) By reopening the bidding process the GON 
saved over $21 million. The initial NITEL/GSM awards 
totaled $176.7 million compared to the renegotiated 
award total of $155.5 million. Representatives from 
ZTE, Siemens and Huawei confirmed to Econoff that the 
GON received rock bottom prices, but since Nigeria's 
potential GSM market is so large, companies were 
willing to initially lose money or give considerable 
discounts in order to establish a market share. 
 
 
SORE LOSERS 
----------- 
6. (C) Following the announcement that Motorola, 
Ericsson and ZTE had won, Embassy sources indicated 
that Siemens tried to overturn Oronsaye's decision. A 
Siemens' official revealed to Econoff in mid-March 
that the company had already spent $6 to $7 million on 
the deal, apparently on bribes. The French Ambassador 
lobbied senior GON officials on Alcatel's behalf. 
Oronsaye said he and other officials at the Presidency 
came under intense pressure from Vice President Atiku 
to favor Siemens. Vice President Atiku has strong 
financial connections to both Siemens and Ericsson. 
 
 
COMMENT: A LANDMARK ON THE ROAD TO TRANSPARENCY FOR GON 
--------------------------------------------- ---------- 
7. (SBU) The award to Motorola marked a symbolic and 
important step on Nigeria's road to greater 
transparency in awarding government contracts. Spurred 
by the President, senior-level Nigerian officials, at 
least in this case, refused to conduct business as 
usual.  Now a key will be whether this is a harbinger 
of things to come or just a unique and unfortunately 
isolated instance of priority. 
 
 
MOTOROLA SAYS MISSION ADVOCACY EFFORTS KEY TO SUCCESS 
--------------------------------------------- -------- 
8. (SBU) During 2001, the Mission advocated for 
Motorola's bid on the initial NITEL GSM roll-out 
contract. Under a process that lacked transparency, 
Motorola lost the contract (Refs. B, C, and D). In 
late September 2002, Motorola Country Director Raphael 
Udeogu told the Ambassador his concern that Motorola's 
original $230 million bid to expand NITEL's GSM 
infrastructure was not assessed fairly by the GON 
(Ref. A).  Motorola filed an advocacy request with the 
Department of Commerce Advocacy Center, and shortly 
after, Ambassador Jeter and EconOff met Udeogu to 
discuss how to move. 
 
 
9. (SBU) In December 2002, the Ambassador wrote 
President Obasanjo asking the GON to consider 
Motorola's NITEL proposal. The letter stated that, 
"giving the contract to less competitive and less 
qualified bidders would not serve anyone's interest, 
and frankly creates an impression that American 
companies outside of the oil sector are not welcome in 
Nigeria". On January 14, Secretary of Commerce Evans 
wrote a similar letter to Communications Minister 
Bello. 
 
 
10. (SBU) Throughout early 2003, the Mission remained 
in regular contact with Motorola officials. In mid- 
March, the DCM telephoned Vice President Atiku, 
stressing the need to treat Motorola's bid fairly. The 
Ambassador also spoke with Oronsaye on several 
occasions on Motorola's behalf. 
 
 
11. (SBU) On April 4, the Ambassador met with 
Motorola's Nigeria Country Director Raphael Udeogu, 
Regional Finance Director Ben Melican, Senior 
Technical Sales Manger Noel Kirkaldy, and Systems 
Integration Manager Manuel Millan for a final readout 
of the NITEL/GSM deal. The team thanked the Ambassador 
and the entire Mission for our advocacy on Motorola's 
behalf. The team agreed with the Ambassador that this 
contract presented a huge opportunity for Motorola and 
was a turning point in Nigerian telecom. Udeogu stated 
that without the Mission's and Washington's efforts, 
Motorola probably would have not secured this 
important contract. After over two years advocating 
for U.S. companies, Motorola's contract marked the 
Mission's first major transaction outside the oil 
sector. 
 
 
BACKGROUND: NIGERIA'S MASSIVE TELECOM POTENTIAL 
--------------------------------------------- -- 
12. (SBU) Motorola's Noel Kirkaldy stressed to the 
Ambassador the importance Motorola attached to winning 
the NITEL/GSM bid. Kirkaldy stated that Motorola, with 
this contract, was only scratching the surface of the 
Nigerian market. Nigeria is on the verge of a 
telecommunications explosion; now Motorola is well 
placed to participate in the boom. Motorola is 
projecting that the Nigerian market will expand to 13 
million lines in 5 years, adding an additional 20 
million lines in 10 years, Udeogu stated. 
 
 
13. (U) The low teledensity in Nigeria offers telecom 
companies enormous profit opportunities. Mobile 
players have an advantage, given NITEL's decaying 
fixed-telecom infrastructure. Even conservatively, 
most analysts say the Nigerian market could grow to 
over 10 million cellular subscribers in a few years. 
Moreover, mobile providers in Nigeria have charged 
some of the highest per minute rates in Africa. Most 
telecom companies have recouped their initial 
investments in Nigeria in six months to two years. 
14. (U) With Nigeria's 126 million population, 
Nigerians will likely benefit when per minute rates 
begin to fall the more new users sign-up for service. 
(When Obasanjo assumed office in 1999, investment in 
the telecom sector was $50 million compared to over 
$2.1 billion in 2002). With NITEL's GSM expansion, 
NITEL itself can now share in the profits of Nigeria's 
expanding telecom sector. Motorola is also well poised 
to tap into the business created by 35 to 40 million 
cell phone users by 2013. 
 
 
15.  (C)  This transaction has been a win-win outcome 
for everyone; Motorola will profit handsomely; the 
Nigerian consumer stands to reap benefits from the 
availability and declining costs of telcom services; 
finally, after years of non-transparency in the telcom 
sector which have drained Nigeria of billions of 
dollars, the chain of corruption, by government 
officials and companies alike, finally may have been 
broken. 
 
 
JETER