Press Release:
Press Release
News Article February 2005
PAUL BUDDE writes: "With the 28 January deadline for expressions of interest just passed, British Telecom, Vodafone, a Singaporean telco, South Africa's Telkom and Richard Branson''s Virgin Group are rumoured to be among those keen to acquire a 51% stake in Nigeria''s incumbent telco, Nitel.
But Nitel is not in good shape: The fixed-line network infrastructure has been neglected during decades of operation as a state-owned monopoly under a military government. The company suffered a record loss of US$145 million in 2003, including a debt write-off of US$61 million – only a small part of the US$328 million that customers owe Nitel in unpaid bills. And Nitel itself owes US$113 million to other organisations, mainly in interconnection fees to other network operators – to the extent that mobile operator V-Mobile has asked a Nigerian court in October last year to liquidate Nitel. Instead, the cash-strapped company secured approval in November to draw on a controversial US$108 million loan from local banks in preparation for privatisation.
The opportunity, however, is enormous: A booming economy growing at 10% per year with a population of 130 million of which up to now less than 1% have a fixed telephone or Internet access. And there is also a little pearl in the basket: Nitel''s wholly-owned mobile subsidiary M-Tel has been growing at almost 600% in the first nine months of 2004 alone, following a massive network expansion program, making the value of the company shoot up from US$75 million to US$500 million during this time. Nigeria's mobile market has experienced triple-digit growth rates every single year since 2000, serving as a substitute for poor or non-existing fixed-line services – an indicator for the massive pent-up demand. The massive growth will continue for some time to come as mobile penetration so far has only reached a level of around 5%.
The strong interest in Nitel may be justified, despite the poor company data."
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