Investigations by TECHNOLOGY TIMES Reporters in Lagos and Abuja Bureaux

Lagos. February 6, 2010. The Federal Government has been petitioned that the favourable regulatory clearance for second national operator (SNO), Globacom, to buy rival Nigerian Telecommunications Limited (NITEL) could fundamentally undermine competitiveness in the telecoms market.

Chairman, Globacom Limited, Mike Adenuga Jnr

A top official of the Ministry of Information and Communications told TECHNOLOGY TIMES  in Abuja Thursday that the supervisory ministry of the Nigerian Communications Commission (NCC) has been petitioned by an unnamed bidder among companies vying to buy NITEL over allegations that the regulator allegedly favoured the SNO by giving a “flawed regulatory interpretation” that may pave the way for Globacom to become a private monopoly, if allowed to buy its rival.

The brewing crisis created by the petition currently under investigation by government, is that by offering Globacom the regulatory clearance, NCC allegedly paved the way for another monopoly situation, with the implications that if the SNO becomes successful in its bid to buy the fixed line business of NITEL as is being speculated, it would place it in firm control of vital infrastructure of its rival.

Specifically, the petitioner cited comments credited to the Executive Vice Chairman/Chief Executive, NCC, Ernest Ndukwe that Globacom could be allowed to buy the fixed line business of NITEL.

“If that happens, the petitioner is alleging that NCC’s conclusion is that the SNO can buy the fixed lines and the transmission facility of the First National Operator, NITEL even though the regulator had earlier excluded Globacom from bidding for MTel or SAT‐3.”

EVC, NCC, Ernest Ndukwe

According to the official, the NCC chief’s comments at a pre-bid conference held in Abuja on January 20, this year has created concern among bidders since the conclusion by Ndukwe that Globacom could bid for the fixed line business breaches the SNO’s licence conditions, competition laws and the National Telecommunications Policy.

“Clearly, fair competition will be destroyed by re‐monopolizing the industry. Further, investment within the industry will be constrained where Globacom holds the only national carrier license (NCL) when there is an opportunity to strengthen the FNO (First National Operator). The BPE’s process to privatize NITEL and MTel demonstrates that some 14 companies are willing to make fresh investments that will resuscitate the FNO NITEL, only for it to stopped by regulatory misinterpretation”, according to allegations levelled by the unnamed bidder, our source added.

Both NCC and Globacom declined comments on the matter which is on the table of the Ministry and the Bureau of Public Enterprises (BPE), the midwife for the privatisation process, among other government agencies.

The petitioner wants government to consider the practical implications of the NCC pronouncement amid the fact that MTel, the mobile business unit owned by NITEL, unlike rival players like MTN, Zain and Etisalat, does not have a network that is autonomous of its parent company, NITEL.

The implication is that MTel’s over 400 towers, switches, base station and other network equipment are sited on NITEL’s properties and also used by the latter. Additionally, NITEL’s transmission terminates in the same properties that house its local exchanges that are also used by MTel switches, base station and other network infrastructure.

“All of NITEL’s national transmission lines, both cable and microwave, terminate in NITEL local exchange buildings and premises. These termination points, cross-connect frames, computer systems, network monitoring & management systems, can only be accessed through these local exchanges”, claimed the petitioner.

The Ministry official said that government is examining the alleged practical implications that a Globacom-owned national network of local exchanges belonging to NITEL will transfer control of the following vital infrastructure to the SNO:

•    All of the MTel switches, base station controllers, over 75% of the towers and all of the MTel control & support systems and all of MTel national transmission capability;

•    All of the termination points and all of the monitoring and management systems of the NITEL national transmission termination infrastructure.
•    In the event that Globacom acquires the national fixed network exchanges, it will have the unintended consequence of allowing Globacom to control both the MTel business and national backbone (fibre and microwave) transmission networks.

Our source noted that the petitioner alleged that, “the EVC (Executive Vice Chairman) erred when he stated that different rules shall apply to similar or identical license conditions, set out in the respective DMLs (digital mobile licences) and the NCLs (national carrier licences). It is clear that the interpretation that the EVC proffered at the Pre‐bid Conference first mentioned above will impede competition and promote undue market dominance, if Globacom is allowed to breach its own NCL license conditions, as well as breach provisions of the Telecommunications Act 2003 and National Telecoms Policy by acquiring any part of NITEL.”

NECOM House in Lagos housing the SAT-3 landing point, one of many NITEL properties across Nigeria

The policy of telecoms deregulation was initiated in 1992 by the former Military Regime of ex-President Ibrahim Babangida to encourage private players enter into the market and compete with then market monopoly, NITEL. The vision was to enable the private sector become the growth engine for the then parlous telecoms market boasting less than half a million lines.

Under the phased deregulation plan, a competing future SNO was envisaged to compete with NITEL to check its awesome market dominance, introduce a range of new services and deepen competition in the deregulated telecoms market. That vision became a reality in 2003 when Globacom, promoted by Nigerian businessman, Mike Adenuga Jnr, was issued an SNO licence to compete with NITEL.

The final phase of the envisaged deregulation plan started in 1992 was expected to have been completed with the final privatisation of NITEL but the sale process has fallen into many murky waters after series of botched efforts to sell to credible strategic core investors that would turn around the fortunes of the ailing telecoms company.

The brewing crisis initiated by the fresh allegations is yet another blow to the seemingly interminable process of privatising NITEL and is causing concern among incumbents GSM operators and other new bidders lined up to buy into the unbundled business of the telecoms company.

Asked to comment on the allegations against the telecoms regulator, NCC spokesman, Dave Imoko, declined comment and subsequently did not pick up follow-up calls by TECHNOLOGY TIMES to shed light on allegations that the government agency may have allegedly acted unfairly in clearing Globacom to bid for NITEL.

At Globacom, the situation is also the same as the company officially declined comments on the allegations of alleged undue preferential regulatory backing to its bid to buy rival NITEL.

The top official of the Ministry further said that Globacom was alleged to have been in fundamental breach of its SNO licence provisions and if allowed to continue in the race would fundamentally undermine the envisaged competition in the telecoms marketplace which today accounts for multiple players and over 70million lines, a dynamic market buoyed by private sector investments.

According to the petitioner, NCC has allegedly ignored Globacom’s alleged default of its SNO licence provisions and missed key annual milestones of publishing annual accounts and achieving rollout targets for connected fixed telephone lines set at a minimum of 1.2 connected with at least 1 per cent subscriber base in each state of the Federation.

If allowed to buy NITEL’s fixed line business, the implication is that NCC would have been giving Globacom more fixed market licences when it is currently in alleged default of its existing licence obligations.

BPE had in August 2009 invited prospective investors to apply to acquire either at least 75 per cent equity in the entire NITEL conglomerate or a stake in one or several of its components including SAT-3, domestic fixed line telephony, national fibre-optic transmission backbone, CDMA network, MTEL (GSM) and Analog System (TACS.)

The privatisation agency said that that preference would be given to bidders who desire to acquire NITEL fixed lines, transmission backbone, MTEL and SAT-3 components together, while those bidding separately for MTEL must be ready to make necessary investments to detach MTEL from NITEL networks.
Following the announcement, BPE said that the first wave of Expressions of Interest (EOIs) came from telecoms market incumbents like MTN, Globacom and Etisalat Nigeria (EMTS).

Other local and international players that joined the first batch include Omen International Limited (BVI), Summit Group, MTI Consortium, Finetek.Com, Ericsson Consortium and MTNL Limited, India. Others are Anas Network Services Limited, Telefonica Consortium, Metro PCS Communications Inc, Brymedia (W.A) Limited and Galaxy Backbone Plc.