Africa & Middle East Market Perspective / Vol. 7, Issue 6, July Edition

Publication Date: July 2007

Crisis at Nitel and MTel: opportunity or pitfall for Vodacom and others?

ANALYSIS SUMMARY

• Nitel‘s experience shows the risks involved in the privatization of African national telecom incumbents.
• Distressed assets and customers can be grabbed on the cheap, but acquirers should not go for anything unless these are clearly and legally segregated from the rest of the Nitel-MTel group.
• The Nitel-MTel situation offers unique opportunities for operators and investors willing and able to bear the significant risk involved.

SPOTLIGHT

On June 15, 2007, Vodacom was reported to be studying the acquisition of MTel, which is the mobile arm of Nitel, the recently privatized Nigerian fixed-line incumbent. In the past few months, that privatization, which had seemed promising, turned into a nightmare as BT terminated a technical services agreement with Nitel due to corporate governance and liquidity issues, and as Transcorp, which holds a controlling stake in Nitel, had an IPO widely seen as disappointing. The crisis offers opportunities as well as risks for interested acquirers and current competitors. Legal segregation of assets as well as transactions is paramount in order to protect parties against a potential implosion of the Nitel-MTel group. Don’t count on a government bailout, but remember that it always has the final say, especially in telecommunications.