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Editor, Itedge, Segun Oruame.

Nitel: Waiting to die

Nigeria's state-owned Nitel has a new headquarters to house its operations in Abuja. A piece of superb architecture that joins the array of majestic constructions dotting the skyline of Abuja, Nigeria's only planned city and political capital.

The magnificent structure with its fresh smell of paint does not tell the true story. Nitel is in sorry state, as several of its buildings and installations nationwide would prove. Nigeria's public telco is haunted by decades of rot that is ensnaring its Dutch managers Pentascope in a web of intrigues. Since it took over Nitel's management after a botched attempt to sell it off over two years ago, Pentascope has had to struggle to keep its grip on Nitel and itself through series of unnerving boardroom and management battles. It only managed to survive one of those battles via a recent orchestrated media campaign that it has only succeeded to worsen Nitel's condition.

Rot within
Critics love to describe Nitel as an empire with structures that are badly in need of replacements. Take its Lagos Territory, its largest territory, for instance. The territory has seven exchanges, and a total capacity of 48,060 lines; connected lines are 41,631. But it is a struggling territory that embodies all of Nitel's aches. Over 80 % of the exchange is analogue. Breakdowns are frequent and maintenance cost is high. The technology on which the exchanges were built has long been discarded meaning that spares are scarce. The impact on revenue generation is much. In a competitive market, there is little use for an exchange with lines that are often faulty. Because subscribers have options, Nitel has lost a sizeable number of its customers to more enterprising independent networks. This gloomy picture hangs over the entire Nitel enterprise.

But there are exchanges that are even worst off just as there are structures in terrible state of disrepair that aptly denotes Nitel's state of health. One such example is the exterior of one of its exchanges in Port Harcourt (see picture). It's been a long time since the structure saw a can of paint or had any renovation work done on it. None of the new players on the turf would want to be associated with that kind of structure in an industry where image is as important as increasing the number of subscribers.

The structure symbolically expresses the disorder within the telco and the level of task Pentascope has on its hands. In all, Nitel has 43 primary centres, 284 local exchanges of which 144 are digital and 140 analogue. About 524,000 are connected lines while about 450,000 are digital lines. Most of the exchanges need to be totally overhauled and new ones constructed. There are over 11,000 workers for a network of less than half a million active lines compared the less than 2000 on the service of MTN with over three million mobile lines. Maintaining this over-bloated workforce is an agonizing challenge but cutting down the workforce would simply mean to invite war. Besides, for a company that has lingered so long on the slow path of privatisation, staff morale is expectedly low; there is a high sense of uncertainty in the workplace, and soaring cases of fraud.

Pentascope's initial attempts at cleaning up the telco had focused on closing the loopholes for internal fraud by putting in place a financial information system. A pre-paid billing system was installed to close the holes for debt on talk particularly by public institutions. Nitel is owed over N45 billion by individual subscribers and organisations. Most of these have been written off as bad debt. With a pre-paid platform, chances of bad acquiring bad debts have been knocked off by over 70%.

There have been attempts to re-structure Nitel as a competitive player against equally strong rivals and imbue it with a new sense of corporate attitude. There are clear attempts to purge it of the civil service mentality with the attendant bureaucratic process. Now, there is relatively a higher sense of marketplace reaction, a mediation platform and a better interconnect/international billing system. In the old order, the interconnection procedure was dictatorial and approached from the premise other players needed the incumbent to survive. But that thinking no longer holds. The new wave of competition has since created new market leaders and Nitel has been sufficiently humbled to work within a non-overbearing interconnect framework, though a recent interconnect brouhaha with GSM operators (notably Vmobile) indicates that there are still areas that need to be fine-tuned in the new order.

But growing the business to keep abreast of competition as well as increase revenue remains a hard nut. A much-celebrated Pentascope's business plan has never been able to take off. While other networks expand their reach and grow their revenues, Pentascope's Nitel has remained a slumbering wreck. No single expansion work has been carried out in the last two years and maintaining the analogue exchanges is becoming seemingly difficult. A competitive tariff structure is in place, VoIP has been adopted to lower cost of selling talk minutes and the wholesale ISP initiative to ride on SAT 3 appears to be on course but the big plans for network expansion and fresh rollout are already timed-out. In one of Nitel's board meetings in the closing weeks of 2004, voices were raised with Pentascope complaining bitterly of "certain interests" keen on killing Nitel and rubbishing it (Pentascope). Less than three weeks later it was in Lagos addressing a press conference on its 'journey so far.'

The business plan envisaged that the end of 2004 would have put 600,000 new lines into Nitel's network with Lagos having the largest share of 250,000. It never happened. The issue was money. In the last two years, MTN and other operators including the PTOs have been able to build a war chest of over $800 million through loan syndications to expand their networks. But Nitel's best has been to get some minor projects going, and even then, these have been slowed down by its cash squeeze. The projects include a Asymmetrical Digital Subscriber Line (ADSL) for fast Internet access, five new digital exchanges with a total of 30,000 lines, new software and billing hardware in all its digital exchanges to address its billing problems, hundreds of generators and batteries to back-up and improve power supply to its installations.

Pentascope blames its problem on the "politics over the control of Nitel." Since it settled in to clean up the telco, it has never been able to effectively address questions over its competence and commitment to the public telco. For its failings, the Dutch team blames 'elements within government that have refused to give it free hands to run Nitel..' In the heat of its last battle during the closing weeks of 2004, Rein Zwolsman who leads Nitel as CEO could not hide his frustration and was more forthcoming. He blamed Pentascope's problems on "politics." He believes those spearheading the anti-Pentascope campaign are people within government who have lost out over Nitel's control after the BPE deal with Pentascope took effect.

Pentascope may have won this fight, as are several others it has won in the past months over its management of Nitel. Rumour that the Dutch team would be given the red card by the Nigerian government appeared to have fizzled out. In fact, Pentascope is having its contract re-drafted to address areas \queried by the Nigerian Communications Minister Chief Cornelius Adebayo as unduly tilted to favour it (Pentascope). A N14 billion (about $100 million) loan syndication involving seven banks led by Afribank, which contributed 20% of the money, has been negotiated to fund the 250,000 lines expansion for Lagos. The Lagos initiative, long delayed, is a CDMA fixed wireless initiative and should be ready before the third quarter of 2005.

If other big projects are able to take off, Pentascope should be able to meet its profit target for the telco that is expected to enter the salesroom again next year. But if the lull continued, the Dutch managers might as well procure a coffin for the telco as its undertakers. It would be an ironic task for a team that came on the scene as revivalist.

"As there are structures in terrible state of disrepair that aptly denotes Nitel's state of health"

 

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