NASIR EL-RUFAI'S BPE VERSUS NITEL AND NIGERIA

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NITEL, acronym for Nigerian Telecommunications Limited, was not just a giant outfit in Nigeria but had monopolized the country’s telecommunications industry from 1960 till 2001 when the Obasanjo administration allowed in the mobile phone companies. As the world celebrated a new millennium in 2000, Nigeria had just 767, 000 lines, all land-lines, among its 130 million population. By then, even more than the car, a phone was a status symbol as only companies and highly-connected persons could afford it.

Yet, in the 1970s, NITEL had built itself a grandiose 25-storey building and its Managing Directors had a corporate business jet at their merry disposal. Its untamed staff had become so wicked they could toss the lines (industry lingo for disconnection) of an entire city and wait like lords while everybody would line up in endless queues to present their receipts to convince the officials that they were not indebted. Of course, only those who greased the palms of NITEL staff or went through well-entrenched touts for a fee, would ever get their cases treated. Back then, it was most usual for a client to just wake up and see hundreds of international calls billed against his telephone line even though he had blocked his international calls facility. Yet, pay he must or his phone would be disconnected. All the while, NITEL workers enriched themselves at the public’s expense, playing games with customers lines and pockets such that a man could be in Lagos, beside the Atlantic, and have a NITEL phone operator route an international call to his phone but bill the cost to an unfortunate client in Maiduguri 2,000 kilometres away just by the rim of the mighty Sahara Desert.

So privatising NITEL was a business priority as well as a patriotic assignment. Yet, the first attempt failed woefully. BPE had announced that Investors International (London) Limited, IILL, a hastily put together outfit whose capacity and provenance have remained unclear for years and may forever remain so, defeated TELNET to win the bid. Then a great count-down began as the nation waited for IILL to pay up the rest of US$1.317 billion bid price for NITEL’s 51 per cent equity shares, but the nation waited in vain as the company could not drop a cent beyond the 10 per cent (US$ 131.7) it had deposited as part of the bidding process in November 2001. Surprisingly too, the Reserved Bidder, TELNET, supposedly standing by to eagerly pay up its own bid sum if IILL became too ill not to default, failed to enter into any further communication with the BPE, as it showed no further interest whatsoever to buy up NITEL.

As a fall-back position, the BPE chose the management-contract option to get NITEL on a sound footing preparatory to out-right privatization. One would have expected the BPE to seize this opportunity to be transparent and do the right thing to douse the widespread protests it had reaped, including the House of Representative’s trenchant denunciation of BPE, for having been less than transparent in the failed privatisation attempt.

Yet, problems sprang up very early in the process; 14 companies replied to BPE’s advertisement for “Expression of Interest” but ten of those were consultants and consortiums contrary to the spirit and letter of the advertisement which expressly asked for operators. So, it must have become clear to BPE from the 14 replies that speculators as opposed to core operators were in the majority. Also, instead of sticking strictly to its own terms and opening up discussions with the phone operators among the outfits that replied, all the 14 applications were evaluated by BPE and its contractor for the evaluation process, PriceWaterhouseCopers (PWC) . This was BPE’s first step towards iniquity and there was no turning back as it went from iniquity to even worse but more audacious iniquity. The first thing to note here is that the clear and unambiguous pre-qualification criteria, which were clearly stated in the advertisement that only operators need apply, were spat upon as nine companies among the 14 applicants received invitations to submit managerial, financial and technical bids. Interestingly, none was disqualified for being consultants or consortiums.

Indeed, a consultancy and no core operator, Pentascope International B.V Private Ltd of Belgium (The Netherlands), emerged first, ahead of BNSL/TCIL (India), a core operator. This was on January 8, 2003 when PWC presented to NITEL BOARD the Management Contractor selection process status and the proposed interview format for selecting who would serve as CEO, CTO (Chief Technical Officer) and CFO (Chief Financial Officer) for NITEL and M-TEL (the mobile phone arm) - in a seeming show of absolute transparency. African Access/Lucent, another consortium, placed third. Interestingly, while BNSL/TCIL had proposed to be paid US$35 million over three years for its services to NITEL and Nigeria, Pentascope charged US$45 million, yet Pentascope received PWC’s nod despite its charge being above BNSL/TCIL’s by a clear US$10 million.

Yet, to really earn the Preferred Bidder’s tag, Pentascope’s staff nominees needed not only to pass the CEO, CTO and CFO interviews but impress PWC during its visit to Pentascope International in Holland to verify their claim of KPN’s being its parent – a claim which solely tilted the decision in Pentascope’s favour, and to clarify the bidder’s corporate standing.

On 16th January 2003, NITEL Board received the proposed contract with Pentascope – after PWC’s visit to Holland where it (PWC) found everything prim and proper. Instead of singing alleluia, the Board kicked that:

· The performance targets on the Network role out and the revenue collections were low. (Author’s comment: this was a genuine point if the actual reason to seek an external management for NITEL preparatory to its privatisation was to enhance its status by achieving more than it ever could under the usual management of its executives. But if revenue remained low and so too the number of the outfit’s fixed and mobile lines, NITEL would only fetch a poor price during its privatisation, but most of all, the reason for putting it under private sector management would have been defeated).

· Contractor/Board relationship unclear or not good enough for effective and efficient management.

· The composition of the Executive Committee was in favour of the contractors and gave the contractors spending powers of up to US$1 million without recourse to the Board. (Author’s Comment: with more Pentascope staff in the Executive Committee (three to two), giving it overwhelming majority, it would have its way any and every time. Also, giving it such a stratospheric spending ceiling was to give it absolute control of the NITEL coffers).

· Insufficient provision for Capacity building/transfer of know-how to Nigerian managers. (Author’s comment: a separate contract worth all of N500 million would later be awarded to train NITEL staff under a different heading and NITEL as opposed to Pentascope paid the bill).Yet, the capacity building was a main reason for seeking a Telcoms giant to manage and buoy up NITEL preparatory to its privatisation.

· Unfavourable conditions for terminating the contract.

In all, what was the result of the NITEL Board’s observations? BPE assured the Board that its concerns would be addressed in the final draft. But that was not to be as the Board saw no other draft, second or final, until it received an invitation to the signing of the Management Contract through a letter communicating Government’s directive/decision to it to sign the Contract Agreement. Finish! Yet, it must be borne in mind that while the PriceWaterhouseCoppers evaluated the bids, full-fledged Nigerians in the Udo-Udoma and Bello-Osagie & company drafted the Management Contract which was totally in favour of Pentascope and unfavourable, detrimental even, to their motherland. Yet, as sad as it could be that not even one of the several issues the Board raised against the Contract Agreement was addressed, it would remain unclear why such a lop-sided document was ever dreamed up and to so weigh against a publicly owned company. Not surprisingly, in the only valiant and patriotic act in the sordid NITEL story, the NITEL Board initially refused to sign the contract and would only do so under duress after the weight of the Federal government was invoked against the members.

One could wonder how and why did the BPE get the government to issue the NITEL Board that Executive Order to go sign the contract against which terms it had kicked, yet stranger things did happen. For instance, it is clear that Pentascope would never have been selected as the preferred bidder if the bid evaluation process was clean and transparent. It is on record that the NITEL Board sent to BPE the report of its visit to the Netherlands to evaluate Pentascope’s corporate claims, especially its relationship with KPN – the very basis for its being pronounced the preferred bidder. Page six of the Management Contract made it clear that Pentascope won the bid because of its claimed relationship with KPN in a letter from KPN – a letter that was later proved a forgery. The report highlighted that Pentascope International was a consulting firm with no direct shareholding relationship with KPN or VW Network Bouw of the Netherlands. So, not only was it known that its parentage was not clear, what is more and worse, its claims about such a subsisting relationship were deliberate lies. The report, so far never contradicted, informed BPE and the government that Pentascope was a small consulting firm with a share capital of E5,000 (five thousand Euro) and a claimed (read unsubstantiated) annual turnover of E25,000, 000 (twenty-five thousand Euro), and it was coming to manage an outfit worth over a billion United States of American dollars!

Most of all, while Pentascope claimed a turnover of E25, 000,000, the company that came second in the bidding had a verifiable year 2000 turnover of US$2.560 Billion.

So, if the Reserved Bidder was financially stronger than Pentascope, and Pentascope was limited operationally as staff was arranged on ad hoc basis raising serious doubts over their ability to work as a team, and it was clear that it lied in its claim that it had a relationship with KPM, why did Pentascope whose charge was US$10 million more than that of the bidder that came second, get BPE’s nod for the contract, despite all other ills recounted above?


The answer is that the evaluation of the bids was “suspect”, to use the very word of the House of Representatives Communications Committee in its May 10, 2004 report. And who evaluated the bids? At the House of Representatives Public Hearing, PWC claimed the technical aspect of the evaluation was not part of its assignment, placing the responsibility squarely on BPE. El-Rufai, the BPE Director General then also told the House committee that PWC and not BPE handled the technical evaluation. If so, why did BPE not fall back on NITEL technical staff to do the technical evaluation? Really, not only were NITEL staff shunned in all the deliberations, even a stakeholder as significant as the Ministry of Communications (MOC) was totally left out. So to put it most mildly, there was no technical evaluation whatsoever on the NITEL bid..., yet all the bidders were awarded marks on the column meant for technical evaluation; a complete forgery pulled off by the office El-Rufai ran!

What did NITEL lose owing to that Pentascope misadventure? Monetarily, within the first financial year after the takeover, NITEL’s N15 billion profit in 2002 had turned into a loss of N19 billion in 2003. Its turnover also dipped from N53 billion to N41 billion. Yet, despite the drop in turnover, Direct Costs and Overhead Costs increased from N21.3 billion to N26.3 and from N19.4 to N30 billion. For Nigeria, the loss was well above that and included loss of jobs, but we will leave that for another chapter.

Nigeria lost all this money just because some persons had the gumption to appoint a small consulting firm, with a paid up share capital E23, 000 (twenty three thousand Euro) definitely less than N4 million at the extant exchange rate and a workforce of just eight (yes eight) persons including a janitor, a company that was claimed to have been registered on 1st January 2002 (a public holiday in most European countries), that was only three months before the date of PBE’s Expression of Interest advertisement, and such a company with only three months experience in its entire life was chosen to manage NITEL. By the way, if Pentascope had existed for all of just six months before it was fraudulently awarded the pass mark to do the needed wonders with NITEL, HOW ON EARTH DID IT COMPUTE ITS YEARLY TURNOVER WHEN IT WAS YET TO LAST UP TO A YEAR IN BUSINESS?

No wonder the House of Representative suspected that Pentasope was actually floated by proxy just to ensnare the NITEL contract. Such reason would also lead to the conclusion that apart from BPE, both PWC and the legal firm of Udo-Udoma & Bello-Osagie knew that Pentascope was not only unqualified for the task but penned the contract details to favour Pentascope.

Now, what on earth could have made anybody or outfit to choose Pentascope for the NITEL assignment? BPE’s pre-qualification advertisement set down these stringent, laudable and unambiguous criteria, that: “Interested Managers must be international telecommunications operators and must demonstrate evidence of:

· Having installed and managed at least one million telephone lines.

· A successful track record of expanding a telecommunications network in a developing country.

· Sufficient management resources to grow NITEL and enhance shareholder value.

Like a crafty hypocrite out to leave a huge impression, it set out a faultless criteria to hoodwink any audience – that it was on a search for a proven Telcom Operator of international stature, with outstanding track records to nurse NITEL back to life and position it to bring in the highest possible revenue for the country when it is eventually privatised. Yet, this publicly stated high principles did not deter BPE and its consultants from later doing what all hypocrites do; do nothing to meet the feigned high principles, but pretend that the self same high principles were met all the same; in the classic definition of hypocrisy. This false claim to having high principles was the defining feature of the Obasanjo administration and also runs through Nasir El-Rufai’s mal-stewardship. Yet, administration never strove to meet such often loudly-touted high ethics and those in its inner circle were never sanctioned for failing in this regard. Yet, this false claim to having such elevated and admirable principles, beliefs and feelings, were continually being advertised so lustily that heaven itself must have become inundated by its din. Nasir el-Rufai claimed this moral high ground continually in his book: “The Accidental Civil Servant”.

The bid process clearly required the bidders to deal with three clearly defined areas; Technical, Financial and Operational aspects. It emerged at the House of Reps Public Hearing that nobody but nobody looked into the Technical aspect at all; El-Rufai announced on the third day of the hearing that “PWC handled it all, and they had the capability to do so”. That was El-Rufai at his best, obfuscating the matter by turning it from whether PWC actually ever did Technical Evaluation into something totally different; the capability and prestige of PWC, an otherwise internationally recognised outfit. But the focus here is on the job done on a specific contract and not the capability or stature and status of PWC. Stretch it further and it would mean that he, with his public persona of a public-spirited and conscientious administrator contracted a highly-respected international company such as PWC to evaluate the technical strengths of the bidders, yet Nigerians, totally unappreciative, failed to applaud his overt transparency. But it is on record that the real transactional advisor to PWC on the project and the company’s representative at the public hearing, Mr. Ken. Igbokwe, told the world that “the evaluation of the engineering aspects of the bids were handled by BPE”. He appeared on the first day of the hearing – and two days later El-Rufai was still totally adamantine in claiming that PWC did what PWC had publicly voiced out to the entire world, and at a parliamentary public hearing too, that it never did! Hypocrisy was in full sail and El-Rufai was the captain of that ship.

A critical look at the terms of the contract between BPE and PWC showed that nothing was ever said about Technical or Engineering evaluation aspects of the bid. According to the contract, BPE appointed PWC nothing beyond Financial Advisor only! So, why was the Technical evaluation mentioned as a key component of the bid process? Hypocrisy was at work; to the administration and El-Rufai, appearance always trumped substance.

Of course there are other aspects of this sordid deal, including the role played by the NITEL Board, etc, but that will wait for another day. This is just the tip of the ice berg.

Written By Tony Eluemunor.

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