NIGERIA: MOTOROLA'S BID FOR GSM EQUIPMENT

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001679

SIPDIS


COMMERCE FOR ADVOCACY CENTER


E.O. 12958: DECL: 07/16/2011
TAGS: EINV PREL ETRD BEXP ECON NI
SUBJECT: NIGERIA: MOTOROLA'S BID FOR GSM EQUIPMENT
CONTRACT: AMBASSADOR DISCUSSES COMMERCIAL ADVOCACY CASES
WITH VICE PRESIDENT ABUBAKAR

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Summary
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1. (SBU) Summary. Following up from his meeting with
Motorola representatives on July 9 (following septel from
Lagos),Ambassador Jeter met the Principal Secretary to
President Obasanjo, Stephen Oronsaye, on July 10 and with
Vice President Atiku Abubakar on July 11. The Vice President
confirmed that the technical evaluation committee had
recommended the Motorola bid because it was better qualified
on all aspects including price, project financing, technical
qualifications, and delivery time. However, the Vice
President said, alleged improprieties between Motorola and
Director-General Nasir El-Rufai, who chaired the Financial
Restructuring Committee, invalidated the evaluation
committee's recommendation and caused the President to decide
in favor of Ericsson. Both Motorola and Nasir El-Rufai
dispute these allegations and claim they are completely
unfounded. El-Rufai is threatening to take the issue to
court. End Summary.


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Background
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2. (SBU) In May 2001, the GON established the Financial
Restructuring Committee (FRC) mandated with refinancing NITEL
debts and seeking long-term financing for the GSM roll-out
and transmission network expansion. To conduct the actual
tendering process, the FRC established a five-man technical
committee comprised of representatives from NITEL
(state-owned telecommunications monopoly) and the Bureau of
Public Enterprises. There were two rounds of bidding and a
third round of reassessment to include prices for all omitted
items according to standard World Bank methodology. After
the final reassessment, the evaluation committee submitted
its report, which recommended Motorola be awarded the
contract, to the President and Vice President for the final
decision.



3. (SBU) On July 5, Embassy advocacy assistance was requested
on behalf of Motorola in its USD 39.3 million bid for the
NITEL GSM equipment contract. The other companies competing
for the bid are Swedish company Ericsson whose final bid was
USD 49 million and Shangai Bell of China bidding USD 39
million. On July 6, the Department of Commerce informed the
Embassy that Ericsson, not Motorola, had been awarded the
contract. End Background.



4. (C) On July 10, Ambassador Jeter met with the Principal
Secretary to the President Stephen Oronsaye and, on July 11,

SIPDIS
with Vice President Atiku Abubakar to discuss Motorola's bid
for the GSM equipment contract. In the meeting with
Oronsaye, Ambassador Jeter emphasized that it was hard to
understand how Ericsson could have won the bid given
Motorola's lower bid price, best technical specifications,
and fastest delivery time. While Oronsaye was not clear on
all the details of the tendering, he was comfortable that the
decisions made were in line with the desired transparency and
integrity of the process. Oronsaye did mention a possible
conflict of interest between Bureau of Public Enterprises
Director-General Nasir El-Rufai, who chaired the Financial
Restructuring Committee, and Motorola. This point was
further elaborated on by the Vice President.



5. (C) From the outset of the July 11 meeting, the Vice
President made it clear that he felt no obligation to explain
the reasons behind the Presidency's decision to award the
contract to Ericsson, but that he would explain in the
interest of transparency and fairness. In considering the
contract award, the Vice President said, he and the President
looked at the credibility of the exercise, the petitions and
their desire for Western technology. Based on these
considerations they decided to offer the bid to Ericsson.
Vice President Abubakar confirmed that Ericsson had been
awarded the contract under the condition that it deliver the
services at Motorola's lower bid price and within 4 months,
not 5 months as it had proposed.



6. (C) The determining factor in the decision in favor of
Ericsson appeared to be allegations, brought forth by
Ericsson, against Motorola. Vice President Abubakar
commented that he had received two petitions from Ericsson
that alleged Nasir El-Rufai was biased in favor of Motorola
and questioned the validity of the tendering exercise.
Specifically, Ericsson complained that El-Rufai had a
conflict of interest because he had worked for Motorola in
the past. The Vice President also said that the petition
claimed that El-Rufai's elder brother was a 10
percent-shareholder in Motorola. According to the Vice
President, El-Rufai's failure to respond to these petitions
in a timely fashion led the Presidency to award the contract
to Ericsson.



7. (SBU) Motorola Regional Sales Director Karen Johanson, who
was in Nigeria seeking resolution of these issues, disputed
Ericsson's allegations on July 12. Johanson asserted that
El-Rufai's brother does not hold Motorola stock, although he
is part-owner of Intercellular Nigeria Ltd., a small fixed
wireless company in Lagos that distributes Motorola
equipment. She said that although El-Rufai worked for
Motorola for two years prior to his GON employment, he did
not offer assistance to Motorola during the tendering
process, "squeezing us just as much as the other companies."



8. (C) Ambassador Jeter asked the Vice President
hypothetically that even if El-Rufai were biased toward
Motorola, given the technical committee's unanimous vote in
favor of Motorola, how much influence could one man truly
have on such a diverse collection of officials. The Vice
President argued that if you know El-Rufai personally, you
would know that "he could sway an entire crowd to agree with
him on almost any issue." (Comment. Since the meeting,
Embassy has received a copy of El-Rufai's written reply to
the President regarding Ericsson's allegations. His letter
clarifies that he was not, in fact, on the evaluation
committee itself, but rather the chairman of the Financial
Restructuring Committee that oversaw the three evaluation
committees established for three separate contracts of which
the GSM equipment contract was one. End Comment.)



9. (C) The Ambassador then raised the concern that, in light
of irregularities surrounding Ocean Energy's and ABB Lummis'
bid for government contracts, the GON's decision to go
against the technical committee's recommendation would create
the perception that the tendering process in Nigeria is not
transparent, and, in fact, would be construed as a bias
against companies from the United States. Ambassador Jeter
stressed to the Vice President how critical it is that the
GON avoid sending a signal to U.S. companies that Nigeria is
not a friendly place to conduct business. The Vice President
responded that he also is anxious not to create the
impression that U.S. business investment is unwelcome in
Nigeria. As a compromise approach, Ambassador Jeter
suggested that the contract be split regionally with Motorola
providing equipment for the southern half of the country and
Ericsson for the northern half. The Vice President did not
respond directly, but left the idea on the table for further
consideration.



10. (C) Vice President Abubakar claimed that the Minister of
Communications had signed the contract with Ericsson on July

10. However, as of July 16, Motorola Nigeria representative
Raphael Udeogu asserted that although the Minister had signed
two related contracts with Siemens and Alcatel, the contract
with Ericsson had not yet been signed. Udeogu reported that
Ericsson had not yet responded to the GON's contract offer at
Motorola's significantly lower bid price of USD 39.3 million
as compared with Ericsson's bid of USD 49 million.



11. (C) Comment. The fact that the President and Vice
President would believe allegations of corruption brought to
bear by Motorola's competitor without verifying their
accuracy leaves us questioning the efficacy and transparency
of the tendering process. Nasir El-Rufai is a close Embassy
contact and has a reputation for honesty, fairness and
transparency, particularly in his official capacity as
overseer of the GON privatization program. The Vice
President's claim that El-Rufai could have easily influenced
the technical committee's evaluation seemed to ignore the
fact that El-Rufai himself was not on the technical
committee. Moreover, in his letter to the President,
El-Rufai strongly refuted Ericsson's allegations. He also
described the involvement of the Vice President's
Aide-de-Campe who, El-Rufai says, attempted to influence the
Vice President and him in favor of Ericsson. The Embassy is
unable to verify the accuracy of these statements.



12. (C) Comment Continued. Ambassador Jeter will send letter
to President Obasanjo this week forwarding a Motorola
statement addressing Ericsson's allegations of impropriety.
The letter will request that the President reconsider
Motorola's disqualification, which we believe was based on
erroneous information. Post will continue to advocate on
behalf of Motorola. End Comment.
Jeter