Identifier
Created
Classification
Origin
03ABUJA682
2003-04-14 17:31:00
CONFIDENTIAL
Embassy Abuja
Cable title:  

NIGERIA: MOTOROLA'S SUCCESS MARKS MAJOR

Tags:  BEXP EINV ECPS ETRD ECON PGOV NI 
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C O N F I D E N T I A L SECTION 01 OF 03 ABUJA 000682 

SIPDIS


STATE PASS USTR, TDA, EXIM
STATE PASS OPIC


E.O. 12598: DECL: 04/10/13
TAGS: BEXP EINV ECPS ETRD ECON PGOV NI
SUBJECT: NIGERIA: MOTOROLA'S SUCCESS MARKS MAJOR
ADVOCACY VICTORY

REFS: (A) ABUJA 3345, (B) ABUJA 1615, (C) LAGOS 1933,
(D) LAGOS 2133


Classified by Ambassador Howard F. Jeter. Reasons 1.5 (B & D).


SUMMARY
-------
C O N F I D E N T I A L SECTION 01 OF 03 ABUJA 000682

SIPDIS


STATE PASS USTR, TDA, EXIM
STATE PASS OPIC


E.O. 12598: DECL: 04/10/13
TAGS: BEXP EINV ECPS ETRD ECON PGOV NI
SUBJECT: NIGERIA: MOTOROLA'S SUCCESS MARKS MAJOR
ADVOCACY VICTORY

REFS: (A) ABUJA 3345, (B) ABUJA 1615, (C) LAGOS 1933,
(D) LAGOS 2133


Classified by Ambassador Howard F. Jeter. Reasons 1.5 (B & D).


SUMMARY
--------------

1. (C) On March 31, the GON awarded Motorola a $49.9
million contract to expand Nigerian
Telecommunications' (NITEL) cellular telephone
network. This award is a major advocacy victory for
the Mission as well as an important landmark on
Nigeria's road to greater transparency. It is the
most significant U.S. investment in the non-oil sector
in recent years. However, this achievement was not
easy. Some important players within the GON did not
want Motorola to get this attractive slice of the
cellular network. President Obasanjo had to reverse a
late February decision by the Federal Executive
Council (FEC) that awarded the lion's share of the
network expansion to traditional non-U.S. telecom
companies and he reopened bidding after complaints
that the GON's bid tendering process had not been
transparent. Motorola believes it is now well
positioned to take advantage of Nigeria's booming
telecom sector. END SUMMARY.


OFFICE OF THE PRESIDENT MAKES THINGS RIGHT
--------------

2. (C) On March 6, the GON retracted its February
announcement awarding the three largest contracts for
NITEL's Global System Mobile (GSM) expansion to
Siemens, Alcatel and ZTE. Losing bidders (Motorola,
Ericsson) and diplomatic missions had expressed
concern that the selection process was not
transparent. Oronsaye admitted to the Ambassador that
NITEL and Communications Ministry officials had
brokered side deals favoring certain telecom
companies, business-as-usual in the Nigerian telcom
sector that had cost the country billions of dollars
and deprived the consumer an expansive and efficient
telcom network. Oronsaye said President Obasanjo was
unhappy with the situation and was determined to
correct it.




3. (SBU) On March 10, Oronsaye held a lengthy meeting
at the Presidential Villa where all bidders
technically pre-qualified by NITEL and the Ministry of
Communications resubmitted their final offers.
Oronsaye and his staff judged each bid solely on price
and financing. Econoff, who attended the session,
observed that Oronsaye made every attempt to clarify
the process and ensure each bidder was treated
equally.


MOTOROLA WINS $49.9 MILLION CONTRACT
--------------

4. (SBU) At the end of the meeting, Oronsaye released
spreadsheets to the participants indicating Motorola,
Ericsson, and ZTE were the low-bidders for each part
of the three-phase expansion. The GON awarded Motorola
a $49.9 million contract to implement Phase II of
NITEL's $155.5 million GSM three-phase infrastructure
expansion. Motorola will also supply an additional $7
million in equipment to NITEL's other partners.
Motorola, Ericsson (Phase I),and ZTE (Phase III) won
almost equal shares in the expansion which will add an
additional 1.2 million mobile lines over the next six
months to NITEL's present 118,500 GSM line network.



5. (SBU) By reopening the bidding process the GON
saved over $21 million. The initial NITEL/GSM awards
totaled $176.7 million compared to the renegotiated
award total of $155.5 million. Representatives from
ZTE, Siemens and Huawei confirmed to Econoff that the
GON received rock bottom prices, but since Nigeria's
potential GSM market is so large, companies were
willing to initially lose money or give considerable
discounts in order to establish a market share.


SORE LOSERS
--------------

6. (C) Following the announcement that Motorola,
Ericsson and ZTE had won, Embassy sources indicated
that Siemens tried to overturn Oronsaye's decision. A
Siemens' official revealed to Econoff in mid-March
that the company had already spent $6 to $7 million on
the deal, apparently on bribes. The French Ambassador
lobbied senior GON officials on Alcatel's behalf.
Oronsaye said he and other officials at the Presidency
came under intense pressure from Vice President Atiku
to favor Siemens. Vice President Atiku has strong
financial connections to both Siemens and Ericsson.


COMMENT: A LANDMARK ON THE ROAD TO TRANSPARENCY FOR GON
-------------- --------------

7. (SBU) The award to Motorola marked a symbolic and
important step on Nigeria's road to greater
transparency in awarding government contracts. Spurred
by the President, senior-level Nigerian officials, at
least in this case, refused to conduct business as
usual. Now a key will be whether this is a harbinger
of things to come or just a unique and unfortunately
isolated instance of priority.


MOTOROLA SAYS MISSION ADVOCACY EFFORTS KEY TO SUCCESS
-------------- --------------

8. (SBU) During 2001, the Mission advocated for
Motorola's bid on the initial NITEL GSM roll-out
contract. Under a process that lacked transparency,
Motorola lost the contract (Refs. B, C, and D). In
late September 2002, Motorola Country Director Raphael
Udeogu told the Ambassador his concern that Motorola's
original $230 million bid to expand NITEL's GSM
infrastructure was not assessed fairly by the GON
(Ref. A). Motorola filed an advocacy request with the
Department of Commerce Advocacy Center, and shortly
after, Ambassador Jeter and EconOff met Udeogu to
discuss how to move.



9. (SBU) In December 2002, the Ambassador wrote
President Obasanjo asking the GON to consider
Motorola's NITEL proposal. The letter stated that,
"giving the contract to less competitive and less
qualified bidders would not serve anyone's interest,
and frankly creates an impression that American
companies outside of the oil sector are not welcome in
Nigeria". On January 14, Secretary of Commerce Evans
wrote a similar letter to Communications Minister
Bello.



10. (SBU) Throughout early 2003, the Mission remained
in regular contact with Motorola officials. In mid-
March, the DCM telephoned Vice President Atiku,
stressing the need to treat Motorola's bid fairly. The
Ambassador also spoke with Oronsaye on several
occasions on Motorola's behalf.



11. (SBU) On April 4, the Ambassador met with
Motorola's Nigeria Country Director Raphael Udeogu,
Regional Finance Director Ben Melican, Senior
Technical Sales Manger Noel Kirkaldy, and Systems
Integration Manager Manuel Millan for a final readout
of the NITEL/GSM deal. The team thanked the Ambassador
and the entire Mission for our advocacy on Motorola's
behalf. The team agreed with the Ambassador that this
contract presented a huge opportunity for Motorola and
was a turning point in Nigerian telecom. Udeogu stated
that without the Mission's and Washington's efforts,
Motorola probably would have not secured this
important contract. After over two years advocating
for U.S. companies, Motorola's contract marked the
Mission's first major transaction outside the oil
sector.


BACKGROUND: NIGERIA'S MASSIVE TELECOM POTENTIAL
-------------- --

12. (SBU) Motorola's Noel Kirkaldy stressed to the
Ambassador the importance Motorola attached to winning
the NITEL/GSM bid. Kirkaldy stated that Motorola, with
this contract, was only scratching the surface of the
Nigerian market. Nigeria is on the verge of a
telecommunications explosion; now Motorola is well
placed to participate in the boom. Motorola is
projecting that the Nigerian market will expand to 13
million lines in 5 years, adding an additional 20
million lines in 10 years, Udeogu stated.



13. (U) The low teledensity in Nigeria offers telecom
companies enormous profit opportunities. Mobile
players have an advantage, given NITEL's decaying
fixed-telecom infrastructure. Even conservatively,
most analysts say the Nigerian market could grow to
over 10 million cellular subscribers in a few years.
Moreover, mobile providers in Nigeria have charged
some of the highest per minute rates in Africa. Most
telecom companies have recouped their initial
investments in Nigeria in six months to two years.

14. (U) With Nigeria's 126 million population,
Nigerians will likely benefit when per minute rates
begin to fall the more new users sign-up for service.
(When Obasanjo assumed office in 1999, investment in
the telecom sector was $50 million compared to over
$2.1 billion in 2002). With NITEL's GSM expansion,
NITEL itself can now share in the profits of Nigeria's
expanding telecom sector. Motorola is also well poised
to tap into the business created by 35 to 40 million
cell phone users by 2013.



15. (C) This transaction has been a win-win outcome
for everyone; Motorola will profit handsomely; the
Nigerian consumer stands to reap benefits from the
availability and declining costs of telcom services;
finally, after years of non-transparency in the telcom
sector which have drained Nigeria of billions of
dollars, the chain of corruption, by government
officials and companies alike, finally may have been
broken.


JETER