HARRIS CORPORATION DUKING IT OUT FOR A

UNCLAS LAGOS 001467

SIPDIS

STATE PLEASE PASS TO FCC, EX-IM, AND OPIC

E.O. 12958: N/A
TAGS: ECPS ECON NI
SUBJECT: HARRIS CORPORATION DUKING IT OUT FOR A
LUCRATIVE NIGERIAN TELECOMS CONTRACT

REFTEL LAGOS 00676


1. (SBU) Summary: Harris Communications, a U.S. firm,
faces Japanese NEC for a multi-million dollar contract
with Globacom for microwave telecommunications
equipment. Whether the playing field is level is an
open question. End summary.


2. (SBU) Harris Communications Systems Nigeria Ltd.
(Harris),a subsidiary of Harris Corporation of Redwood
Shores, California, is pursuing a $30 million microwave
communications equipment contract in Nigeria. Harris
is a large player in the local telecommunications
equipment market, and counts as customers three of the
four GSM service providers in Nigeria (South Africa's
MTN, Zimbabwe's Econet Wireless International, and M-
Tel, a subsidiary of state-run NITEL).


3. (SBU) The Nigerian company Globacom, which Harris
eyes as a potential customer, holds the fourth and
final GSM license in the country. While late to roll
out its mobile network (reftel),Globacom has plans for
a system that could eclipse Nigeria's largest mobile
players, MTN and Econet. Such a feat might be possible
since MTN and Econet are oversubscribed and are having
a hard time keeping up with Nigerian demand. Harris
Nigeria could raise its revenue in Nigeria in the near
term thirty percent if it were to clinch the Globacom
contract.

The Competition


4. (SBU) Globacom has narrowed its search to two
microwave equipment suppliers: Harris and the Nippon
Electric Company (NEC) of Japan. Globacom initially
courted a number of other firms including Alcatel and
Siemens. Harris Nigeria company executive told Econoff
that Globacom is likely to choose a supplier within the
next two weeks.


5. (SBU) Comment. Were Globacom to award the contract
to NEC, the latter might gain more than just a large
share of Nigeria's microwave communications equipment.
It could also establish a foothold in an equipment
market sector in which there has so far been only one
player, Harris. Harris is concerned that the NEC may
be prepared to use whatever tactic is necessary to gain
access to the Nigerian market.

Downside of Doing Business in Nigeria


6. (SBU) While Harris is engaged in negotiations with
Globacom, Harris is preparing itself for what it did
not expect when it came to Nigeria. As a supplier to
NITEL-owned M-Tel, Harris may soon be pressed to accept
naira payment for some of its local business. Payment
in naira could reduce Harris's profit margin as a
result of unfavorable foreign exchange rates, the
effect of which could be magnified were Harris to be
compelled to pay additional income taxes in Nigeria.


7. (SBU) Nigeria's population numbers about 130
million, but its fixed telephony rate is a mere four
telephone landlines per 1,000 people. GSM service is
thus the only viable mid- to long-term connectivity
resource in Nigeria. Since GSM services were introduced
in August 2001, about four million subscribers have
become hooked to mobile phones.

Browne