MTS FIRST WIRELESS ROLLOUT SET BACK TWO MONTHS BY

C O N F I D E N T I A L LAGOS 000416

SIPDIS

SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY

STATE FOR AF/W

E.O. 12958: DECL: 03/16/2015
TAGS: ECON NI
SUBJECT: MTS FIRST WIRELESS ROLLOUT SET BACK TWO MONTHS BY
MANAGEMENT TAKEOVER ATTEMPT

REF: LAGOS 167

Classified By: CONSUL GENERAL BRIAN BROWNE FOR REASONS 1.4 (b) AND (

d)


1. (SBU) As MTS First Wireless (MTS) tries to recoup from a
very open and public feud between rival factions in the Board
of Directors (reftel),its Senior Vice President, AMCIT
Charles Kimbrough, estimated the company's rollout has been
delayed at least two months. Kimbrough recently returned to
Nigeria after going to the US to avoid alleged police
intimidation and arrest threats purportedly fueled by the
rival faction of the MTS Board. Nigeria's telecom market is
extremely competitive and MTS has yet to prove itself a
viable entrant in this demanding market. However, MTS
maintains it will be profitable once it has a foothold
established.


2. (U) MTS rollout, so far limited to Lagos, Abuja, and Port
Harcourt, has been in aberance since the board of directors
split into two factions due to requests by MTS's primary
investors (chiefly banks) to scale back board membership and
dissolve its management board. Dismissed board members
reportedly petitioned the Nigerian Economic and Financial
Crimes Commission (EFCC) to investigate the company and
allegedly encouraged the local police to harass the company,
the remaining board members, and some key employees,
according to Kimbrough and MTS corporate affairs manager.
The EFCC investigation continutes into alleged improprieties
such as: the company restructuring was not agreed upon by all
board members; non-payment of import duties on telecom
equipment; and share allocations between US investor, MTS
Inc., and other investors were never agreed to by all board
members. Standing MTS board members maintain MTS innocence.


3. (SBU) Kimbrough speculates that dismissed board member,
Obafemi Olapade, was the fillip behind the swift EFCC
response. Olapade is a friend of President Obasanjo.
Olapade and several other directors were brough on to the MTS
board because their political connections played a key role
convincing the Nigerian Communications Commission in 2002 to
reinstate MTS's fixed wireless license, revoked during the
Abacha regime.


4. (SBU) Sensing that the public spate was damaging all of
them financially, the two rival factions moved to pacify
investors through tentative "peace agreements". All members
of the original board and management board have been
reinstated for four months as a stabilizing move to quell
customer and investor uncertainty.


5. (C) Comment: MTS First Wireless is 44 percent owned by
US-based MTS Inc. MTS Inc. senior staff members have close
ties to Nigeria, several hold dual citizenship. MTS Inc. and
other investors have, since 2002, sunk millions of dollars
into MTS with little return. Going against the stream of
risk-aversion that keeps many US companies out of Nigeria,
MTS Inc. investors want to succeed here. MTS Inc. believes
the Nigerian market can be profitable if you have the stomach
for its ups and downs. What the latest episode teaches is
that Nigeria remains a rough and tumble business environment
where much hinges on political connections often more than
business acumen. Here, the political connections may open
the door, but if those connections go sour, they may also
swing the door shut. Thus, while the removal of some board
members may have made business sense, the political realities
have bucked against it. To move forward, MTS will have to
more skillfully balance its financial/business considerations
against the potential fallout of alienating influential
members of its board. This is business Nigerian style. End
comment.
BROWNE