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Archives: Adenuga: I didn’t default in payment of 2001 GSM licence

Archives: Adenuga: I didn’t default in payment of 2001 GSM licence

Technology Times Editors are pleased to pull this story first published October 7, 2012, from our archives: 

Lagos. October 7, 2012: Mike Adenuga Jr, the Chairman of Globacom Limited, has said that Communication Investments Limited (CIL), his investment vehicle used to bid in the January 2001 Nigerian GSM Licence Auctions, did not default in meeting deadline stipulated by government to the four winning bidders in the milestone deal that was to profoundly redefine the telecoms landscape in the country.

Adenuga’s decision to walk down memory lane comes amid another milestone for Globacom, his wholly-owned Second National Operator, which last August clocked nine added to the complementary distinction for the telecoms magnate who was awarded the nation’s second highest honour, the Grand Commander of the Order of the Niger (GCON) medal for national economic development contributions by President Goodluck Jonathan.

Globacom has grown to become number two operator by subscriber numbers even though it entered the telecoms game two years behind rival MTN Nigeria, Airtel Nigeria and Mtel, the moribund mobile phone business of pioneer national operator, NITEL.

In the keen 2001 GSM bids, CIL was pitted against Econet Wireless Nigeria Ltd; United Networks Mobile Ltd; MTN Nigeria Communications Ltd and MSI-Celtel Nigeria Ltd, who all deposited $20 million each to prequalify for the auction.

Adenuga again reopened the sticking point of the 2001 Nigerian GSM Auction that was generally regarded as free and fair during which the licence earlier awarded CIL was withdrawn by government over alleged late payments.

The development was to set back Adenuga’s entry into the competitive but lucrative telecoms stakes by some two years when he eventually launched service using Globacom, the company under which he was eventually issued the multi-service SNO licence for $200 million in what market analysts reckon was a concession to resolve the CIL debacle.

The Globacom Chairman’s took exception to a newspaper columnist’s view that, “Adenuga could not muster the requisite licence fee within the stipulated time of 14 days.”

Speaking through Mike Jituboh, the Executive Director Special Project, Globacom, Adenuga, recollected the events that were to culminate in him losing his $20million bid deposit and also set him back two years in entering the Nigerian telecoms market.

Jituboh, who also led the CIL team to the three-day GSM Auctions that opened January 17, 2001 at the Nicon Hilton Hotel in Abuja, says it was imperative to set the record straight about the chain of reactions that precipitated the controversial CIL licence debacle.

According to him, “A day after winning one of the three GSM licences, a CIL team led by Dr Adenuga headed for Paris for negotiations with BNP Paribas. After several days of protracted negotiations, agreements was reached on the terms and conditions for a loan facility of $265 million for paying the balance of the GSM licence. The deadline for making payments was 5pm of 9th February 2001 and on that fateful day all was set for a transfer by swift instruction when word came in from our colleagues in Lagos that the frequency allocated to CIL was the same frequency that had been allocated to and being used by Motophone. The latter was in court to challenge the government’s withdrawal of the frequency.”

Globacom headquarters in Lagos
Globacom headquarters in Lagos

According to the Globacom Director, the CIL team faced a debacle that needed quick and decisive action in the light of the fact that its assigned frequency spectrum was under litigation from Motophone owned by the Chagouris and the dilemma of meeting the strict deadline for the provisional licence assigned by NCC, the telecoms regulator that auctioned the spectrum.

“With its assigned frequency under litigation and the deadline for payment approaching, we had to decide whether or not to pay the huge sum of $265 million and hope that Motophone’s litigation would not end up ensnaring both the money and our ambitious plan, of establishing one of the biggest and best telecommunications network in the world. With no time left to resolve the matter with the government before making payment, we decided to make payment with the condition that the money should be released after the government gives CIL an indemnity to cover the possibility of Motophone winning its suit and retaining the litigious frequency”, Jituboh says.

According to him, “Consequently payment of $265 million was made by BNP Paribas before the deadline hour on 9th February 2001 directly to the designated account at JP Morgan, New York, along with the aforementioned condition.”

Jituboh says that chains of events were to follow in the wake of the payment and the subsequent cancellation of the CIL licence which were also to dovetail into the founding of Globacom by Adenuga.

“As most Nigerian will recall, the government rejected the condition that was placed on the payment and condition that was placed on the payment and cancelled the CIL licence. The government refused all entreaties and the funds were ultimately returned to BNP Paribas. Eventually we won the bid for the Second National Carrier Licence and launched Glo mobile. Ironically the same erstwhile litigious frequency was given to Globacom along with the Indemnity that had been denied CIL!” he adds.

The 2001 GSM Auctions attracted a record $855 million into government coffers under which the licences were sold to the winning bidders and a slot pre-allocated to the public owned pioneer National Operator, the Nigerian Telecommunications Limited (NITEL), at the time.

Today, the GSM networks now numbering five but with four actively operational, continue to ride the crest of the market as they account for 101,404,011 active lines out of the 105,239,815 active lines in Nigeria at the end of August, this year.

On the other hand, their CDMA counterparts also offering mobile telephony services account for 3,347,716 active lines while fixed line and fixed wireless networks, a hugely neglected segment of the market, account for only 488,088 active lines within the same period.

At the time the bids were held, Nigeria could only count some 500,000 landline phone lines in operation out of a capacity of 700,000 lines and only 30,000 analogue mobile phone lines.

During the period, the short-term telecoms policy outlook was that the country should attain 1.2 million mobile lines within two years of the formulation of the National Policy on Telecommunications in 1999.

The SNO was mandated by its licence to provide a Minimum of 100,000 lines connected to subscribers12 months after commercial launch; minimum of 750,000 lines connected to subscribers 36 months after commercial launch; minimum of 1,500,000 lines connected to subscribers 60 months after commercial launch and provisions that the licensee shall provide by 36 months after commercial launch a minimum of 5% of its total lines connected to subscribers in each of the geopolitical zones in the Federal Republic of Nigeria, among other obligations.

Meanwhile, President Jonathan has commended Adenuga for contributing to economic growth in Nigeria noting that, “He worked very hard to establish Globacom which today provides hundreds of thousands of jobs in Nigeria, Ghana and Benin Republic. He has established a formidable brand. His company also has footprints in Cote d’Ivoire, Senegal and The Gambia.”

He made the commendation at the 2012 National Honours Awards in Abuja where Adenuga was decorated with the Grand Commander of the Order of the Niger (GCON) medal, the only recipient in the category, alongside 148 other eminent Nigerians who were also decorated for outstanding services to the country.

According to the President, “I encourage you to sustain the tempo of performance and to re-dedicate yourself to the service of humanity and God.”

The Globacom Chairman was also lauded by Goodluck as a major employer of labour when he adds that, “Chief Adenuga has done a great deal for the country through his numerous business concerns which employ thousands of Nigerians.”


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