Telecel Listing Faces Resistance in Zimbabwe

Plans by Telecel International, the 60 percent majority shareholder in Telecel Zimbabwe, to list on the Zimbabwe Stock Exchange to comply with telecommunications regulations, face resistance from existing and prospective shareholders who smell an ulterior motive in the proposal, it has emerged. Existing shareholders told Herald Business they would take legal action against any listing of Telecel Zimbabwe if the proposals were implemented.

In addition, Telecel Zimbabwe faces unspecified regulatory action amid revelations that the local telecommunications regulatory authority would not recognise the listing on the local stock exchange as compliance with the law.

Telecel International has to sell 20 percent of its controlling stake in Telecel Zimbabwe in line with terms upon which the local mobile phone's licence was issued by the Postal and Telecommunications Regulatory Authority of Zimbabwe in 1997.

Telecel International recently announced that it would list on the ZSE first instead of addressing the lopsided shareholding by offloading the stake to prospective or existing shareholders, some of whom have first right of refusal.

Herald Business has gathered that some of the shareholders intend to file a court interdict once it has emerged that the company had listed on the ZSE.

Sources said it has been established that listing on the ZSE might not result in genuine compliance with Potraz regulations amid fears that Telecel International might dispose of the 20 percent stake to some of its investment vehicles.

While finer details on how compliance with Potraz regulations would be achieved through listing on the ZSE remained sketchy, it has emerged that while Telecel international would whittle down its stake to 40 percent, existing shareholders' current 40 percent stake would be cut to a minority 25 percent.

Telecel International chief executive Kai Uebach is alleged to have held a meeting with ZSE chief executive Emmanuel Munyukwi on its plans to list, but the ZSE boss was not reachable on his mobile phone last week to comment on that.
What makes the issue more intriguing, sources say, was that the controlling shareholders failed to comply with Potraz requirements to address the lopsided shareholding within five years after the licence was issued.

After failing to address the shareholding irregularity in five years, which resulted in the cancellation of Telecel Zimbabwe's licence by Potraz in 2007, Telecel International was given another two years to do so, but three and a half years down the line, the international firm has defaulted on its pledge.

Telecel Zimbabwe is presently operating without a licence after Potraz cancelled it, but has been operating courtesy of Government's leniency while the company awaits a determination on the case by the Ministry of Transport, Communications and Infrastructure Development to which it appealed against.

Sources have indicated that authorities would never allow Telecel Zimbabwe to list on the ZSE before normalising the shareholding anomaly as per regulatory terms and conditions on which the licence was issued.

"According to authorities, there is no way of going to the stock exchange before normalising the shareholding structure. That is an attempt to get away with murder. We know they intend to use investment vehicles to buy back the shares and remain in firm control of the company. Local shareholders have the right of first refusal, why do they want to dispose of the 20 percent stake on the ZSE when they agreed to sell directly to locals?" said a source.

Potraz chairman Mr Davidson Chirombo said the regulatory authority was not interested in the firm's other transactions, but in compliance with its laws."What they should know is that we are only interested in compliance. We have nothing to do with their other transactions -- we do not care about that. We have to go back to basics and say what were the conditions to start with? Those are the conditions they should comply with," said Chirombo.

The 20 percent stake was sold to Telecel International under unclear circumstances, in violation of the Potraz Act, by the then Telecel Zimbabwe chairman Mr James Makamba, now in self-imposed exile, on the grounds that the company was looking for capital to start the network way back in 1998.

A number of initial prospective shareholders in Telecel Zimbabwe, which include local empowerment lobby group-the Affirmative Action Group, Wealth Creation Empowerment Corporation, the Zimbabwe Farmers' Union, Zimbabwe National Liberation War Veterans' Association and the Small-Scale Miners' Association, are lining up to swoop on the 20 percent shareholding.