Vodacom Faces Lawsuit in Democratic Republic of the Congo

Telecoms

South Africa based Vodacom has revealed a potential dispute with its partner in the Democratic Republic of Congo (DRC) that it says could affect its relationship in that country. Although Vodacom says that it has continued to constructively engage with 49% shareholder Congolese Wireless Networks (CWN), these discussions have thus far proven unsuccessful. This is despite CWN having explicitly approved the terms of funding agreements that are now being disputed. In 2009 a document was circulating offering the company for sale.

Vodacom Congo, which commenced operations in 2002, is 51% owned by Vodacom. In the absence of alternative funding sources, Vodacom is the sole provider of capital to the company.

The funding agreements for Vodacom Congo, which clearly state the terms of the funding, were unanimously approved by the company's directors including those appointed by CWN. CWN has always been free to seek alternative funding. Despite this fact, CWN's primary dispute with Vodacom relates to these funding agreements, and CWN has threatened to take this matter to court in the DRC to force Vodacom to invest significant further sums in the business.

Speaking on behalf of Vodacom Group, Bob Collymore, Chief Officer Corporate Affairs said: "We have been entirely open in our dealings with CWN and have acted in good faith to ensure the viability and growth of Vodacom Congo. We are single-handedly supplying funding to Vodacom Congo at commercial terms that were agreed by CWN's directors. Having explicitly approved the terms of the funding, CWN cannot now claim ignorance of these terms and we refute any suggestion that Vodacom has unduly benefitted from the finance agreements. Any intended litigation on this issue is entirely without merit and a contrived attempt to force Vodacom to disproportionately fund further investment. "

"Vodacom remains firmly focused on developing the Vodacom Congo business to its full potential, but we cannot justify further investment while relations with our minority shareholder are combative and dysfunctional. Vodacom finds the actions of CWN counterproductive and not in the best interests of either Vodacom Congo or the country as a whole."

Vodacom says that it will defend any legal action in the DRC while continuing to seek an amicable resolution. For the year ended March 2009, Vodacom Congo accounted for 5.3% of Vodacom Group's revenue.

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