Tanzania: New Telecom Bill Sends Shockwaves to Investors

Mergers, Acquisitions and Financial Results

Parliament last week passed a communication bill that makes it mandatory for mobile companies to be listed on the Dar es Salaam Stock Exchange (DSE). But the bill has riled the companies, calling it retrogressive.

"It takes the country back to the era of nationalisation when individuals were forced to sell their companies or shares to the government," said the legal and regulatory affairs head of Vodacom Tanzania Limited, Godwin Ngwilimi.

But debating the bill before they passed it, many MPs criticised mobile phone companies for unfairly treating customers and denying the government billions of shillings in taxes.

Presenting the Electronic and Postal Communication Bill 2009, the minister for Communication, Science and Technology, Prof Peter Msola, said it was meant to set up a legal framework for providing comprehensive regulations for electronic communication service providers.

Once the bill becomes a law, telecommunication companies will be required to offer shares to the public. Subsequently, they will also be required to list with the DSE within three years after the Act come into force, but subject to requirements of the Capital Market and Securities Act.

In disposing of local shares listed or registered with the DSE, the companies will have to sell their local shares to Tanzanians according to procedures prescribed in the regulations. It emerged last week those officials of the cellphone companies were in Dodoma attempting to lobby MPs to block the passing of the provisions seen as a big threat to their operations and profits.

In separate interviews the stakeholders continued with their criticisms of the Electronic and Postal Communications bill 2009. Ngwilimi told The Citizen that by forcing mobile companies to be list on DSE the government was going against the constitutional rights of the parties involved.

According to him, the Tanzanian constitution gives individuals the right to own private property and dispose it willingly without being pressured. "There is currently no law, not even the Companies Act 2002 nor the Capital Markets and Securities Act No. 5 of 1994 as amended by Act No 4 of 1997 that forces companies or individuals to list shares in the DSE," he said.

DSE board chairman Peter Machunde said the bourse was opposed to the idea of the government forcing mobile companies to list with the DSE. "Representatives from the DSE participated in the Parliamentary committee for Infrastructure when they were discussing the (Electronic and Postal Communications) bill right from the beginning. We advised the committee to make the listing of shares optional not mandatory, but they ignored our advice," he told The Citizen yesterday.

He echoed Mr Ngwilimi's sentiments that forcing the listing of shares would bring back sentiments that the country was shifting to the era of expropriation of private properties. He said what the government needed to do was to provide incentives to attract firms to list with the DSE.

"There are rules that companies have to adhere to before listing, such as getting profits in two successive years prior to listing, but we are afraid that the capital intensive mobile firms might not be able to meet this and other requirements," he said.

But Nkasi MP Ponsiano Nyami (CCM) alleged that some MPs had been corrupted to block the law that makes it compulsory for the companies to list with the DSE.

"I cannot hesitate to say that they (mobile phone firms) have been lobbying with some MPs and even corrupting them with money to achieve their goal; that they are not forced to list with the DSE," he told the House.

A CCM insider confided to The Citizen that the issue had cropped up during a meeting of all CCM parliamentarians on Thursday night.

He said some MPs vigorously fought to block the bill before they were overpowered by those in its favour. Last week Nyami said forcing the companies to join the DSE would mean that the government would be able to assess their revenues and collect taxes.

"They are getting billions of shillings for which they were not paying taxes and that is why they fear joining the DSE. Nearly every Tanzanian owns a mobile phone. The business offers them super profits and joining the market will mean that their profits are known and tax is collected accordingly," said the MP.

Mbozi East MP Godfrey Zambi (CCM) questioned the reason for the companies shunning to list with the DSE, while there was evidence that the same firms are listed with stock exchanges in foreign countries. "These companies fear that listing with the DSE means that there will be proper scrutiny of their revenues," he told the House.

He wondered that the companies feared to join the DSE while they enjoy a waiver of corporation tax from 25 per cent to 30 per cent. Some mobile companies operating in Tanzania are listed on foreign stock exchanges.

Vodacom is enlisted on the JSE Security Exchange of South Africa, Zain (MTC) on the Kuwait Stock Exchange and Tigo (MIC) on a US stock market.

Same East MP Anne Kilango Malecela (CCM) said the enactment of the Communication Act would have significant benefits to the nation because it would curb capital flight. She said there were foreign companies that had enlisted with the DSE. She named Kenya Airways, East African Breweries Limited, Jubilee Holding Limited and Kenya Commercial Bank. She wondered why not for Tanzanian companies.

"The listing of these companies on DSE will give opportunities for Tanzanians to have shares in them...and this is very important for our economy," she said.

But the opposition spokesman for the Parliamentary Committee on Infrastructure, Mr Said Arfi (Chadema, said the provision was discriminatory for it only touches investors in the communications sector. "Investors are in many sectors, including those in the mining sector. Why shouldn't they also be targeted to join the markets?"he queried. Mwibara MP Charles Kajege (CCM) said it would be unfair to make it mandatory for the companies to join the market for this depends on the volume of their business.

A former cabinet minister, Dr Juma Ngasongwa, said the law forcing mobile companies to list with the DSE was long overdue. "Compelling the companies to enlist with the DSE is crucial and there should not be a choice. The companies are earning a lot of money; so the taxes must go to the government and the people be empowered through buying of shares," he said. In his summation, Prof Msolla said mobile phone companies were posting a gross profit of Sh1.4 trillion annually.

The Citizen