Ownership Wrangle Breaks Out Over Telecel Stake in Zimbabwe

Mergers, Acquisitions and Financial Results

An ownership tussle has split Telecel Zimbabwe after Telecel International announced plans to sell a disputed 11% stake in the country's second largest mobile phone operator, the Zimbabwe Independent can reveal. A fugutive from legal charges living outside the country and a person who allegedly defrauded the company are now fighting over this 11% stake.

Sources close to the developments say Telecel International, the largest shareholder in the company, last month indicated that it would sell the 11% stake in its local operation in line with laws restricting foreigners from owning a controlling shareholding in local telecoms companies. Telecel International currently owns 60% of Telecel Zimbabwe but the High Court ordered in 2007 that the foreign group should sell 11% to locals.

Pressure from empowerment laws has also forced the international company to consider selling the disputed stake. Empowerment minister Saviour Kasukuwere recently gazetted indigenisation regulations compelling foreigners to sell 51% stakes to blacks.

It emerged this week that the local shareholders are now at each other's throats over the stake amid indications that Jane Mutasa, a businesswoman currently in custody for allegedly defrauding Telecel, and fugitive businessman James Makamba are both reportedly eyeing the stake.

Sources say although Telecel International prefers selling to Makamba, he is a fugitive after he left the country in August 2005 in the wake of externalisation charges. In order for the transactation to get through, Makamba would need regulatory approval. Sources say his legal problems will stand in the way of the deal.

The fugitive businessman, according to the same sources, is a favourite for the Egyptian-controlled mobile telecoms company. Makamba engineered the partnership and holds more shares in the company than Mutasa. But Mutasa, according to the same sources, has not been a favourite for the shares after she clashed with executives from the parent company earlier this year.

If Makamba's bid for the stake fails, Mutasa stands to get the shares, sources said.

She is also said to have pre-emptive rights for the shares. "Makamba is fighting Mutasa for the stake," one of the sources said. "Telecel told workers and other shareholders of its plans to sell its stake." Telecel is also considering a share option scheme. That way the shares would be in the hands of a neutral party, sources say.

The deportation of Telecel managing director Aimable Mpore last month is said to have also increased the tension between Mutasa, Makamba and Telecel International executives. Mutasa clashed with Telecel on the appointment of Mpore by the majority shareholder late last year. Mpore was deported last month for breaching immigration rules.

Mutasa wrote a strongly worded letter to Telecel International rebuking the group for the senior appointments at the company. She wrote: "Zimbabwe is a proud nation of highly experienced and very qualified people such as engineers and accountants. On what basis does Telecel recruit foreigners and award them top positions? "Why are foreigners being paid more than local managers who have endured and suffered in this country?

This is serious discrimination.... In his address to workers, Mpore indicated that his mandate was to fire existing managers. To my surprise as acting chairperson of the board, Mpore wanted to do everything in secrecy at Telecel without my knowledge."

She alleged Telecel International was "syphoning millions of dollars" from the company.

"To my surprise millions of dollars are being siphoned from the country to other economies. This money generated locally must circulate in Zimbabwe and promote black empowerment. I am bitter to see how these foreigners are working together in cahoots externalising funds generated in Zimbabwe... I want to see that money supporting local people who supported the network during difficult times," read the letter in our possession.

Mutasa also argued that Telecel's competitor Econet Wireless run by Zimbabweans was "very successful". She also attacked her partners Telecel International for not awarding contracts to local companies and opting to engage foreigners.

Mutasa added: "The (Telecel) licence clearly indicated that we must empower our local people both men and women. The licence is wholly owned by Zimbabweans. Why is it foreigners want to manage our company? Is this the reason Telecel is reluctant to cede the 11% shareholding? It was agreed that an 11% stake was to be handed over two years ago. This is now three years. We want our 11% back so that we can manage ourselves." In another letter to Mpore, her lawyers reminded the former Telecel boss that she was a director and shareholder and would not hesitate to resort to disciplinary measures.

Documents show that at least US$15 million is said to have been paid to foreign suppliers from various companies. She also queried why contracts were awarded to foreigners when local companies could have been engaged. "Mobi Factory from Egypt was given US$750,000 to supply towers. Why should we buy towers all the way from Egypt?" asked Mutasa. Mutasa says Telecel Zimbabwe paid US$3 million to foreign companies for the purchase of handsets. She added: "Money was transferred to foreign companies. This was done without going to tender. No single local was contracted to supply handsets."

Telecel appointed Alexander Kiel, a German national, as chief financial officer, Tobias Jack, a Tanzanian as chief technical officer, Mohamed Abdeinkang an Egyptian as a rollout director, and Anwar Soussa, another Egyptian, as head of the commercial department. Mutasa argues there are suitably qualified Zimbabweans for these jobs. She was this week denied bail on fraud charges.

Zimbabwe Independent