Tanzanian Government blocking sale of its stake to Bharti

Telecoms

Bharti Airtel of India, which recently completed the purchase of the African operations of Kuwait-based Zain Group in a deal valued at USD10.7 billion, could be heading into troubled waters in Tanzania, with the news that the government has an acquisition strategy of its own. Local press suggest that Bharti has put in place a USD11 million bid to acquire the state’s 40% stake in Zain Tanzania, but the government now maintains it will not sell its holding, and will instead look to buy back the majority of the company that it does not currently own. The Tanzanian government claims that the acquisition of the Zain Tanzania operation by Bharti Airtel contradicted the partnership agreement between Zain Tanzania and national fixed line operator Tanzania Telecommunication Company Limited (TTCL). Alongside its stake in Zain Tanzania the Kuwait group owned 35% of TTCL. However, an agreement signed in April 2010 saw Zain agree to sell its TTCL stake back to the government in order for TTCL to be wholly owned by the state. Now, in addition to wanting to reacquire Zain's stake in Zain Tanzania, the Tanzanians want to make TTCL a 100% government-owned firm, hoping the company will be able to compete with private operators in the local market. The permanent secretary of the Ministry of Finance and Economic Affairs, Ramadhan Khijjah, is on record as saying Zain Tanzania’s management did not fully communicate to the relevant government authorities information about the Bharti Airtel deal. Earlier this month and as reported by CommsUpdate, the country's minister for Higher Education, Science and Technology, Prof Peter Msolla, told the National Assembly that the government was still in talks with Bharti Airtel concerning the sale. In a debate on the country’s budget for the 2010/11 financial year, Msolla said: ‘We met with the company’s officials on 21 June to discuss the sale… We have told them to finalise the evaluation of the assets so that we can determine whether the payment made to us is satisfactory.’ The minister went on to add: ‘Since the government has shares in the company, it is imperative that it be involved in transactions regarding the sale. The shares we hold in the company are assets that ensure our role is not underestimated.’