Once more with feeling: Tanzania’s TTCL in third sale attempt, raising US$214 m

Telecoms

The publicly-owned Tanzania Telecommunications Limited (TTCL) is seeking a US$214.67 million credit facility, as it plans to enter into the third privatization attempt.
Reports from the TTCL workers’ union revealed last week that an unnamed Vietnamese firm has shown interest in buying the country's telecoms back bone firm.

This will be the third privatization attempt after the first two that ended miserably for Tanzania as the two firms bought in failed to meet agreed terms and scope of work and business targets.

The unconfirmed reports come in the wake of the TTCL's attempts to recapitalize by seeking a Government loan guarantee for US$214.67 million (Tshs 322 billion) to keep it financially afloat and competitive in a tough telecommunications atmosphere.
Junus Ndaro, the Secretary General of TEWUTA - a workers' union, said in Dar es Salaam last week that TTCL needs an immediate recapitalization fund of Tshs70 billion ($46.67 million).

TTCL finds itself in this situation partly because its major customers, the Government and some of its institutions, have failed to settle huge outstanding telephone bills that amount to millions of dollars, and the competition against four (major) mobile operators is mounting.

The firm, twice privatized to foreign firms, is now operated by Tanzanian staff and management, but stiff competition and an inadequate entrepreneurship has tended to drag it down. Whilst competing telecommunications firms change with the times to cope with customers' demands and appetites, TTCL has been slow to respond appropriately.
TTCL, retrenched over 500 staff in 2007 to cut operational costs and to hire new blood to boost business, has had to hire a large number of untrained staff, and those trained in-house have apparently been migrating to the competition. If the intimated sale proposal to a Vietnamese company succeeds, it will be the third foreign firm take over TTCL in the last 10 years.

TTCL first went into an 'unsatisfactory' partnership with a joint venture of millionaire Mo Ibrahim's MSI of the Netherlands and Detecon of Germany. The reasons, according to the report in East African Business Week were the failings of its management and its non-delivery of a targeted number of fixed lines. However, the company was sold on the understanding that a certain level of outstanding debts could be collected and the buyer was unable to do so.

The joint investors instead arranged to have 60% in Celtel and the Tanzania Government agreed to take 40%. A few years later Celtel was sold to Zain, and resold to an Indian firm and renamed Airtel.

Following the failed Government-MSI joint venture, the Government once again entertained foreign interests by hiring a Canadian telecoms management company Saskatel. Although the report in East African Business describes its period as a failure, Balancing Act readers will remember that it failed to find a buyer on terms the Government wanted. Maybe there’s lesson in there for this third attempt to sell? Good luck but don’t hold your breath.