Telecom Namibia burnt cash in failed Angolan venture
Telecom Namibia has over the past seven years lost more than N$100 million (US$12.4 m) through their investment in Mundo Startel (MST) in Angola, of which it holds 44 per cent shares.
The company has now decided to exit the joint venture, which has been described by those close to the deal as a “difficult” partnership. An urgent meeting between the two companies is expected to take place to finalise Telecom’s exit in this joint venture which is no longer viable.
“Mundo has struggled to achieve its business plan over the past few years and as a result there is an indication that carrying value of this investment in the company accounts may be impaired. “By impairment it means a reduction in the value of an asset because the asset no longer generates the benefits expected earlier as determined by the company through periodic assessments,” Telecom Namibia’s Senior Manager Corporate Communications and Public Relations, Oiva Angula, told The Namibian.
He further explained that in the light of the current difficult situation of this venture “Telecom management and Board have impaired the carrying value of this investment in the company’s financial statements by an amount of N$18 million in 2011 to bring the accumulated impairment [loss] of the investment to N$79 million”.
In 2005 when Telecom Namibia entered into a business partnership with the Angolan investors, it made an initial investment of N$29.8 million for the 44 per cent shareholding in MST. However over the years Telecom invested N$162 million in the unprofitable company. Due to Angola’s challenging geography the new company would have concentrated on installing next generation networks, VSAT and wireless digital technology instead of digging trenches and setting up telephone poles.
However, by May last year Telecom saw the writing on the wall and decided to jump ship and exit the partnership. Now a year later a final meeting is planned in Luanda to try and finalise the controversial issue, which cost Telecom Namibia a loss of more than N$23.7 million. “This is a follow-up meeting of the one that was held in March this year during which certain proposals were made after the Angolan partners agreed to buy Telecom Namibia’s shares. We have to ensure that we recover our investment,” said Angula.
Telecom provided start-up capital as well as loans to MST to the tune of N$146.3 million to get the business off the ground and build the initial network in Luanda.
It is understood that MST now wants to offer Telecom a cash payment of about N$15 million over a 60 day period from the date of sale and that the issuance of about N$94 million preferred shares be paid with a premium once MST becomes profitable.