Madamobil SA liscence revoked

Telecoms

Madamobil Holdings Mauritius Limited (“MHML”) announced on 15th May, that OMERT, the telecom regulatory agency of Madagascar, has issued a decision to revoke the license of Madamobil SA, its subsidiary in Madagascar. Madamobil is the 4th mobile operator in Madagascar and holds a 3G mobile operating license, awarded in 2008. Madamobil, which has been offering telecommunications services to tens of thousands of subscribers, has been faced with a sustained campaign by the Government to pay amounts that it does not owe. MHML considers that the decision of the Government’s past and current actions, taken at the behest of existing operators, are illegal and amount to an expropriation of its investment in the country.

In response to the decision taken by the Government, MHML and its shareholders shall be starting international arbitration proceedings against the Republic of Madagascar. Claims shall be filed under the rules of the International Center for Settlement of Investment Disputes (ICSID) in Washington DC for in excess of 200 Million US Dollars in damages.

Since 2008, MHML and its shareholders invested over US$ 60 Million in the Madagascar project after securing the country’s 4th mobile telephony license. Phase I of the network was completed in 2009 within a record time of 6 months despite the turbulent events of that time.
After 2009, the new Government of Madagascar (through the then Prime Minister and the then Minister of Telecoms, who is now the head of OMERT) decided to block Madamobil’s interconnect to other operators after Madamobil’s refusal to accept demands for additional payments that are not specified under the Madamobil license nor in any of the prevailing laws and regulations. The impossibility for Madamobil’s subscribers to make calls to other networks limited its attractiveness for customers and severely impaired its operations and growth.

Although the original business plan of Madamobil projected 1,200,000 subscribers in 2012, Madamobil captured far fewer subscribers due to the lack of interconnect. In addition, other direct or indirect restrictions and threats (such as the refusal to grant import licenses for technical equipment required to expand the network, the refusal to grant frequencies while at the same time granting them to the other operators, the withholding of expatriate visas to the technical staff of Madamobil, the prohibition on attending industry fairs etc.) have made it impossible for Madamobil to operate its business normally.

In its official communications, OMERT has indicated that the license of Madamobil has been revoked as a result of Madamobil’s failure to comply with tax obligations and further to complaints from other operators about Madamobil’s competitive tariffs and “unfair competition”.

Contrary to the statement made by the Government, Madamobil has fully complied with its obligations under published laws and regulations and was never notified by OMERT of any violation of its pricing or tax obligations before the decision was taken to revoke its license and expropriate its investment. MHML therefore believes that this decision is motivated solely by Madamobil’s refusal to make payments that are not specified under the Madamobil license or in any of the prevailing laws and regulations.

MHML’s Chief Executive Officer, said: “MHML and its shareholders believe that the Government of Madagascar has severely infringed Madamobil’s rights as an operator and MHML’s rights as a foreign investor under the prevailing bilateral investment treaties. We would prefer not to stop service and not to commence international arbitration, but the Government of Madagascar leave us with no alternatives. We would be prepared to reconsider our decision only if the Government were to restore the license and its frequencies, implement interconnection and compensate for all of the losses incurred during 3 years of Government restrictions”

Madamobil’s principal shareholders are Private Equity firm, Life Telecom managed by Life Emerging Markets Capital in the Netherlands and Tecom Investments, a subsidiary of Dubai Holdings based in Dubai. The Company employs between 80 direct and 150 indirect Malagasy staff.