Liberian Government turns up the heat on Comium to Renegotiate Agreement
There are always political risks for operators but none more so than in countries where a successor Government decides to unpick the decisions of its predecessor. The mayhem that followed the Beninois Government’s decision to renegotiate licence fees last year has been the most recent example. But a much more low-profile case is the Liberian Government’s attempts to “standardize” the terms and conditions of its mobile operators. Shelby Grossman reports on the arm-wrestling contest between the Government and Comium.
Comium is one of four GSM providers operating in Liberia, and has the most favorable licence conditions. Yet in recent months the company announced its willingness to renegotiate its licence. This decision is the result of sustained pressure and explicit threats from the Liberian government
When former Liberian President Charles Taylor left office for exile in Nigeria in 2003, a transitional government took power. Gyude Bryant, a businessman, was picked to head this government.
Bryant is widely credited with setting the stage for free and fair elections in 2005, and facilitating a peaceful transition of power to current President Ellen Johnson Sirleaf. The United Nations Security Council and many human rights groups, however, have criticized Bryant's government for a lack of transparency in making deals with companies.
The Comium-Liberia Act is "one of many bad deals" signed under Bryant, according to Othello Garblah, news editor at New Democrat, a Liberian newspaper.
The Act gives Comium a twenty-year tax holiday and 100% duty-free import privileges. Competitor GSM providers have tax holidays about one-fifth as long and only have 90% duty-free import rights.
Under Liberia's investment code, if a company's initial investment is greater than or equal to US$10 million, the contract between the company and the government must be ratified by the legislature. Comium says it has exceeded this investment level. In 2004 the Comium-Liberia Act was passed, making Comium the only cell phone company in the country to have its licence agreement enshrined in a specific piece of legislation.
"Comium is the only one that has followed the law," said Alphonso Toweh, a media consultant with the GSM provider Comium. For the other companies, "the initial capital did not reach $10 million," according to Toweh. "Comium's investment was above that, so Comium decided to follow the law."
Albert Bropleh, Chairman of the Liberia Telecommunications Authority, however, says, "Comium would be hard pressed to show that their initial investment was $10 million. It was less than $5 million."
There is debate as to whether Bryant had the authority to sign investment agreements. The mandate of the transitional government authorized him to implement the provisions in the peace agreement that ended the war, and perform "normal state functions."
On the basis of doubts about the legal basis of agreements signed under Bryant, current President Sirleaf has renegotiated several contracts. Both Firestone Liberia Inc. and ArcelorMittal have renegotiated large concessions agreements. The new agreements provide greater tax revenue for the government and require the companies to provide more social services to employees and their families.
The government's efforts to repeal the Comium-Liberia Act are part of this broad process and also the cornerstone of the regulator LTA's attempt to standardize the terms under which the mobile operators compete. Better licence conditions for one operator over another means unfair competition.
"Comium is not against any standardization," Monie Captan, Executive Chairman of Comium-Liberia told The Analyst, a local paper, in 2007. "All we need is harmony in the industry. But if you go now and repeal our investment incentive and take it to zero, the others will be enjoying theirs which will be unfair to us." Toweh argued that if the government wants to cancel Comium's agreement, it would be bad for attracting other international investment.
Bropleh disagrees: "If the government decides to kick Comium out it won't reflect badly on the government. This government is open to foreign investment. If a company does not abide by the rules, the government has no obligation to provide protection."
Three times the government has sent to the legislature a bill to repeal the Act, and three times the legislature has sent the bill back to Sirleaf, asking for modifications. The current head of the Senate, Isaac Nyenabo, has been one of those rejecting the new bill. As of November, the bill is with Sirleaf and she is deciding how to proceed.
"Comium has spent hundreds of thousands of dollars to keep the law on the books. Call it lobbying or bribery," said Bropleh.
Editor of the New Democrat Garblah believes that Comium publicly expresses a willingness to renegotiate, but its heavy lobbying sends a different message. A Comium administration employee, who requested anonymity because he was not authorized to speak with journalists, appeared to support Garblah's assessment. "Comium has not yet agreed to renegotiate," the employee said, contradicting public statements by Captan.
It remains to be seen whether the Comium-Liberia Act will be modified or repealed but the company's existence in the country is tenuous. "Comium decided to renegotiate because the LTA said if you don't allow the law to be repealed we will not reauthorize your license," said Bropleh. Another senior government official said the president explicitly threatened to expel Comium if it does not participate in the standardization process.
Comium is a Lebanese-owned company with operations in Africa, the Middle East and Europe. Its African mobile operations are all in West Africa and include: Cote d’Ivoire, Gambia and Sierra Leone. Group Chairman Dr Nizar Dalloul is the son of former Lebanese Defence Minister Mohsen Dalloul was a close ally of the assassinated former Prime Minister Rafik Hariri.