AFRITEL VS TELECOM NAMIBIA

Telecoms

The arbitration hearing between Africa Telecommunications (Pty) Ltd (Afritel) plaintiff and Telecom Namibia (TN) defendant which began in Windhoek Namibia on 4 July 2005 will continue in July 2006. The lengthy delay in concluding the arbitration is as a result of TN amending its defenses in February 2006.

Afritel is claiming damages of over P100 million for the loss of profits arising out of the alleged failure by TN to provide adequate VSAT services to Afritel’s customers. Under an agreement signed in 2003 TN was to provide vsat services to Afritel customers in Botswana and several other countries throughout the rest of Sub Sahara Africa.

Afritel claims that in over nine months TN was not able to elevate its service level to acceptable world class standards, as contemplated in the agreement, resulting in a loss of customers and an eventual shut down of the VSAT operation of Afritel. “TN is a state run monopoly and appears not to have understood the service levels required in a competitive environment. They missed a great opportunity to earn export revenues for both Namibia and Botswana.” -a spokesman said.

TN continues to enjoy virtual total protection from the local Regulatory Authority and has one of the highest call rate tariffs in Africa. As well as controlling the country’s internet they also own the only cell phone operation in the country. The company's net profit after tax was N$ 85 million (approximately P74, 000,000) for the financial year ended 30 September 2005.  This is down from N$121million in 2004. In their 2005 annual report which was audited by PriceWaterhouseCoopers TN states:-

 “Contingencies

The company is currently busy with arbitration proceedings instituted by Africa Telecommunications (Pty) Ltd (‘Afritel’). The arbitration was agreed between the parties in order to resolve claims for damage by Afritel of some US$20 million and certain

counterclaims by Telecom against Afritel. The claims and counterclaims arise from or relate to four agreements that were entered into. Under one of the agreements Telecom agreed to provide certain hub use services to Afritel. Afritel cancelled this hub use agreement on the basis of a number of alleged breaches by Telecom pertaining to the services Afritel claims Telecom was required to provide to Afritel and its customers. Following the cancellation Afritel instituted claims for damages.”

TN appears not to have provided for any possible losses arising from this claim TN is involved in a Joint Venture in Angola which is also partly part of the arbitration as TN have reneged upon their obligation in this regard towards Afritel as well. TN is also part of the consortium setting up the Second Network Operation in South Africa

The Arbitrator in the hearing is a Senior Council from Capetown. Afritel is represented by legal council from Pretoria. Telecom Namibia is represented by Lorentz & Bone from Windhoek. It is estimated that the arbitration is costing both parties approximately P100, 000 per court day in legal fees.