MALAYSIANS BREACHED DEAL ON TELEKOM NETWORKS MALAWI SHARES
Telekom Malaysia (TM) breached a Joint Venture Agreement (JVA) with Malawi Telecommunications Limited (MTL) by selling its 60% stake in Telekom Networks Malawi (TNM) before MTL exercised its pre-emption rights.
Pre-emption rights are contractual restrictions on the rights of transmission of a company's securities. They allow current shareholders to maintain their existing fractional ownership by buying a proportional number of future issues of common stock.
TM signed the JVA with the Malawi Posts and Telecommunications Corporation-from whose split MTL was born-in 1995.
The JVA stated that TM may not sell any of its shares in local mobile phone network operator TNM without first offering the same to the land line phone company. MTL owns 40% of TNM.
Finance Minister Goodall Gondwe said in an interview on Monday government already offered to purchase the shares last year, consistent with the provisions of the JVA.
He was surprised, he said, to hear that Econet Wireless had bought the stakes before the agreed one-month offer period elapsed.
On 27 January this year, TM International group chief executive Yusof Annuar Yaacob and Econet Wireless group chief executive Strive Masiyiwa announced in a joint statement issued in Kuala Lumpur that the South Africa-based Econet had bought the 60% stake.
A letter in the possession of Nation Business Review dated the same 27 January 2006 addressed to TNM chief executive for the attention of Ghazall Bin Haanim and signed by Yaacob, confirms the existence of the 1995 agreement.
The letter also instructed TNM to offer MTL the 60% shares.
"Pursuant to clause 4 of the JVA, TM hereby offers to sell to MTL, in accordance with and on the basis of the provisions of clause 4 of the JVA, the 21 million ordinary shares held by TM in the share capital of TNM and the claims at an aggregate purchase price of US$24.5 million. The offer is an indivisible offer in respect of both the shares and the claims.
"In accordance with clause 4.4 of the JVA, the offer is open for acceptance by MTL within a period of one month from the date hereof and through delivery by MTL to TNM, of a written notice of acceptance," Yaacob said in the letter.
Apparently, sources say TNM owed its parent company TM US$6.8 million as at November 2005.
The debt will have to be paid off to the Malaysian group from the purchase price - meaning that the actual value of the 60% shares in Telekom Networks is far lower than the publicised US$25.5 million.
The letter added that if the offer is accepted, MTL would be obliged to deliver a banker's draft in the stated amount and payable to TM within seven days from the date of offer.
It said if MTL failed to express interest within the offer period, the Malaysian company would proceed to dispose of the shares and the claims in terms of the third party offer.
Gondwe said government was having "discrete talks" with Telekom Malaysia to ensure that the issue is resolved amicably.
He added that government would ask TM to let MTL purchase at least 11% of the 60% so that the telephone company can have a controlling stake.
Government still owns 20% of MTL after selling 80% of its shares to THL.
Gondwe said it was unacceptable for TM to dispose the shares without giving MTL the first right of refusal and before the end of the offer period.