The Government of Tanzania and Celtel International, the pan African mobile operator, have announced an agreement to make a total investment of US$53 million in both TTCL (Tanzania Telecommunications Company Limited) and Celtel Tanzania.

Under the agreement, the roles of the two companies have been redefined. The two companies will be independent from each other, with TTCL focusing on providing a modern backbone infrastructure and broadband data solutions while Celtel Tanzania will focus on the mobile business.

The Government and Celtel International will maintain their current ownership in TTCL, at 65% and 35%, respectively. The two shareholders have agreed to spin off Celtel Tanzania from TTCL allowing for the two shareholders to have a direct shareholding in the former. Concurrently, the Government will sell 25% of its shareholding to Celtel International at a price of US$28 million, resulting in the Government owning 40% of the shares in the new Celtel Tanzania and in Celtel International owning the remaining 60%.

The Government and Celtel International also reached agreement on strengthening the financial positions of the two companies. In order to achieve this objective, the following will be done: (i) Out of the US$82 million Celtel Tanzania owes TTCL, US$40 million will be converted into equity; (ii) Celtel Tanzania will mobilize funding from local financial institutions so as to repay TTCL the remaining US$42 million within six months; (iii) the government will on-lend the proceeds of US$28 million to TTCL; and (iv) Celtel International will provide a loan of US$25 million to Celtel Tanzania. Thus, the two companies will have about US$95 million to invest in their networks during 2005.

The two shareholders have also agreed on the structures of the two Boards of Directors and on the management of the two independent companies. The Government will have majority on the TTCL Board and Celtel International will have majority on the Celtel Tanzania Board.

An independent private sector management company will manage TTCL and Celtel International will continue to manage Celtel Tanzania, both under new management agreements.

Commenting on the agreement, Omari Issa the Chief Operating Officer of Celtel International, said: "This was clearly the Government's initiative. We want both TTCL and Celtel Tanzania to bring value to consumers in Tanzania which objective we recognized is in the best interest of both shareholders. The new structure will further this objective by enabling both companies to focus on their greatest areas of strength".

"Our partnership with the Government of Tanzania has resulted in the accelerated development of the telecommunications sector", said Dr.

Mohamed Ibrahim, Chairman of Celtel International. "We are pleased that this arrangement will strengthen the respective roles of TTCL and Celtel Tanzania as we strive to enhance their effectiveness for the good of the Tanzanian people".