Zim ICT Minister ‘cancels’ Telecel’s licence. Accuses Vimpelcom of speculation

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The Telecel shareholding situation, which we last wrote about here when it became clear that the sale to Brainworks was not going to go smooth (Mutasa opposed the selling, won, and James Makamba eventually acknowledged they were not sellingwas essentially back to square one of impasse. Well, until the sudden announcement by new ICT Minister, Supa Mandiwanzira, reported today in the government owned publication, The Sunday Mail.

The report says 4 key things:

1. The ICT Ministry is cancelling the agreement Telecel made with the government of Zimbabwe to pay the US $137.5 million licence over time.

What this reveals is that the ICT Ministry in 2013, then led by Nelson Chamisa, was involved in the negotiation of the licence. and that there was apparently an agreement between the ministry and Telecel. It is this agreement that is being cancelled and not the licence.

It’s strange that the ICT Ministry negotiated and signed an agreement with Telecel when the issuer of the licence, the telecoms regulatory body called POTRAZ, fell under the Ministry of Transport and Communications at that time. And, since October 2013, POTRAZ is now under the President’s Office and not the Ministry of ICT. Effectively, from what we know the ICT Ministry has never been the line ministry of POTRAZ. Unless of course something changed since October 2013 and no one announced it. This calls into question if the ICT Minister can cancel the licence or that if he cancelled an agreement, it would have any consequence on the licence. Actually, he admits himself that the company will keep operating. A real cancellation would criminalise operating a mobile telecoms network without a licence.

2. Vimpelcom and the Makamba led Empowerment Corporation should stop trying to sell their stake, and should engage the government instead. Any such selling without government involvement would just be the selling a pricey asset (a 20 year $137.5 million licence) they don’t own.

Effectively, this criminalises any effort the Empowerment Corporation and Vimpelcom to sell their stake in the company. The Sunday Mail says that the government’s intention is to buy out the current shareholders.

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This is confusing because

  • Why would the government want to own another mobile operator? That would be the 3rd mobile operator government would own as they already have NetOne and TelOne (Yes, TelOne has a mobile licence they don’t ‘use’, which we’ve long suspected was for speculation, but that’s another story).Could this be a plan for the government to buy Telecel cheap – Once you have criminalised a business, scared away any suitors, threatened current owners with possibility of a shutdown, the business would probably be cheap to buy – and sell to the someone else, maybe the Chinese, at a profit?
  • Does the government have money and the capacity to buy and operate a company the size of Telecel?

3. Vimpelcom “is busy speculating on an asset in Zimbabwe which hasn’t paid a licence….Only a foolish government can allow that thing to happen, and we are not a foolish government”

This one we found strange because as far as we knew it was clear that the licence hadn’t been paid and that if anything, not paying it was a result of the impasse in shareholding and not that any company was looking to speculate and benefit from the sale of a Zimbabwean asset they don’t have.

The telecoms licence is a big deal yes, but Telecel’s monetary value is more than just a licence. The company has network equipment and millions of customers. Only an uninformed and therefore foolish investor would be buying a paid-for licence if they transacted with either Vimpelcom or the EC. They would just be buying the other assets plus established access to getting a renewed licence.

In fact, the whole point of Brainworks valuing EC’s 40% at just $20 million was in view of the reality that there’s a huge outstanding amount in licence fees to be paid. In their financial reports, Vimpelcom has long valued their stake in Telecel Zimbabwe at cost, meaning they don’t have much influence in improving the asset’s value and would be satisfied if anyone just paid them what they put in.

4. “We are now getting back the business because it has not benefited the people who were supposed to benefit in the first place. It has not benefited the people of Zimbabwe.”

This too was a surprise since at the very least Supa Mandiwanzira himself admits in the same report that “…as a business, they employ Zimbabweans; they have subscribers who, if we take drastic action, will be inconvenienced.” Clearly the business has benefited the people. I’d actually hazard that the only reason they are not investing enough for the licence is that their majority ownership has been under threat for some years now.

Imagine you were the majority owner in a business, and that stake was under threat; would you plough in additional investment of $137.5 million, especially after just injecting $70 million? Wouldn’t you ask whoever feels entitled to your stake to just buy you out and do the additional investment themselves? That this has not happened despite Vimpelcom showing they were looking to get rid of the asset (and successfully getting rid of other assets in other countries) must mean no one here has the money to buy, and out there whoever has the money thinks Zimbabwe is a bigger risk than, say, Central African Republic (all 10 news items in the Google results are about war in the country)

And still on the issue of businesses helping the people, it’d be interesting to find out how much government injected into it’s own telecoms businesses aside from the Chinese loans that don’t even come in cash but financing terms that shackle the operators to Chinese vendors for expensive equipment, after sales technical support, and vendor specific future upgrades. Would be interesting to calculate how this is better and how it is benefiting the people that pay the taxes that keep government and its companies on their feet?

I’m still wondering why the minister found it necessary to say these things at a time when everyone Zimbabwean has about agreed we’re in a mess, that we need to sort out the message around indigenisation and that we need to send a consistent signal out there. The reality is he’s a politician and who knows who the audience for this announcement was and what they needed to go away believing? Or maybe The Sunday Mail just quoted him out of context!

15 Comments

  1. Tapiwa✓ says:

    Zimbabwe’s power elite has a long history of political alchemy: they convert legislation into personal profit.

  2. tinm@n says:

    1. The ICT Ministry is cancelling the agreement Telecel made with government to pay the US $137.5 million license over time.

    Wasnt the negotiated sale a 40% stake which translated to $20million, by their terms?

    Is it not then logical that they be stopped in their tracks for undervaluing the company without full consideration of that licensing agreement? If my reasoning is correct, I believe it should have been valued worth more, regardless of the fact that government is eyeing a “conflicting” stake

  3. TheKing says:

    Pamberi neZANU PF

  4. Anonymous says:

    The writer of this article is confusing itself . Telecel is operating without a license . Econet paid for it’s Licence. It’s absurd to value 40% of Telecel at $20 million …..but then again …..this is a techie emagazine targeting techies who know no better …

    1. TheKing says:

      This is a blog, not an e-magazine. The writer is simply blogging about an article from The Sunday Mail. These are strictly opinions not facts

    2. Just curious, how would you value Telecel Zimbabwe, and what is your rough valuation of the company right now? If you’re sure it’s absurd to value 40% of Telecel at $20 million, then you probably have an alternative method and figure.

  5. LTMMMMayhem says:

    Kabweza, the word go this company was on a long haul operation flight on a quarter tank. Having been criminalized by the authorities for ZERO license will it be logical to operate and trade or maybe the Zanu-pf way when the business needs over US$300 million the guess remains as good as anybody’s but welcome ZIMASSET hupfumi to my countrymen. If the future hangs by the thread will they pay interconnection rates as the lights are technically off, will anyone go into near term and immediate business deals or whatever??? What off disposing the assets, the future for Telecel Zim is ZERO.

  6. Anonymous says:

    Lol ! I am still blinking fast as I see The Editor persisting that Telecel is worth only $50 million . ..and someone talks of turning legislation into profit !!!! What exactly does “they convert legislation into personal profit mean ” ?

  7. Anonymous says:

    Thanks The King for enlightening all of us that what The Editor ….ooops Blogger posts are not facts ….and are mere unsubstantiatable opinions. I guess it’s in keeping then for one Tapiwa (not his real name) would say something as meaningless as “they convert legislation into personal profit”…..and all thoughtfully nod in agreement !!!!!

  8. Anonymous says:

    Interest on Telecel— an established business! Where can the market get the truth? May I ask the EC shareholders to list what they paid for the stake in telecel, to convince the public that they are not just trying to carry out another invasion of private interest in a private company. It is difficult to sympathise with unsubstantiated claims of ownership, no share certificates or even a receipt evidencing payment. Greed is abound in Zimbabwean people.If anyone wants a mobile phone licence, they should apply to the relevant authorities. Leave telecel alone, it employs Zimbabweans who just want to earn an honest living out of their work. Corporate predators are just that. There is no other interest other than their own.Take serious note of the characters involved in the process, link that to the organisations who have claimed ownership, falsely or otherwise, of the company, see the truth, do not wait to be told. Long live James Makamba, the undisputed entrepreneur behind Telecel Zimbabwe!

    1. tinm@n says:

      All ado about nothing. I could fall short of calling you James wacho. Taking the matter too personally, if you are the same Anonymous person who’s been posting.

    2. Anonymous says:

      Laughable. By the same token, show us the proof of payment for tiger $137 million licence …..a bargain in my view .

      Telecel is unlicenced. Show me the evidence to prove otherwise !

  9. Keith says:

    Telecel is unlicensed which makes 40% for 20 million not a bad deal as the new new holder of those shares will have to fork out another 137 million. Therefore, we are looking at a rough estimate of $160 million for 40 % of Telecel. Ofcourse, the assumption here is that the holders of the 60% will not contribute to the licence.

  10. juss says:

    Great article.

    Brainworks valuation for telecel is 50m for 100% share holdings plus 137m licence fee less 5m already paid for licence = 182million.

    That’s the Brainworks valuation. it might be high or low, it is still their valuation.

  11. Cris says:

    I do not believe the Minister and cabinet are so foolish to commit political suicide. Then the people will consider Zim Asset as a programme of ensuring the populace is jobless. If he does his political career is as good as dead. 2018 is to near for the people to forget since he will be sending another 1000 plus to South Africa to be victims of Xenophobia. Good luck Minister in your endeavors fore warned is fore armed.

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