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

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 selling) was 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.

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!