TELECOMS minister Super Mandiwanzira confirmed Wednesday government’s takeover of mobile phone firm Telecel Zimbabwe after threatening to shut the company down, accusing it of failing to pay its licence fee.
But the transaction has raised eyebrows as it emerged government forced NSSA to finance the transaction with an unsecured loan, thus putting pensioners funds at risk.
Mandiwanzira claimed to have effectively paid nothing for the 60 percent majority shareholding in the company.
“Frankly speaking, the value of Telecel had been eroded over the years and what we bought were the receivables extended to the unit and just paid a $1 for the shares,” the minister is quoted saying by State media Thursday.
He was being rather economical with the truth.
Vimpelcom Ltd demanded $40m to exit Telecel. In addition to that, there is also an $80m obligation by way of Vimpel’s shareholder loan to Telecel.
Documents forwarded to NewZimbabwe.com show that Mandiwanzira forced NSSA to stump up the $40 million, despite the state pension firm making clear it did not want to participate in the “risky deal”.
Curiously, the 60 percent shareholding is not going to NSSA but some shadowy company called ZARNet (Private) Limited said to be owed by the government.
Mandiwanzira wanted ZARnet to takeover Telecel but ZARnet could only come up with $7m; thus the resort to cash-rich NSSA which collects about $10m from Zimbabwean workers every month.
Significantly too, NSSA had made clear to Mandiwanzira that it did not want to be involved in the transaction, adding they had no appetite for what would be “a messy fight” with Telecel’s 40 percent indigenous shareholders led by South Africa-based James Makamba.
NSSA said transaction too risky
NSSA chairman, Robin Vela, made this clear in a September 23, 2015 letter to Mandiwanzira.
Said Vela: “As promised, I met with my investment committee yesterday to discuss NSSA’s support for … the project to acquire Vimpelcom’s shareholding and $80m shareholder’s loan in Telecel.
“I understand Vimpelcom’s interest to be 60% equity and $80 shareholder’s loan. I can disclose that NSSA’s investment team and management had formally declined to participate in the transaction based on the assertion that NSSA was just a funder, providing an unsecured loan.”
He added: “This is fundamentally against what NSSA’s mandate is, given NSSA is the custodian of Pensioners’ funds on which securing the capital and gaining a return on the same is a critical requirement.
“NSSA does not lend funds direct to any company, it lends to banks … under strict and limited conditions. The Telecel transaction would not qualify as such.”
Vela also proposed that NSSA could pay Vimpelcom the $40m and then hold onto the 60 percent shareholding until ZARnet recompenses NSSA, failing which the latter would take over the transcation.
“Should ZARnet fail to fund the $40m, then NSSA steps in and takes over the transaction with ZARnet forfeiting its $7m deposit,” Vela said in a September 23, 2015 letter.
The proposal was rejected by Mandiwanzira, with the apparent support of NSSA’s line minister Prisca Mupfumira.
Govt’s poor corporate record
Mandiwanzira said NSSA could not take over Telecel because it would not manage a prospective fight with the 40 percent indigenous shareholders.
“I need to point out as well that there is a lot of work that would be done on the 40 percent shareholder,” wrote Mandiwanzira on September 23.
“It could be a bruising battle which I don’t think NSSA should be at the forefront of at this stage. I could shade some more light and will try and call you from China where I’m at the moment.”
Quite why Mandiwanzira decided the cash-strapped government must take over Telecel remains unclear, especially given that the Zanu PF administration has failed to financially back Net-One, another state-owned mobile phone firm.
NetOne was licenced ahead of Econet, the latter having to fight a five-year battle to be allowed to operate. But Econet now leads the industry with a reported 8 million subscribers compared to NetOne’s 2.3 million.
Again, the government’s record in running companies does not make encouraging reading with parastatals such as ZISCO, NRZ and Air Zimbabwe, either collapsed or perennially struggling.
There was private sector interest in Telecel, but an offer by Brianworks Capital was rejected in favour of the ZARnet deal.
But having failed to raise the full purchase price of a about $40 million, it also remains unclear how ZARnet will be able to recapitalise Telecel.
The transaction also means government now controls two mobile phone phone companies unable to pay licence renewal fees, leaving Econet alone saddled with the burden.
An attempt to seek comment from Telecel chairman Makamba was unsuccessful late Wednesday as he was busy with other commitments