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Published On: Sun, May 17th, 2015

The curious case of Telecel Zim

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by Africa Moyo and Darlington Musarurwa

AS Telecel Zimbabwe gasps for breath, a look at its 18-year history reveals intriguing political sub plots, obscene staff turnover and a curious reluctance to open up the company to broader participation of local investors, which, ironically, was a key founding tenet of the telecommunication firm.1505-2-1-TELECEL

Telecel’s licence was issued by then Information, Posts and Telecommunications Minister Dr Joice Mujuru on March 6 1997 in circumstances largely considered controversial.

Twenty companies were vying for the licence and six were shortlisted.

Telecel Zimbabwe shrugged off stiff competition from SupaNet — fronted by Ambassador Christopher Mutsvangwa — and Tritell, which was led by Mr Larry Mavhima.

SupaNet and Tritell came in second and third, respectively.

Notably, Mr Strive Masiyiwa’s Econet, which has now become the biggest operator by revenues and subscribers, was distant fourth.

Immediately after announcing Telecel as the winners, Dr Mujuru urged the losing bidders to throw in their lot with the winning bidder by taking up 15 to 20 percent equity in Telecel — a proposal that was rejected outright.

On March 26, 1997 SupaNet and Tritell representatives issued a joint statement saying the move “proposed by the minister does not make commercial sense”.

Then Acting President Dr Joshua Nkomo also slammed the awarding of the licence to Telecel, suggesting Econet was a deserving winner.

“We don’t do things like that in this country. The young man (Mr Masiyiwa) was running around and now they are taking things from him. That is unacceptable . . . we will sit down and discuss the matter,” said Dr Nkomo.

The general and the businessman

There has been enduring speculation that Telecel Zimbabwe got the licence on the strength of close business ties between Dr James Makamba, who later emerged as the lead agent in Empowerment Corporation (EC), a consortium stitched up from special local interest groups, and Dr Mujuru’s husband, the late General Solomon Mujuru.

It is believed that Dr Makamba’s time as an activist during the liberation struggle provided him with influential contacts both in Government and commerce.

Market rumours suggest that when Gen Mujuru resigned from his post-Independence post of Commander of the Zimbabwe National Army, he went into business and farming and chose Dr Makamba to be one of his partners in Bindura.

Dr Makamba disagrees.

Last week, he maintained that the processes leading to the award of an operating licence were above board.

“Telecel was the third licence or last licence to be issued. NetOne and Econet were both operational before Telecel. The licences were awarded by The Cellular Adjudication Committee set up by the Cabinet.

“It was made up mostly by persons with qualifications in telecoms and finance. I hope that clarifies the matter sir,” said Dr Makamba in emailed responces to enquiries from The Sunday Mail Business.

Records, however, show it was in fact the second cellular licence.

Empowerment

What is indisputable is that increased local participation in the mobile telephone company was borne out of Government’s desire to empower locals.

The Zimbabwe Wealth Creation Council, a broad-based organisation whose vision was to economically empower members, played a crucial role then.

Government had since 1991 advanced the cause of black economic empowerment.

Pressure to empower locals became organised in 1991 when the Indigenous Business Development Centre was launched and got a Z$100 million injection from Government.

Another Z$400 million was put in but internal squabbles led to the formation of splinter groups by dissatisfied members.

The Affirmative Action Group, then led by Dr Phillip Chiyangwa as president and Mr Peter Pamire as VP, was one such splinter formation.

Patchwork of shareholders

It seems the squabbles plaguing affirmative action groups were exported to Telecel Zimbabwe, whose shareholding was a powder keg as it brought together different visions, aspirations, philosophies and backgrounds.

The two anchor shareholders in Telecel Zimbabwe have always been Telecel International and the Empowerment Coporation (EC). EC controlled 60 percent equity, while Telecel International held 40 percent.

In turn, Dr Makamba’s Kestrel Corporation 15 percent of EC and the AAG, fronted by Dr Chiyangwa, held nine percent stake.

Dr Chiyangwa’s equity was later transferred to his company, Native Telecoms.

Other EC shareholders were the Indigenous Business Women’s Organisation, the Zimbabwe Farmers’ Union, Magamba Echimurenga Housing Scheme and the National Small-Scale Miners Association — who all held nine percent stakes; and Mr Leo Mugabe and Mr Patrick Zhuwao who, through their Integrated Engineering Group, had 10 percent.

Thirty percent of Telecel Zimbabwe was warehoused.

The EC borrowed Z$16 million from a bank and was asked to provide security. However, most shareholders failed to raise the funds as they had hoped to borrow from United Merchant Bank – businessman Mr Roger Boka’s bank — which unfortunately folded in 1998 after only three years of operating.

Only Kestrel Corporation and Native Investments raised the security required, and an arrangement to allocate shares in accordance with the commitment fees paid and security provided was reached.

Kestrel Corporation consolidated its 15 percent shareholding and Native Investments secured 11 percent.

Other shareholders who subsequently paid were IBWO, Selphon, the miners association and the Magamba housing scheme.

Cold War

Shareholder relations were testy, as each sought to pull the rug from under the feet of the others.

Just a year after Telecel Zimbabwe got its licence, Dr Chiyangwa allegedly attempted to mastermind a boardroom coup that could have seen him taking over as chair, replacing Dr Makamba.

The bid hit a snag, prompting the flamboyant business magnate to announce that he was pulling out of EC.

Dr Chiyangwa was quoted in 1998 saying: “We have, therefore, made a strategic decision to divest our interest in Telecel Zimbabwe, which is held through Empowerment Corporation . . . We had misunderstandings and they have been resolved by way of concessions and we are companions again and the fight between Chiyangwa and Makamba should not dent indigenisation efforts.

“Instead it should promote it because my pulling out will mean that another indigenous person is coming in and it has actually created more opportunities.”

But in a sensational U-turn, Dr Chiyangwa wrote to stakeholders on February 6 this year claiming that his company remained “a real shareholder” in Empowerment Corporation.

There is speculation that Native Investments’ shares were acquired by Dr Makamba.

If the relationship between Dr Chiyangwa and Dr Makamba was frosty, the relationship between Dr Makamba and Mrs Jane Mutasa, representing IBWO, was downright nasty.

Duels between the two for control of the firm continue today.

In 2001, former war veterans chairperson Mr Patrick Nyaruwata dismissed the notion that the ZNWVA has shares in Telecel Zimbabwe.

This came was after war veteran Mr Andy Mhlanga had threatened to close Telecel Zimbabwe if its chairman Mr Makamba did not “come clean” on the issue of their shares.

Mr Nyaruwata said the only war veterans linked body that had shares in Telecel was Magamba Echimurenga Housing Scheme, which acquired a stake in 1998.

Interestingly, Magamba Echimurenga are understood to have disposed of their shares in 2000 and 2001 and got just over Z$16 million from the sale of the shares, against an investment of about Z$120 million.

The drama continues

Cracks over shareholding within the consortium resurfaced in 2005, amid allegations that Dr Makamba had secretly altered the shareholding structure and board of directors of Telecel Zimbabwe.

Consequently, Dr Makamba’s Kestrel Corporation amassed 40 percent equity in Telecel Zimbabwe at the expense of the dilution of other members of the consortium.

But without stating figures, Dr Makamba says Kestrel’s stake had been diluted and other stakeholders’ equity been brought to initial levels before the squabbles.

In February 2004, Mr Mugabe engaged Gula Ndebele and Partners Law firm allegedly to reclaim his undisclosed stake in Telecel Zimbabwe, over and above the 10 percent he held through IEG.

Mr Mugabe owned 80 percent of IEG while Mr Patrick Zhuwao controlled the balance, naturally making him a shareholder in Telecel Zimbabwe.

At the same time, Mr Mugabe was understood to have been receiving Z$10 million cheques every month from Telecel – an arrangement insiders described as “curious”.

He claimed IEG was receiving payment for services provided to Telecel. Kestrel was touted as the project promoter while IEG was the technical advisor, hence the payments to IEG.

The drama in Telecel Zimbabwe continued in December 2005 when Mr Mugabe allegedly distributed a 30 percent stake in Empowerment Corporation that had been warehoused for future disbursement.

He allegedly gave Kestrel Corporation five percent to increase its stake to 20 percent and allocated IEG five percent in addition to its original 10.

Magamba Echimurenga, ZFU, IBWO and the Small-Scale Miners got five percent each.

In 2000, Telecel International, the majority shareholder in Telecel Zimbabwe, sold 80 percent of its shareholding to Orascom Telecom of Egypt.

The Orascom Telecom deal was valued at US$413 million and was expected to bring in a substantial amount of investment in the local subsidiary.

The deal did not change the shareholding of Telecel Zimbabwe, which is still 60 percent owned by Telecel International and 40 percent controlled by the EC.

Orascom Telecom is part of the Orascom group of companies which is the largest employer in Egypt with 20 000 employees.

Now, international telecoms company VimpelCom has a controlling stake in Orascom. However, VimpelCom is understood to be planning to sell its stake.

The company operates in 14 countries and is head-quartered in Holland.

Locals play second fiddle

Through it all, the foreign investor does not seem keen to give locals a controlling stake in Telecel Zimbabwe.

Calls for the company to regularise its shareholding predate enactment of the Indigenisation and Economic Empowerment Act, which was signed into law on March 9, 2008.

In fact, the Postal Telecommunications Regulatory Authority of Zimbabwe cancelled Telecel Zimbabwe’s licence in 2007 because its shareholding structure.

The company successfully sweet-talked Government to reverse the decision and for the past eight years, there has been nothing but drama vis-a-vis shareholding.

A fed-up State decided to pull the plug again on April 29 this year.

But the High Court has since ruled that Government erred in cancelling operating licence.

While some observers interpreted the recent license cancellation attempt as a political decision linked to the jettisoning of a putschist clique from the ruling Zanu-PF, analysts say there are compelling reasons to redo things at Telecel.

For example, while other telecommunications companies – Econet Wireless Zimbabwe and NetOne – have paid up their operating licence fees, Telecel, which is purportedly owned by foreign investors, has only paid US$31 million.

Potraz said last week Telecel Zimbabwe still owes Government more than US$106 million.

“They have paid over US$31 million for the new licence. In the past, they also paid for their licence fees.

“What has been happening is that in 2007, we cancelled their licence but they appealed to the minister and the minister upheld their licence but with a condition that by the time of renewal, shareholding would have been sorted out.

“So we said we will not issue them with a new licence until shareholding and payments are done. That was back in 2013, and unfortunately one of the conditions is yet to be met. They have been operating without a licence for some time and they have developed a thick skin.

“In January we wrote to them saying it was not sustainable for them to continue operating without a licence and we have had meetings with them.

“There was an agreed payment plan with Government in 2013 but they were in default with the plan. Now that they have paid something for the licence, they are in compliance in terms of payment but the shareholding structure is yet to be addressed,” Potraz acting director-general Mr Baxton Sirewu told The Sunday Mail Business.

Mr Nicholas Goche, who was the minister in charge of the sector for years, is accused of negotiating softer payment terms with Telecel.

The terms of Telecel’s licence renewal agreement that were signed on August 6, 2013 stipulated that the company would pay US$14 million by August 6, 2014.

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