Telecel: Govt shuts out private investors

via Telecel: Govt shuts out private investors – DailyNews Live 17 July 2015 by Mugove Tafirenyika

HARARE – The cash-strapped Zimbabwean government is bulldozing its way into “buying” Telecel Zimbabwe (Telecel) after it pushed out bids from local companies, that wanted to inject fresh capital into the mobile communications company, the Daily News has learnt.

This comes after Information Communication Technology (ICT) Postal and Courier Services minister Supa Mandiwanzira told the National Assembly on Wednesday that Telecel shareholders had offered government through its internet service provider, Zarnet to take over the company.

“Recognising that government doesn’t have immediate financial capacity to buy into the company, government chose one of the entities it owns 100 percent to pursue the transaction.

“This was after the major shareholder in Telecel — Vimplecom, which holds 60 percent and the Empowerment Corporation — which has a 40 percent shareholding in the company had both written to government offering their respective shareholding,” Mandiwanzira said.

The ICT minister said government stepped in when it emerged that Telecel ownership had changed hands twice, with foreigners taking over but not remitting capital gains tax.

“We came to a position that Zimbabwean assets could not continue being traded without capital gains tax. So as most of you may be aware, Vimplecom sold a 60 percent stake in one of its Algerian businesses to government, so the same arrangement was implemented,” he said.

However, questions are being raised on government’s capacity to buy Telecel when it is struggling to raise cash to fund its day to day activities.

Documents seen by the Daily News show that Kingvile Investment — one of several companies which bid to buy Telecel in March this year — was being elbowed out of the race to ensure that government has a 100 percent shareholding in the telecommunications firm.

Kingvile intended to complete the takeover at an equity value of $100 million in which the Telecel International (a subsidiary of Vimplecom) would pocket $600 000 while the minority shareholders (Empowerment Corporation) were entitled to $400 000.

“Due to the existing Telecel debt of over $200 million against a total asset base of $200 million, the true cost to Kingvile for acquiring 100 percent is an enterprise value of over $300 million,” reads part of the document Kingvile presented to Telecel.

The company also sought to issue a five percent stake to the Employee Share ownership Plan in order to provide an ownership interest to over 400 Telecel workers.

“Kingvile will also disburse a further $130 million to local telecommunications regulator Potraz on or before June 30, 2015 to clear the outstanding balance on Telecel’s mobile licence valued at $137 500 000 of which $8 million was previously paid by Telecel in 2013,” reads the bid.

It was also envisaged by Kingvile that the company would inject $390 000 into Telecel between July 2015 and June 2016 “for the rollout of a Next generation all IP telecommunications network platform with converged fixed-mobile service delivery comprising 4G,LTE Fibre, Wifi,VSAT, IMS-VoLTE,IPTV,CCTV,Mobile Money,M2M,Cloud and other platforms…”.

The company intended to source $500 million from Project Financing ex International Investment Bankers while the other $120 million would be availed by Equipment and Device Financing ex Network Equipment and Device Vendors.

When contacted for comment over the allegations, Mandiwanzira said he was not prepared to comment.

“I am not going to say anything more than what I said in Parliament yesterday (Wednesday). Concerning claims that government does not have money, again, I do not wish to comment on such poverty views,” said Mandiwanzira.

Telecel — with over 2,2 million subscribers — is currently embroiled in a legal battle with government over the cancellation of its operating licence.