LEO Mugabe’s clandestine bid to buy a stake in Telecel Zimbabwe (Pvt) without the knowledge of other local shareholders has fallen on its face after major shareholder Telecel International Ltd snubbed the
Telecel International owns 60% of Telecel Zimbabwe while a local group, Empowerment Corporation (EC) in which Mugabe claims to have a stake, owns 40%.
Zimbabwe’s telecommunications regulations stipulate that a foreign company can only own up to 49% in a cellular network.
EC as a whole holds the preemptive rights to dilute Telecel International’s shareholding in Telecel Zimbabwe.
The government has for the past two years been threatening to cancel Telecel Zimbabwe’s operating licence unless it changes its shareholding structure to reflect a 51% shareholding for EC and 49% for Telecel International in Telecel Zimbabwe. Telecel International had offered to sell the outstanding 11% stake to EC in compliance with the law. EC has since started negotiations with Telecel International.
Confidential documents to hand however show that while EC are still negotiating to buy the shares, Mugabe went behind their back and made a secret offer to take over the stake through his company, Integrated Engineering Group (IEG).
In his two offer letters of July and October, Mugabe told Telecel International that he had been tasked by EC to buy the stake. He reminded the international firm that Telecel Zimbabwe’s operating licence would be cancelled unless they disposed of the outstanding 11% to a local company — in this case his IEG.
Mugabe, a nephew of President Robert Mugabe, offered US$3 million for the shareholding, documents to hand say. Two letters in possession of this paper show that his secret offer collapsed after Telecel International discovered that Mugabe did not have permission from EC to buy the shares as he claimed.
Telecel International’s interim chief executive Jim Bailey wrote to Mugabe informing him of the complications of his offer. In the first letter dated August 1 Bailey told Mugabe that he was “surprised that IEG had been asked by EC to purchase the stake” because he had not received such communication from EC.
“We have been informed by them that all communications between EC and TIL (Telecel International) should be done through the office of the chairman of EC, and we have heard nothing of the matter through this channel,” Bailey said. He said there was something amiss about Mugabe’s offer because Telecel International had a binding agreement with EC that both shareholders should approve the introduction of a new partner into Telecel Zimbabwe.
Mugabe wrote another letter to Telecel International in August repeating his offer. He said he was ready to start negotiations. He warned them that the licence was in danger unless they sold the 11% to a local company.
Two weeks ago Telecel International wrote again to Mugabe reiterating that they were not in a position to start negotiations unless he proved that he had permission from EC to undertake such a deal.
In that letter, Bailey said he found Mugabe’s claims that he has been given the permission to by the stake “curious”.
“We find it curious that although you have, as you say, been informed by other members of Empowerment Corporation that they have no objections to your entering into discussions with us regarding the 11% shareholding, we have not received any notification of a change in the chairmanship of Empowerment Corporation,” said Bailey.
Bailey said Telecel International only dealt with EC’s representatives on the Telecel Zimbabwe board of directors—James Makamba and Jane Mutasa.
“Accordingly, and until such time as we would receive such proper official notification, we see no point in entering into such a discussion.”
When contacted for comment this week, Mugabe confirmed he had made the offer saying he had the permission of EC to buy the stake.
“Yes, I made the offer to buy the 11% because if we don’t correct the structure Telecel Zimbabwe’s licence will be cancelled. Apparently EC does not have the money required,” Mugabe said.
It is understood that government had given Telecel International and EC to the end of 2007 to put the structure in place to avoid losing Telecel Zimbabwe’s licence. When pressed to prove that EC had surrendered its preemptive rights to him, Mugabe was evasive saying he needed time to find the evidence because he was at parliament. He accused this paper of trying to scuttle his deal.
“So you guys want to destroy my deal? Is that what you want to do?”