HomeBusiness DigestEconet braces for combat in Nigeria

Econet braces for combat in Nigeria

Dumisani Ndlela

SOUTH Africa-based Econet Wireless Group this week sprung into combat, claiming the right of first refusal for a 65% controlling stake in Nigeria’s Vee Mobile offered to Kuwaiti firm MTC under a US$1 billion deal.

Businessdigest under

stands that the move at once unsettled Vee Mobile management who immediately granted the emerging African telecommunications giant its preemptive rights, prompting Econet to dispatch a 20-member team of legal, financial and technical experts to Nigeria for a due diligence exercise scheduled to have commenced on Wednesday.

A report from Econet’s due diligence is expected to form the basis of the telecommunication group’s offer to Vee Mobile shareholders selling their stock.

Group spokesman Sure Kamhunga said Econet would decide on the way forward once the due processes had been completed.

He, however, remained mum on how much Econet was prepared to pay for a controlling stake in Vee Mobile, or even discuss whether it will bid for the 65% that MTC wants to buy or a lower threshold that will still give it management control.

Econet chief executive officer Strive Masiyiwa was also not talking about whether he had the cash needed to buy out his partners or how it would be raised.

But sources indicated that Econet was taking no prisoners in its bid for full control of Vee Mobile, Nigeria’s third largest cellular network which had again been subject of a take-over bid by South Africa’s largest cellular network operator, Vodacom, which later abandoned its bid after facing several lawsuits from Econet which claimed preemptive rights.

The Nigeria operation is expected to be a key asset in Econet’s portfolio as the telecommunications group seeks a listing on the London stock market to raise US$400 million through an initial public offer.

Kamhunga yesterday confirmed from South Africa that they had received documents from Vee Mobile’s company secretary containing details of MTC’s offer, as well as a notice advising Econet of its preemptive rights.

“We have received the offer made by MTC to buy shares in Vee Mobile, and we are currently studying it. We will need to establish its validity first before we decide on the way forward,” the spokesman told businessdigest on Wednesday.

Kuwaiti telecom services provider MTC or Mobile Telecommunications Co, said on Sunday its Africa-based subsidiary Celtel International had signed a conditional deal to buy 65% of Nigeria’s Vee Mobile for just over US$1 billion.

MTC said in a statement that the deal included an option for the purchase of the remaining 35% of Vee Mobile.

Kamhunga said Econet lawyers had already begun perusing the “voluminous offer documents that the company has received from Vee Mobile regarding the conditional offer by MTC to acquire a 65% controlling stake”, maintaining: “Our lawyers are going through the documents to confirm whether it’s a bona fide and valid offer.”

“We have received similar such offers in the past and we need to confirm the validity of the documents that we have just received. Once this process is through, we would be in a position to make further statements on the way forward,” Kamhunga said.

In terms of the shareholders agreement, an existing shareholder has right of pre-emption over any offer made by a third party.

The investment in Nigeria by Econet in 2000 remained its most ambitious project since Masiyiwa founded the company in 1993.

The expected return to Africa’s most populous country by the company is expected to be the lynch-pin of its global foray where it is already planning to seek additional funding in Europe through the UK listing.

“Having come this far, it is inconceivable that Masiyiwa would simply walk away from such a deal and we expect a bitter fight to the end,” a telecoms analyst said.

Sources indicated that Econet had linined up financiers who are willing to participate in what is now believed to be one of the top three telecommunications markets in Africa after South Africa and Egypt.

In 2003 failure by Vee Mobile to allow Econet to exercise pre-emption on an offer made by Vodacom led to a legal dispute with Econet which eventually forced Vodacom to withdraw its offer for the company.

Econet owns 5% of Vee Mobile whose shareholding includes more than 20 private Nigerian shareholders, among them state governments.

Vee Mobile was originally called Econet Wireless Nigeria but current shareholders had changed the name to punish Econet for foiling their bid to hand over a controlling stake to Vodacom.

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