Telecel buyout scandal deepens

DODGY attempts by government to take over Telecel through the backdoor are deepening the scandal engulfing the company as it emerged this week the state-owned firm, Zarnet, cherry-picked to buyout the mobile network operator, is a shadowy and bankrupt entity with state security links.

Elias Mambo

This comes as it emerged influential people in government are actually trying to use Zarnet as a cover to corruptly take over Telecel for private rather than public benefit.

Although Unitel, Angola’s largest mobile phone network in which President Eduardo Dos Santos’ daughter Isabel has shares, and South Africa’s MTN have been linked to a Telecel takeover, it has now been confirmed by government itself the state wants to take over the company.

Last week Information and Communication Technology minister Supa Mandiwanzira told parliament discussions were currently underway between Zarnet and Telecel shareholders.

“Recognising it (government) did not have immediate capacity to do the transaction (acquiring Telecel), it has chosen one of the entities it owns (Zarnet) to pursue the transaction in a commercial way,” Mandiwanzira said.

This has raised questions and suspicions about the goings-on around Telecel given that the shady process lacks transparency and accountability.

To start with, government already owns NetOne, the second-largest mobile network operator by subscriber base, which was financially troubled until it secured a US$218 million funding from China’s Eximbank. The Chinese government approved the loan facility that will see NetOne expanding its base stations and acquiring new technology, rendering it more competitive.

Second, government has done everything in its power to stampede Telecel into a deal until it was stopped by a High Court order after it cancelled its licence, citing alleged non-compliance with licensing conditions and empowerment laws.

Third, TelOne wants to be the country’s fourth mobile operator.
Fourth, the firm government wants to use to acquire Telecel, which has over two million active subscribers, is in financial chaos and technically insolvent. Econet remains the market leader with 6,5 million active subscribers and NetOne is in second spot with 3,2 million active subscribers.

Zarnet was founded in 1997 and has been operating as an internet service provider.

It runs government internet services and on its website touts the presidential e-learning programme, government digital villages and community information centres as some of its major projects.

Sources say it is linked to state security structures.

However, the company, housed at the old Reserve Bank Building in Harare, is a mere shell. Its financial records show it is struggling and teetering on the verge of collapse. The company has also been operating without a board of directors. Investigations by the Zimbabwe Independent this week showed Zarnet has neither the capacity nor expertise to run a mobile operator, let alone take over Telecel.

Sources close to the company said besides being bankrupt, the company lacks capacity.

“Asking Zarnet to acquire Telecel is ridiculous,” the source said. “Zarnet has been in financial trouble since its formation in 1997, so it simply lacks the financial resources and capacity to take over Telecel. It’s a scandal on its own to even begin to think like that. Of course, it’s also clear Zarnet is being used as cover for some murky deal.”

Most of Zimbabwe’s state enterprises or parastatals, which are a perennial drain on the fiscus, are broke or technically insolvent. The last report on parastatals by Auditor-General Mildred Chiri for the financial year-ended December 31 2014 showed that.

In her report, Chiri also said Zarnet is broke. She said it lacks proper corporate governance and is heavily indebted.

“The company had no attendance register for board and committee meetings for the years 2012 and 2013,” Chiri’s report says. “There was no evidence that board members declared business interests and there were no formal procedures to declare business interests for the company’s key management staff.”

The report also says the company operated with one committee, that of human resources.

“The company incurred losses from 2011 and has been operating negatively as up to December 31, 2013. Poor cash inflows have impacted negatively on the operational effectiveness of the company, hence the company might fail to fulfil its mandate in the not-too-distant future,” it says.

While responding to a question in parliament, Mandiwanzira last week said since the government did not have money to fund its Telecel takeover bid, it had decided to task Zarnet to buy the Amsterdam-based VimpelCom’s 60% equity in Telecel.

Mandiwanzira said at the same time local shareholders, who hold a 40% stake inTelecel, had also decided to sell their shareholding to the government, which means Zarnet — as broke as it is — would acquire 100 % of the company.

Mandiwanzira also said Telecel had offered to sell its stake to the government after government objected to the disposal of the mobile network operator to a foreign investor because Telecel shares had changed hands twice without the government earning any capital gains tax.

Asked why the government had tasked Zarnet to buy Telecel when it was collapsing, Mandiwanzira said one of the ways to revive an ailing company was to give it a viable option.

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