HomeLocal NewsNew battle erupts over Telecel

New battle erupts over Telecel

THE National Social Security Authority (Nssa), which financed the US$40 million take-over of Telecel Zimbabwe from international telecoms giant VimpelCom, is battling with state-owned information and communications technology (ICT) firm Zarnet for the control of the country’s third largest mobile service operator, it has been established.

By Elias Mambo

This is a new development in the long-running ownership wrangle over the mobile phone operator. Last year private equity firm Brainworks Capital withdrew its bid to acquire Telecel over the opaqueness of the shareholding structure of a local consortium Empowerment Corporation, which has a stake in the firm.

Government, through Zarnet, last year entered into a sale and purchase agreement of Telecel Zimbabwe with Global Telecom Holding, a unit of VimpelCom. The agreement was Zarnet would pay the US$40 million on terms.

Zarnet was to acquire 100% shareholding in Telecel International Ltd which in turn owns 60% of Telecel Zimbabwe.

Zarnet structured the deal and engaged Nssa to raise US$40 million for the acquisition of the 60% stake in Telecel.

The funding structure that Zarnet wanted included a loan payable over a 10-year period at 7% per annum with a two-year moratorium.

However, Nssa initially rejected the proposal saying it was unwilling to fund such a deal, but in October last year its finance, investment and procurement board committee reviewed the offer after a due diligence on legal and tax matters, sources said this week.

Sources said the payment was staggered since government failed to transfer the whole amount due to non-funding of the nostro accounts. Initially, US$10 million was paid and then US$30 million followed, although only US$6 million of that amount has been sent out to VimpelCom due to cash problems in banks.

However, sources said a new battle has erupted between Zarnet and Nssa which now wants to take over Telecel instead of being merely the financier.

“There is a new struggle as Nssa now wants to run Telecel instead of being financier,” a source said. “The funding arrangement was a loan payable in 10 years at a 7% interest, but it seems Nssa now wants to run the mobile service provider as it feels Zarnet has no money and won’t repay. Crisis meetings have been held as Zarnet is refusing to surrender to Nssa’s demands.”

In a letter addressed to Zarnet ahead of crucial meetings between the two companies recently, Nssa said it wanted to resolve issues to deal with the call-back contact person and proposed change to deed of amendments, among many other things.

“Call-back contact adjustment — confirmation that, as per Nssa’s letter of July 13 2016 to yourselves, Zarnet had indeed written to Barclays Bank Plc and Global Telecom Netherlands advising them that Dr (Henry) Chikova (Nssa chief social security officer and acting general manager) is the sole call-back contact of the funds in terms of the escrow agreement,” Nssa wrote. “Deed of amendment — confirmation that Zarnet has signed the deed of amendment to the SPA with VimpleCom in order to protect the extension of the Long Stop Date to 30 September 2016. Proposed change to the said deed of amendment — to include a clause stating explicitly that in the event of a transaction falling through, the US$6m is returned to an account nominated by Nssa.”

Sources said Nssa wants Zarnet to confirm how the new arrangement will work.

“They want Zarnet to confirm that September 30 is the final date on which full settlement is completed and the asset (Telecel) becomes Zimbabwean-owned,” another source added. “Nssa wants that the US$6m which has been paid must be repaid into their account if the deal fails, so they are demanding a clause stating that condition to be inserted in the agreement of sale. Generally, they want Zarnet to have nothing to do with the deal despite the fact that Nssa was approached only as a financier.”

Nssa board chairperson Robin Vela confirmed this week to the Zimbabwe Independent that the social security agency would unlock value by taking over Telecel.

“We have pensioners’ money so we have to look at best ways to deliver good service to them. We are looking into controlling Telecel Zimbabwe because it is an advantage to our business, for instance in such things as mobile money for our pensioners. We have never said we are financiers,” he said.

Zarnet board chairperson Casper Chigwedere said his focus for now was on concluding the purchase of Telecel.
“Priority is to close the transaction on behalf of the Zimbabweans; everything else can always be dealt with internally. Nssa and Zarnet serve the same principal, the Zimbabwe government,” Chigwedere said.

Information Communication Technology minister Supa Mandiwanzira, however, insisted that Zarnet is buyer and owner of Telecel, not Nssa.

“Zarnet is the buyer of the Telecel shareholding from VimpelCom, and it paid its own money (US$10 million), except the US$30 million secured through a funding structure with Nssa,” Mandiwanzira said.

“The structure is such that Zarnet will secure the equity interest and for its part Nssa is getting a bargain buying debt of US$98 for only US$45 million. In order to ensure a smooth execution of the deal, Zarnet and Nssa have agreed a step-in agreement which allows Nssa to enjoy Zarnet’s rights as the purchaser, albeit temporarily.

The agreement between the two parties is to that effect.

“Obviously, we understand where Nssa is coming from. They have to protect pensioners’ funds and that’s why the two parties have agreed on that sort of a structure.”

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