Telecoms firms merger project talks underway

Talks to merge three telecommunications companies, Zarnet, Powertel and Africom, are underway and will be finalised by the end of the year, businessdigest has learnt.

Melody Chikono

Powertel and Zarnet are both State enterprises, while Africom, founded by Kwanayi Kashangura, is a private company.

Powertel and Africom are both internet access providers, while Zarnet was formed by the Information Ministry to provide ICT requirements to government schools and tertiary institutions. It currently holds a 60% equity stake in Telecel Zimbabwe Ltd on behalf of government.

This comes after government earlier this year came up with a plan on corruption-riddled state enterprises and entities that could result in some being merged, privatised, or liquidated.

The parastatal reform plan will also see the partial privatisation of TelOne, NetOne and Telecel, while Zarnet, Africom and Powertel will be merged into one company. This is part of the strategy by government to align parastatals to enable them to access capital.

ICT Ministry permanent secretary Sam Kundishora (pictured) told businessdigest this week that government had an interest in Africom, making it possible for it to be merged with the these State entities, but would not be drawn into quantifying the equity interest. It has also emerged that the ICT Ministry, Office of the President and Cabinet (OPC) and the State Enterprises Regulatory Authority (Sera) has already come up with the terms of reference and a concept document to effect the merger.

Kundishora said a committee is looking into the companies’ financial positions and valuations. The committee has since written to the three entities requesting them to send names of representatives to the committee, but they have not responded.

“We held meetings with Sera and OPC to get to understand the modus operandi for the merger. We now have terms of reference and a concept document. We will have to engage a consultant firm to effect this process. It’s not something we can do as the ICT Ministry. We have sent to Africom, Zarnet and Powertel requesting them to give us names of representatives to the committees, but they have not responded. They will have to respond as this is not our call, but it is a cabinet decision we have to abide by. By next week, we should have the names,” he said.

Of the available details, an intensive analysis into the challenges being faced by each one of the entity will be analysed and categorised. “It all depends on what we get but it’s our duty to execute what we have been tasked by cabinet and we are going to engage consultancies to carry out this mandate. And it’s not something we can do as the Ministry of ICT,” he added.

On how much equity foreign investors could get in the merged enterprises, he said this would be determined by a World Bank report expected to be released soon.

According to Kundishora, the World Bank is currently running a survey on Zimbabwe’s investment climate together with the Ministry of Finance whose findings will guide investment decisions into the country.

“The Word Bank has been here having meetings and there is a report it is developing with the Ministry of Finance.
It’s a country programme in which they are assessing the companies in the country. It’s going to have an impact in relation to other investment factors in the country,” he said.

Powertel and Africom have been experiencing problems of their own and have lost market share. From 2016 to 2017, their market share of internet revenue dropped from 16,8% and 3,1% to 13,9% and 3,0% respectively and has been steadily declining in the past few years. In Q1 2018, total revenue generated by Ipap was US$79,4 million, representing a 52,1% increase from Q4 2017. However, both Powertel and Africom recorded significant declines in revenue and market share. Powertel’s decline was 4,8% to 8,6% from 12,8 % in Q4 2018 while Africom recorded a 0,69% drop to 2,1% from 2,8 % in Q4 2017.

Last year, Fernhaven Investments (Private) Ltd’s, the major shareholder in Africom with a 41% equity stake, won an injunction to suspend a resolution passed by its shareholders to reduce its shareholding in Africom Holdings.

Shareholder differences also saw the Africom non-executive director Kashangura stepping down as CE amid revelations that he was forced out by fellow shareholders. Insiders then claimed that regardless of how he left the company, Kashangura was still going to be entitled to a board seat since he holds a 28% equity stake in the business.

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