Phone
South Africas Econet Wireless Holdings Ltd. disputes the ownership of Zains Celtel Nigeria B.V., and said it sought arbitration measures to prohibit the units sale or transfer. “Celtel provided certain undertakings to preserve the status quo,” it said, when asked about the case. Zain Chief Executive Officer Saad al-Barrak denied on Oct. 5 that the company made such a commitment. “This has no basis whatsoever,” he said.
The dispute may disrupt plans by Kuwaits Kharafi Group and its National Investments Co. to sell a 46 percent stake in Zain valued at $13.7 billion to a group led by Indias Vavasi Group and Malaysian billionaire Syed Mokhtar Al-Bukhary.
“As a potential buyer of a stake in the company you certainly want the dispute about who owns the Nigerian business to be resolved as it poses a significant commercial risk,” Emeka Obiodu, a London-based telecommunications analyst at market research company Ovum, said in a phone interview. “Nigeria is a fast-growing and huge African market and therefore one of Zains most important assets.”
The Nigerian unit is a key asset for Zain. In 2008, Zain generated about 21 percent of its total earnings before interest, tax, depreciation and amortization in Nigeria and about 22 percent of its total sales.
The Dispute
Bryanston, South Africa-based Econet is looking to overturn a 2006 deal in which Celtel bought a 65 percent stake in Nigerian mobile operator Vmobile, since renamed Zain Nigeria. Econet, which owns 5 percent of Zain Nigeria, says it should have been given the opportunity to buy the shares first.
Zain, then known as Mobile Telecommunications Co., bought Celtel International for $3.4 billion in 2005 to expand into 13 African countries, including Kenya and Nigeria.
Econet said it “can confirm that it is currently pursuing arbitration proceedings against Celtel, now Zain, and others to challenge the transaction by which Celtel purported to purchase a majority stake in Vee Networks Ltd., now Zain Nigeria.”
Chris Gabriel, chief executive officer of Zains Africa unit, said the case is “following its due process,” without commenting further when contacted by Bloomberg News on Sept. 21. Zain spokesman Ibrahim Adel said the company had no comment. Celtels Lagos-based law firm F.O. Akinrele & Co. didnt return calls seeking comment.
Vivendi Walks Away
Zain had earlier this year put its African operations on the block. Paris-based Vivendi SA, owner of phone companies SFR and Maroc Telecom, said in July it halted talks with Zain about buying a majority stake in Zains African telecommunications assets, after the two sides failed to agree on the price.
Nigeria is Africas most populous nation with 155 million people and the number of fixed-line and mobile-phone customers increased to 67.9 million in June from 65.5 million in January, according to the Abuja-based Nigerian Communications Commission.
Mobile-phone subscribers accounted for 98 percent of the total. Phone connections in Nigeria soared from 867,000 in 2001 when mobile-phone licenses were auctioned for $285 million each.
Nigeria is the fastest-growing telecommunications market on the continent. It has overtaken South Africa as the African country with the most phone users, with many people carrying multiple handsets because of unreliable services.