Bharti Airtel faces ownership crisis in Nigeria

A court in Nigeria has upheld Econet Wireless Limited’s five per cent claim to Airtel Nigeria, a cellco to which it was a founding shareholder in 2001. The court sided with the Zimbabwe operator that its stake had been unfairly cancelled, and any decisions since the cancellation are void.

“All actions and resolutions taken by the company since October 2003 at which Econet Wireless was entitled to be notified, and to participate in, as a shareholder, but was prohibited, are null and void,’ the judgement said. ‘This includes decisions to sell shares, issue shares, and also transfer shares to third parties.”

Econet said the judgement means the cellco’s name would revert to Econet Wireless Nigeria. “We have made it clear to the company, that as a shareholder, we would like to ensure that all actions that must be taken to comply with the court order are undertaken in such a way that there is minimal disruption to the ongoing operations of the company,” commented Econet Wireless Group chairman Strive Masiyiwa. “The board of Econet Wireless and I remain willing to sit down with Bharti Airtel, to review the best way forward for all parties. In the meantime, we have a fiduciary responsibility to take all of the necessary steps to vigorously protect the interests of our shareholders,” he added.

Laughing all the way to the bank – Strive Masiyiwa has his company’s five per cent stake claim to Airtel Nigeria affirmed by court (Image – courtesy of World Economic Forum)

Bharti Airtel has said it will appeal the court’s decision and that the judgement will have no impact on the equity holding of other shareholders in Airtel Nigeria.

The Indian telco inherited the legal case as part of its US$9 billion acquisition of Zain’s Africa operations in June 2010, including 65 per cent of Zain Nigeria.

Econet has always claimed that its five per cent stake in Econet Wireless Nigeria was cancelled following the takeover of the telco by Vodacom in 2003. Econet Wireless Nigeria was subsequently renamed Vee Networks and its brand name changed to Vodacom, but Vodacom pulled out of its contract soon after, citing ‘irregularities’ in the payment of the brokerage fees. Celtel International then purchased 65 per cent of the company in May 2006, a move that was disputed by Econet Wireless Limited, which claimed its pre-emption rights were breached. In 2009 Econet Wireless began moves to block the sale of Celtel’s (Zain) interests in Nigeria to Bharti Airtel until a ruling on the dispute over ownership of the company was passed. However, the takeover by the Indian firm was concluded in June 2010, with Zain Nigeria rebranded under the Airtel moniker by the end of the year.

A clause in the agreement between Bharti Airtel and Zain Group in the acquisition of the latter’s assets in Africa, was that Zain would be liable for any losses that may result from the ongoing litigation by Econet Wireless in Nigeria.