Telecel Zimbabwe faces cancellation of operating licence

Zimbabwe’s Ministry of Information Communication Technology, Postal and Courier Services has effectively cancelled the licence agreement with Telecel, but it will not force its closure as it seeks to tide over the business to more responsible investors.

It has been reported in local media that the government will this week call for a meeting with shareholders – Telecel International and the Empowerment Corporation – in order to advise them of the new position and also discuss the future of the business.

It is believed that the authorities intend to buy out the current shareholders and court new investors. Both shareholders have recently indicated their own intentions to divest from the mobile telecommunications operator.

In December 2014, VimpelCom – which indirectly bought 60 per cent of Telecel Zimbabwe through the acquisition of Naguib Sawiris’ Orascom Telecom Holdings in 2010 – said it would review its position in the local unit.

Similarly, some shareholders within the Empowerment Corporation (EC), a grouping of local investors who own 40 per cent of the business, have been willing to offload their stake to local equity investment and advisory firm Brainworks Management Capital.

Government has allowed Telecel to operate without a licence since a renewal agreement was struck in June 2013.

The Postal Telecommunications Regulatory Authority of Zimbabwe and Telecel Zimbabwe have since been notified of the decision. Ironically, Econet Zimbabwe – majority owned by local businessman Strive Masiyiwa – paid the US$137.5 million licence fee in 2013, but Telecel Zimbabwe, which is controlled by a foreign entity, negotiated softer terms.

The terms of the licence renewal agreement that was signed on August 6, 2013 stipulated that Telecel would pay US$14 million by August 6, 2013 – a sum yet to be paid in full.

A follow-up meeting was held on June 30, 2014, and it was agreed that the operator would settle the outstanding amount while aligning its shareholding structure by December 1, 2014. By the set deadline Telecel had only paid US$5 million.