Govt and Airtel fail to strike deal on sale of telecom firm
The Tanzania government had intended to acquire the stocks to raise its shareholding in TTCL to 100 per cent. FILE
BHARTI AIRTEL Ltd and the Tanzanian government have failed to reach a deal on the purchase of 35 per cent stock of the Tanzania Telecommunications Company Ltd (TTCL) after two rounds of talks.
The government had intended to acquire the stocks to raise its shareholding in TTCL to 100 per cent, and revive the loss making parastatal into a competitive data and mobile phone services company.
In early November, the government, which owns 65 per cent of the company, announced that it had formally begun the process to buy back the shares that had been sold to the consortium of MSI of the Netherlands and Detecon of Germany for $62 million in February 2001. At that time, the company was operating as Celtel.
The shares were then sold to Kuwait-based Zain Group, which, in 2010, sold all its operations in Africa to Bharti Airtel of India.
In April 2010, before Zain sold its shares to Bharti Airtel, the government and the Kuwait-based company had signed an agreement to buy the shares to make TTCL government-owned.
Negotiations
However, the deal could not be reached because at the time the government was offering Tsh14 billion ($8.7 million) while Zain asked for Tsh100 billion ($62 million).
In negotiations held two weeks ago, Bharti Airtel offered the shares to the government for $62 million, but the government declined the offer claiming that the shares are worthless following losses and debts incurred by TTCL.
The two sides have now engaged private audit firms to look into the matter with TTCL seeking the services of Deloitte and Touche and Bharti Airtel engaging KPMG. Both companies have said they will give the results within two weeks.
The deal is further complicated by the fact that the government owns 40 per cent of mobile phone operating company Airtel Tanzania, a subsidiary company of Bharti Airtel.
Soon after Bharti Airtel bought Zain, it offered the government $11 million for its stake in the company, but the government rejected the offer saying that it planned to buy the rest of the shares of the company.
The Tanzanian government was not happy with Bharti Airtel’s acquisition of the Zain Tanzania operation, saying it went against the partnership agreement between Zain Tanzania and TTCL.
Soon after Bharti Airtel acquired Zain Tanzania, the then permanent secretary in the Ministry of Finance and Economic Affairs, Ramadhan Khijjah, said Zain Tanzania did not fully communicate information about the Bharti Airtel deal to the government.
Three-year plan
Speaking to The EastAfrican about plans to revamp TTCL, the company’s CEO Kamugisha Kazaura said they have started to roll out a three-year plan, in which they will spend up to $300 million.
According to Mr Kazaura, the plan will see the company retrench much of its 1,600 workforce to make it proportional to its customer base.
TTCL has 300,000 customers. He said although Bharti Airtel was not doing very well in voice services, it remains the leading company in data services by selling to other mobile phone services providers, and is currently providing services to Rwanda, Burundi, Kenya, Malawi and Zambia through its fiber optic cable up to the countries’ border towns.
In the next three years the company will also change from its current CDMA to GSM, increase its capacity in data services with the aim of making it the core business.
Kamugisha further said the process of re-evaluating 35 per cent shares owned by Airtel in the company is ongoing after the government proposed to buy them and the former agreed on the grounds that it has no further interest in retaining them.
