#MondayBlues: Gvt Risks Losing Telecel Zimbabwe As VimpelCom Has Not Received Payment.

Zimbabwe government risks losing all its stake and potential investment they have made towards the acquisition of 60% stake in Telecel Zimbabwe, as VimpelCom is now pondering nullification of the deal, amidst revelation that the government has failed to pay for the balance within the agreed 3 year term, TechnoMag has learnt.

Sources close to the development told TechnoMag that if the government does not urgently settle the debt, which has lapsed, it would have breached the contract on failure to pay off in the agreed three years and now VimpelCom is considering nullifying the deal , which contractually allows them to retain the Telecel International stake, plus the deposit advanced.

This would be a huge blow in the face of government to lose such an asset they had bought for a song and also sinking millions they had invested.

Former ICT Minister Supa Mandiwanzira was instrumental in this deal that saw the government getting a large stake in Telecel Zimbabwe.

On November 18, 2015,VimpelCom Ltd. (VimpelCom, Company or Group) (NASDAQ: VIP), a leading international provider of telecommunications services headquartered in Amsterdam, announced that its 51.9% owned subsidiary, Global Telecom Holding S.A.E. (GTH), has entered into an agreement with ZARNet (Private) Limited to sell its stake in Telecel International Limited for $40 million. Telecel International owns 60% of Telecel Zimbabwe (Pvt) Ltd while a local consortium, Empowerment Corporation owns 40%.

However the agreement clearly stated that transfer of ownership to ZARNet will occur after customary conditions are satisfied.

Early this year,in a presentation to the Portfolio Committee on ICT, Permanent Secretary in the Ministry of Information Communication Technology and Postal and Courier Services Engineer Samuel Kundishora revealed that government is yet to pay the amount due to VimpelCom.

Government has not yet paid for the acquisition of Telecel and part of the money is still in an escrow account due to challenges with foreign currency.
It still does not have the shares for the company since the owner is yet to hand them over, he said.

Of the total $40 million USD required for the purchase, Government has paid off $10 million which was sourced from Potraz and paid through ZARnet and an additional $9 million to make it $19 million in total to VimpelCom.

National Social Security (NSSA) had advanced the total balance of $30 million but it has not hit the Russian bank account due to lack of nostro funding.

The outstanding balance of $21 million has exposed government as they continuously struggle to settle the transactions, which puts the whole deal at risk.
Finance minister Mthuli Ncube has to highly prioritize the funding of the nostro account for ZARnet to settle the Telecel International stake takeover , otherwise government may soon , lose the whole asset.

Originally the shareholding was that 60% would be owned by an entity called Empowerment Corporation which was an entity housing all Zimbabwean shareholders to the business and 40% was to be taken up by an investor internationally who would bring in the technology as well as the technical knowhow of setting up a mobile network. What ultimately happened is that a company owned by the late Rwandese Miko Rwayitare Telecel International ended up snapping 40% of that shareholding and a further 20% to make it 60%.

Another time bomb in waiting is on the agreement between NSSA and ZARnet where the former wanted ownership of the asset against loan advanced but they ended up settling for a buy back deal. However the bone of contention will emanate from the outstanding figure which is no longer worth the USD value agreed due to new RBZ trade rates.

The structure is such that ZARnet will secure the equity interest and for its part NSSA is getting a bargain buying debt of $98 million for only $45 million. In order to ensure a smooth execution of the deal, ZARnet and NSSA have agreed a step-in agreement which allows NSSA to enjoy ZARnet’s rights as the purchaser, albeit temporarily.

The agreement between the two parties is to that effect.

ZARnet is then expected to exercise the buy-back over a three year period on terms enshrined in a new agreement involving a number of related-parties to ZARnet.

However ZARnet is known to be very broke and has no capacity for such a buy-back which may add a new twist, which technically means, NSSA would actually assume full ownership not the ministry of ICT, should they not receive their payment.

1 thought on “#MondayBlues: Gvt Risks Losing Telecel Zimbabwe As VimpelCom Has Not Received Payment.

  1. I smell a rotten rat.

    ZARNet bought Telecel from Vipmelcom through Ministry of ICT. ZARNet is broke and did not pay a single cent. POTRAZ paid the downpayment of $10million. NSSA paid balance of $30 million. POTRAZ paid NSSA $30 Million in a buy back deal. Effectively POTRAZ pad $40 million for Telecel.

    ZARNet is the name on the books. Can someone explain this?

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