The debacle, which began last year, reached its peak in April this year, with Vodacom"s abrupt and failed attempt to take over Econet Wireless International"s (EWI) stake in Econet Wireless Nigeria (EWN), a move which would have positioned Vodacom as Nigeria"s leading mobile network operator against rival MTN.
On the day that Vodacom announced its five-year management agreement with EWN, officially changing the name from EWN to Vee Networks, a joke went around the industry that the announcement was an April Fool"s joke. Two months later, Vodacom withdrew from Nigeria.
Up until then, Vodacom"s entrance and subsequent exit from Nigeria was perceived as a miscalculation, but the unexpected firing of Andrew Mthembu, its deputy CEO, and the resignations of strategic director, Robert Parsley, and Willem Swart, raised several questions that Vodacom still has to answer.
In the meantime, as Vodacom"s share price wallowed in the uncertainty, as opposed to the continual rise in MTN"s profits, many believed it was only a matter of time before Vodacom would have to give up its title of "biggest" mobile network provider in Africa. This became one of the most confusing industry events of 2004.
Time line of events
2001 - February
- The Nigerian government announces a bid invitation for mobile network licences, Strive Masiyiwa, CEO of Econet Wireless International (EWI) and founder of Econet Wireless Nigeria (EWN), is granted the licence.
- EWI invites Nigerian and UK investors in the cellular company, leaving it with a 5 percent share. EWN is formed, with EWI setting up the network.
2003 - April
- EWN is in desperate need of funds. Its board members meet with EWI, and a decision is taken that EWI will buy 40m new shares at 3,75 per share for a total cost of R150m. This would be worth up to 33 percent of EWN.
- All agree to the proposal except for director Jonathan Long.
- A few weeks later a letter is sent by Alan Knott-Craig, CEO of Vodacom, to Bart Dorrestein, a director of EWN, soliciting a shift in EWN"s voting decision in favor of Vodacom, and the cancellation of the previous agreement between EWI and EWN. Masiyiwa is told by one of the shareholders that: "Vodacom is like a Rolls Royce, and you are like a VW beetle".
- EWN indicates to EWI its intentions to consider Vodacom"s offer to invest in the company, despite the agreement that gave EWI pre-emptive rights to buy any shares of EWN that became available.
- EWI approaches Andrew Mthembu, Vodacom"s deputy CEO, and warns him of several experiences of attempted bribery and cases of corruption in Nigeria. Mthembu claims to have no knowledge of this, and requests a copy of the agreement.
- Vodacom goes ahead with its pursuit of the move, this time its offer is allegedly "unmistakably similar to EWI"s proposal".
- EWI lodges legal action through the Nigerian Federal High Court against Vodacom for inducing "breach of contract".
- EWI takes the complaint to UN Commission on International Trade Law. Vodacom proceeds with its plan.
- EWN appeals for the arbitration process to stop. Appeal is rejected.
- EWI submits claim for US$1,8bn for damages against Vodacom in Nigerian High Court.
- First case hearing takes place at Nigerian High Court in Lagos.
2004 - January
- Vodacom announces a change in strategy. Telkom"s executive for investor relations, Belinda Williams, announces that Vodacom will no longer pursue its old structure, due to certain issues affecting its US shareholders. Vodacom"s strategy becomes that of starting a completely new company, to be known as Vee Networks, by asset-stripping EWN to form Vee Networks.
- Arbitrators named for EWI/Vodacom case.
- EWI seeks urgent interdict to prevent asset-stripping.
- Vodacom announces that it has sealed the deal and announces a five-year management agreement, officially changing the name from EWN to Vee Networks.
- Dispute over evidence leads to postponement of injunction hearing.
- EWN disregards injunction and rebrands.
- Vodacom withdraws from EWN, Mthembu is fired, Willem Swart resigns and joins Vee Networks; and strategic director Robert Parsley resigns.
- VEE Networks changes name to Vmobile.
- Vmobile directors charged with corruption with regards to an investigation of Vodacom"s withdrawal from Vmobile.