Mobile operators spar in South Africa

Von Nicolas Callegari

Econet Wireless Group chief executive, Strive Masiyiwa, last week said that the operator was open to negotiation, as a dispute continued over the winding up of the failed joint venture between the two companies.

Altech last week rushed to court to stop Econet Wireless Group (EWG) from instituting disciplinary action against suspended COO, Wessie van der Westhuizen, who allegedly made racist comments to colleagues in London. The case was postponed to this coming Thursday.

But it appears that the breakdown in the companies? relationship comes as a result of numerous factors, of which the alleged racist remark was the final straw, EWG says.

Amongst these challenges is the ongoing litigation in Nigeria, where EWG has forbidden Altech from striking a deal with Vodacom, as it was against the company?s policy to do business with competing operators.

EWG, which has four major telecoms assets worldwide, says that its 5 percent stake in the Nigerian telecoms market was not for sale, and that it intends to grow this stake to 51 percent. ?This is our most important asset,? says Masiyiwa.

On June 10 this year, EWG and Altech took the decision that the companies would no longer be involved with each other.

The issue of the offer made to Altech for its shares in the joint venture also came under the spotlight last week.

EWG initially offered Altech US$70 million plus change for its shares, but Altech did not accept this, after which the company filed a SENS notification on winding up the joint venture, and proposing that one party buy the other out for some $100 million.

Says Masiyiwa: ?A valuator should have been appointed, and a fair value agreed upon by the two parties. If Altech comes back to the table and wants to open negotiations, I am happy to do so.?

Winding up ?regrettable?

In a statement issued last week Altech said that it ?regrets that circumstances involving Econet Wireless Global Limited (?EWG?)... have necessitated the decision by Altech?s board to apply for a fair and equitable winding up of EWG or a court order that Altech should buy the interests of EWG?s other shareholders in EWG (or that they should buy Altech?s investment in EWG).?

Cultural differences

According to the statement, Altech believes the relationship with Econet broke down due to ?corporate cultural differences, a lack of implementation of good corporate governance, a difference of opinion on future strategy, and a breakdown of communication between Altech, the TSMI shareholders and the management of EWG.?

On the racism allegation, Altech says: ?Altech was not, and is, at this stage, still not, satisfied that the allegations of racism ... are justified. The alleged incident giving rise to these allegations took place some five months before they were raised with Altech by the CEO of EWG, during the height of the breakdown of the relationship.?

Further, the statement adds: ?The CEO of Altech intended to deal with this matter at the EWG board meeting of the 21st of June 2005, but was not afforded the opportunity to do so, due to the fact that the directors appointed by the TSMI shareholders failed to attend.?

The statement goes on to note that EWG?s CEO unilaterally suspended Van der Westhuizen the following day, whereafter Altech?s application to set aside this suspension was made in a bid to protect Altech?s rights as a shareholder, given that Van der Westhuizen was the only Altech representative in EWG?s executive team.

Altech says it then received detailed documentation concerning the racism allegations against the COO and his suspension, accompanied by an offer to purchase Altech?s shares in EWG ?at a price approximately equivalent to the price paid by Altech in 2004.? The board rejected this offer, on the grounds that it did not reflect fair market value.

Altech thereafter filed a notice of the breakdown of the relationship and winding up of the joint venture (as mentioned above). With regard to the price of $100 million, Altech says it is both a willing buyer and a willing seller, and that the excess of this price over Altech?s original $70 million investment cost, is, in its view, warranted.

Altech concluded that it intends to pursue its original vision of developing interests in cellular network activities in Africa, either through the acquisition of the shares in EWG which it does not already own, or through the use of the proceeds of sale of its interests in EWG.