Econet disputes Zain ownership of Zain Nigeria

UNDER THREAT: Row with South Africa's Econet could put Kuwait telco's divestment plans under threat. (Getty Images)

South Africa-based Econet Wireless is disputing Gulf carrier Zain's ownership of one of its most important operations, Zain Nigeria, in a row that could derail Zain's divestment plans.

Econet said on Wednesday it disputed the purchase in 2006 by Celtel, now called Zain, of a majority stake in a group called Vee Networks Limited, now Zain Nigeria.

Econet - which has operations in nine countries in Africa, Europe and the East Asia Pacific Rim - said in a statement it was pursuing arbitration proceedings because it believed it had been denied its right of first refusal over the stake.

It has now appealed to legal authorities including an international tribunal operating under the auspices of the United Nations for the transaction to be unwound.

Econet has secured an agreement from Celtel not to sell or otherwise dispose of the unit without giving 30 days' notice or until the tribunal resolves the issue, according to legal papers seen by Reuters.

The papers showed that lawyers acting for Econet agreed not to pursue an injunction stopping Celtel from selling on the basis of this understanding.

Zain's Chief Executive Officer Saad al Barrak told reporters on Monday evening that he had not signed anything."This has no basis whatsoever... This is a fantasy," he said.

The South African group was a founding shareholder of Vee Networks and claimed that its right of first refusal over the stake was breached in 2006, when its Nigerian partners sold their shares to Zain.

Zain, a hot but tricky potential acquisition target for stagnating Western telecoms groups, has invested more than $12 billion in Africa. Nigeria is the group's biggest market, contributing 21 percent of customers and 17 percent of revenues.

The company has put on hold for now plans to sell its African operations while one of its major shareholders tries to persuade other owners to club together to sell a 46 percent stake, for which it says it already has a buyer.

Kuwait's Kharafi Group, which owns 11 percent of Zain but is estimated to control about 20 percent in total through other firms, wants to sell 46 percent of Zain to a group of Asian investors - although those investors may press for a larger stake.

Zain Nigeria has traded under various brands since 2001 due to a series of board room conflicts. It has been known as Vee Networks, Vmobile, Celtel and now Zain Nigeria. (Reuters)

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READERS' COMMENTS

Where are the regulators in all this?
Posted by Dr. Madichie, Sharjah, UAE on Friday 9 October 2009 at 16:51 UAE time


The dispute between Econet and Zain is absolutely shocking!!! Its rather worrying that a brand can be in business for so long without having full controlling stakes in its operations (according to Econet). Whats more buggling for me is that I have been researching the invasion of Africa's telecom industry by Middle Eastern Telcos such as Zain and now Etisalat. I think the public deserves to know the methodology applied by the Nigerian Communications Commission and its regulatory counterparts in South Africa in issuing GSM licenses. It is a shame that there does not seem to exist at the moment any tools in place to check possible monopoly breaches of major operators in this multi-billion dollar market. Two tasks lie ahead: first, while the international courts arbitrate over the claims and counterclaims between Econet and Zain, the NCC should take the witness stand. Second, it would be good to read a detailed report in Arabian Business on the specific partnership between EMTS Nigeria Limited and Mudabala/ Etisalat - before another hearing is called for a la Zain way!

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