Wednesday April 13, 2005
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Minister takes Econet war to House

Standard team

Information Minister Raphael Tuju questioned the credibility of Econet Wireless and its ability to roll out a mobile phone network in Kenya.

His comments come as the firm prepares to enter the market, having put out advertisements for key positions and announced its roll-out plan.

Tuju, speaking in Parliament, depicted Econet as a serial failure incapable of mounting a credible communication network anywhere.

He listed six countries in which Econet has attempted to roll out its operations, but said it is only in one country that the company can "claim some credibility".

The minister last year stirred a major controversy in the telecommunications sector after he cancelled Econet’s licence. The High Court overturned the decision, saying Tuju had no powers to do so.

Econet’s roll-out plans have been met with strong political opposition in Parliament. Last week, an MP questioned the financial viability of Econet. This has prompted Econet to mount a fierce public relations fight-back in the press, claiming that its competitors were using Parliamentary privileges to malign its name.

Yesterday, Tuju said that the major players in Africa currently include: MTN, Celtel, Vodacom, Cell-C and Orascom, but Econet "is certainly not one of them".

He said Econet had approached some of these major players to sell them the licence "so that they can pocket the difference — a cool Sh1.6 billion (US$23 million)." This, coupled with the questionable manner in which Econet won the bid for the third mobile provider, prompted the minister to cancel the licence, he told the House.

Tuju said that before Econet won, four of the bidders were disqualified and by the time the bid was being offered their only competitor was "some obscure" outfit who placed a bid of US$11 million compared to Econet’s US$27 million. This, he said, forced one of the bidders who had offered US$55 million to go to court. He said while KenCell (now Celtel Kenya) paid a total of US$55 million for its licence, Econet’s offer was below the market value.

The minister said the Government had received offers of US$55 million from interested reputable companies from South Africa and the Middle East for the licence.

The minister went on to say Econet failed to honour its licence terms and shareholder agreements in New Zealand, Papua New Guinea, Lesotho, Zimbabwe, Nigeria prompting court battles with local partners.

Tuju was responding to Kitutu Chache MP Jimmy Angwenyi, who had sought a ministerial statement on what steps had been taken to protect Kenyans from losses occasioned by Econet in New Zealand.

Tuju said a search on Econet was conducted by the previous regime when the firm bid to buy Telkom Kenya and it was established that it was incapable of taking over Telkom.

"One department had found Econet not viable and somehow it slipped through us (Narc)," he said.

He said in New Zealand, Econet "squandered" US$4 million under a special programme of empowerment for minorities.

The minister said that a licence was granted to the Maoris community under the programme and Econet given US$4 million by the Maoris Trust Fund. "In two years US$4 million had been squandered by Econet, leaving a balance of US$ 6,804 as at June last year," he said.

Tuju said there was no network rollout in New Zealand and the ministry in charge was on the spot to account for the money.

In Papua New Guinea, Tuju said, Econet won a licence through a bid that offered "stratospheric figures". "When they took too long to raise the money, the government conducted due diligence and found that Econet had no money to roll out."

The country’s parliament voted to kick Econet out, but the company went to court with even higher figures for damages that "flew against the earlier valuation of the company they had bid for."

"Interestingly our own CCK (Communications Commission of Kenya) got involved in that fiasco in PNG. But that is a story for another day," he said.

Econet last year denied these allegations —which had been raised in an overseas newspaper—and blamed them on its competitors. CCK on its part told The Standard last year that it had written to the foreign governments over these allegations and they had cleared Econet.

In the case of Lesotho, Tuju said Econet entered the market through a consortium it forged with a South African power utility company, Eskom.

However so far, he said Econet had failed to honour its shareholder obligations to Eskom and had since been deleted from its shareholding.

In Botswana, Tuju said, Econet is a minor shareholder with only 16 per cent of the business. This, he added, is the only place it can claim some credibility.

Tuju said the company’s proprietor Steve Masiyiwa is a wanted in Zimbabwe after he received a GSM licence, sold the company to Old Mutula, had the money paid in a UK account and took off before paying taxes on the proceeds.

"Instead of admitting the facts," he said, "Masiyiwa is currently using the political predicament of President Mugabe to enjoy false credibility that he is facing political persecution."

In Nigeria, Tuju said Econet bid for a licence with Nigerian partners where it was to owns 40 per cent, a consortium of Nigerian banks owns 20 per cent and a group of Nigerians 40 per cent.

After the licence was granted, the other partners raised the licence money, but Econet could not raise its share. He said a new deal had to be struck to save the venture, forcing the other shareholders to raise the balance of the licence fee and reduce Econet shares to a mere 3 per cent. In order to avoid litigation, before the roll-out the Nigerian partners reached a technical agreement with Econet in the rolling out of the network.

"Econet flooded Nigeria with bogus expatriates who performed basic functions like counting Sim cards and other basic administrative functions," he said.

In the meantime, he said the Nigerians had to pay huge and exaggerated management fees.

"Within a few moths of operations, Econet was kicked out of Nigeria and the issue is in Court," he said.

Tuju said the stakes for the third mobile provider are high, thus the aggressive public relations campaign mounted by Econet in the local press.

He went ahead to accuse local media houses and journalists of being "compromised and are part of this pathetic media campaign by Econet".

Tuju said Econet has the capability of using money to "even infiltrate this House".

Then he declared that "the position is that Econet currently has no licence to roll out a network as the matter is still in court".

"I am shocked that they are so arrogant as to continue with plans as if they have already won the case. Can Econet tell Kenyans what they know about the outcome of this case which is still to be heard that we do not know?", the minister asked.

Last week’s request for a ministerial statement was met with a strong reaction from Econet.

"The statement in Parliament was unfortunate because it is not based on any fact regarding our group. We have invested over US30 million (approximately Sh2.25 billion) in cash into Kenya, part of which was applied towards the licence fee, with the remainder being used to purchase network equipment," Econet Executive Director for Business Development, Zachary Wazara said in a statement issued by the firm’s publicist.




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