Tanzanian Probe Finds Airtel Unit Was Privatized Illegally

DAR ES SALAAM (Capital Markets in Africa) – A Tanzanian probe found that the local unit of Indian mobile-phone company Bharti Airtel Ltd. was originally transferred from the state illegally and the government will start talks to retake what it says is its rightful share of the business.

The investigation discovered that the initial privatization of Tanzania Telecommunications Corp. “broke the law, regulations and procedure,” according to a statement from President John Magufuli’s office that quoted Finance Minister Philip Mpango. “What we saw was very dirty and terrible. In short, our country was conned and a lot of money was lost,” Mpango said.

For its part, Airtel said last month its 2010 acquisition of the 60 percent stake in the company from Kuwait’s Mobile Telecommunications Co., known as Zain, was in full compliance and followed all approvals from the government. Tanzania’s complaint relates to the initial privatization of the company five years prior to when Airtel took control, it said in a statement at the time.

Tanzania’s ownership claim follows an order by the government last year that telecommunications companies should sell at least a quarter of their units on the local bourse to boost domestic ownership. The local operations of Johannesburg-based Vodacom Group Ltd. became the largest company on the Dar es Salaam Stock Exchange when it raised 476 billion shillings ($213 million) in August. Airtel has yet to list Airtel Tanzania, in which the government has a 40 percent stake.

Government Asset
Magufuli said in December that Airtel Tanzania is a government asset in remarks aired on the East African country’s national broadcaster. Calls to Zain’s offices in Kuwait weren’t answered when Bloomberg called outside normal business hours, while Mpango declined to comment further when contacted on Friday.

Airtel reiterated a statement it made in December that all transactions related to Tanzania Telecommunications were transparent and fair.

“We are requesting the honourable finance minister to share with us the specific findings or concerns so we can respond with facts from the records of the company,” it said in an emailed statement on Friday. “We intend to work closely with the government of Tanzania and will take all steps necessary to resolve any doubts or concerns to the satisfaction of the government of Tanzania and all of the other stakeholders.”

The Indian telecommunications company is the latest foreign investor to have a run in with the East African state. The government in July demanded $190 billion in back taxes from Acacia Mining Ltd., saying the gold miner had been under-declaring mineral exports for more than a decade. Barrick Gold Corp. Chairman John Thornton agreed that Acacia would establish a new operating model to share the economic benefits from the mines equally with the Tanzanian government and pay $300 million to the state as a “show of good faith.”

Source: Bloomberg Business News