Vodacom International has plundered Vodacom Congo of capital, says Congolese Wireless Networks (CWN), which accuses the mobile operator of fraud.
In a statement released by CWN this morning, the company says Vodacom has forced its DRC operation to pay up to $180 million to satisfy loan agreements with “uncommercial terms and conditions”.
The Congolese business, which holds 49% of Vodacom's DRC operation, says Vodacom International has made it impossible for the company to make any profit, despite it being the largest network in the country.
“Despite a track record of successful growth over the eight years since the joint venture was established, Vodacom Congo has never made a profit and has needed regular injections of additional loan capital to fund its expansion,” says chairman of Vodacom DRC and CWN Alieu Conteh.
He adds that Vodacom has also been trying to avoid paying corporate taxes in the DRC.
Financial pains
Conteh says the loans have been provided by Standard Bank of SA. However, he adds that Vodacom International has refused to provide CWN or Vodacom Congo with any copies of the documentation. “In the main, the loans take the form of a revolving credit facility which places Vodacom Congo in a cycle of perpetual dependence.”
According to Conteh, he has for several years tried in vain to recover some of the money that he believes has been wrongly taken out of Vodacom DRC, and decided as a last resort to take the matter to the country's courts.
CWN lodged the formal lawsuit at the Office of the Public Prosecutor, in Kinshasa, during the middle of last month. It expects the case to go before the Kinshasa Tribunal either by the end of this month, or early in February.
There is still a possibility that the matter will be settled out of court. “To be compelled to resort to the law in resolving a business dispute is never desirable if an alternative can be found, but we feel we have been abused and exploited by Vodacom, and they have refused to take our grievances seriously. All we are seeking is justice for Vodacom Congo and for its shareholders,” he says.
The other side
As the majority shareholder in the DRC operation, Vodacom has lambasted CWN's accusations, halting any further investment in the business until the dispute is resolved.
Vodacom is adamant it has acted in good faith, and that CWN has been the counterproductive partner. “Although Vodacom has continued to constructively engage with 49% shareholder CWN, these discussions have thus far proven unsuccessful.”
The local operator also says it has been the sole financer of Vodacom DRC, ploughing almost R5 billion into the company's network since its operations began in 2002.
Vodacom notes it has conducted all its business in the country above board, saying that CWN as a shareholder agreed to the financing terms and cannot now back out of that agreement.
Vodacom is also hopeful of an amicable solution since its operation in the DRC is one of its better growth opportunities. It will want to hold onto its shareholding in the country if it wants to follow in MTN's footsteps across the continent.
Vodacom DRC dropped operating profit by 44% in the half year, thanks to the country's economic woes.
Related story:
Vodacom pulls DRC funding
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