Fears that Econet Wireless Nigeria (EWN) may engage in asset stripping has seen locally-based Econet Wireless International (EWI) seeking an urgent interdict to prevent this.
The interdict aims to prevent EWN from engaging in any deal or action that would change the structure, assets or value of the company until the conclusion of the international arbitration process around the shareholders dispute.
An arbitration process was instituted by EWI after it claimed its preferential rights to acquire further shares in EWN were ignored, with the Nigerian company instead offering the shares to Vodacom SA.
"Basically asset stripping amounts to selling off the company`s assets in a piecemeal manner. It would be the equivalent of not being able to buy a house for some legal reason, and instead breaking it down and selling it one brick at a time," says EWI spokesman, Kevin Kachidza.
"Our worry is that all of EWN`s assets - from the operator licence and base stations, down to the furniture and stationery - may be sold off to another company, which is controlled by someone else."
He says the interdict is aimed at preventing EWN and Vodacom SA from doing anything that may interfere in the arbitration process.
"The alternative is that, should the arbitration process go in our favour, we find that we are allowed to buy additional shares in a company that effectively owns nothing," says Kachidza.
He says the application asks that EWN be required to maintain the `status quo` of the company as at 29 July 2003 until the conclusion of the international arbitration, which would mean until the arbitration process is concluded, any deal, action or investment engaged in with EWN will be at risk of being reversed.
"The arbitration process is expected to take at least eight months and we are concerned by reports that Vodacom is currently working on a structure in a bid to circumvent our pre-emptive rights as existing shareholders," says Strive Masiyiwa, CEO of EWI.
EWI hopes the application for the urgent interdict will be in place by the end of the month. Also expected at the end of the month is the ruling by the arbitrator on the issue of the technical services agreement between EWI and EWN, which may also have implications for Vodacom SA, which has signed a management contract with EWN.
Meanwhile, EWN appears unworried by the arbitration processes, stating at the release of its figures up to December 2003 that it anticipates an even more robust full financial year, as it expects to witness the conclusion by then of the acquisition of controlling equity in the company by Vodacom SA.
In its half year unaudited result to December 2003, EWN announced that it has more than one million active subscribers on its network as of end December 2003, which amounts to 40% of the total 2.8 million active GSM subscribers in Nigeria.
The company also shows total revenues of N22 billion, with a profit of N3.5 billion, while average revenue per user is at $40, from a customer mix of 97% prepaid, with the balance on contract.
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