An uncertain road lies ahead for Zambia's financially troubled incumbent operator, the Zambia Telecommunications Company (Zamtel) after finally being sold to Libya African Investment Portfolio (LAP) Green Networks, at a total cost of $394 million (R2.94 billion).
The sale, finalised earlier this month, follows a long search after the partial privatisation of the company. In August last year, the Zambian government announced the sale of 75% of shares in Zamtel, in order to save it from collapsing. The following month, the Zambia Development Agency started the process of searching for the firm's equity partner after cabinet approved Zamtel's partial privatisation.
But the sale of the company, as in many other cases of privatisation in Zambia, has been marred by corruption accusations by senior government officials. As a result, Zambia's two major political party leaders, Hakainde Hichilema and Michael Sata, have warned the sale would be reversed if they formed a government next year. By any standard, this is likely to have a negative impact on the growth and expansion of the company as the future of the investment remains uncertain.
Even the choosing of RP Capitals of UK as a financial advisor on the sale of Zamtel was marred with corruption allegations, forcing the then minister of communications and transport, Dora Siliya, to resign.
No easy road
LAP Green agreed to pay $257 million for the 75% equity in Zamtel and an additional $62 million for a network expansion programme, while $75 million will go towards the taking over of government guarantees.
Preliminary bids were received from India's Bharat Sanchar Nigam, Angola's Unitel, Russia's Vimpel Communications together with Altimo Holdings and LAP Green. After months of scrutinising the bids, LAP Green emerged a successful bidder.
Zambia's minister of communications and transport, Geoffrey Lungwangwa, said: "LAP Green's strategic and business plan is aggressive, but logical and achievable. It is for that reason we as government have agreed to go for LAP Green to be a majority shareholder in Zamtel."
At the moment, it is difficult to tell LAP Green's business plan for Zambia, but going by its performance in East Africa, the company will be able to overturn Zamtel's problems for the better - although it will most likely take years to achieve this.
For one, Zamtel's infrastructures are almost obsolete and need a lot of time and money to be brought back to life. Zamtel, which operates the CellZ mobile network, fixed and online services, has over the past years not been able to compete favourably with other service providers.
The telco has been unable to expand its network because it lacked innovations and capital injections, despite controlling the country's international gateway.
On the other hand, the private mobile service operators MTN and Zain have been able to deploy new technologies including 3G networks and managed to expand the networks in most rural parts of Zambia.
The coming of LAP Green to Zambia will inevitably ignite stiff competition and promote innovations by mobile operators, and the company hopes expanding the network will not be a problem. “We are looking forward to transforming Zamtel and to begin the important business of returning Zamtel to growth and profitability,” said LAP Green Networks group CEO, Abdulbaset Elazzabi.
Eager to start
In a hurry to level the playing field and encourage healthy competition now that Zamtel is in private hands, the Zambian government has granted Zain and MTN international gateway licences so the two service providers can operate their own gateways, which had long been a preserve of Zamtel.
Elazzabi and the Zambian minister of finance and national planning, Situmbeko Musokotwane, signed the share purchase agreement in Zambia on 5 June.
LAP Green and the Zambian government also agreed the state will return the 25% shareholding in the company and will continue to have an active role in the management and direction of the company, with two board members having veto powers on certain management decisions.
“LAP Green was chosen because of its ability and willingness to invest in growth. Our objective is to ensure that the selected partner would deliver real, tangible and long-term change,” said Musokotwane after signing the agreement.
With the new partner, Zamtel is expected to live up to its potential and help to grow the telecom sector through competition and real investments.
Although the sale of the company may seem like good news for subscribers yearning for better services, the fate of Zamtel's more than 2 300 workers is not clearly known. However, LAP Green has indicated it will retrench all of them, and after getting their packages, some may later be re-engaged.
With a presence in Zambia, the company will now be able to compete with Zain and MTN in southern Africa.
LAP Green has operations in six African countries including Niger, Uganda, Rwanda and Ivory Coast. The Libyan company, which serves over four million customers, is in the phase of external growth as it plans to open operations in Togo and Sierra Leone and expand its subscriber base by 2012.
In 2009, the company signed a $300 million financing agreement with the Industrial and Commercial Bank of China to fuel its expansion programme in Africa.
Share
