Relations between Vodacom and its Congolese business continue to deteriorate as the Johannesburg-based business begins arbitration proceedings.
The process follows years of heightening tensions between the shareholders of Vodacom Congo, Vodacom and Congolese Wireless Network (CWN).
The companies met yesterday at a shareholder meeting to try iron out the troubles; however, Vodacom now says no resolutions were made.
The JSE-listed mobile operator owns 51% of Vodacom DRC, with CWN holding the remainder. The company officially made its commercial debut in 2002.
Vodacom first hinted at tensions in the DRC operation in its prelisting statement. At the time, the company said it was in discussions with CWN that could result in changes to either the corporate structure of the business, or the financial make-up.
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The basis of the dispute stems from the funding agreement in place between the shareholders. CWN says Vodacom International has plundered Vodacom Congo of capital and accused the company of fraud.
The Congolese company has also accused Vodacom of forcing its DRC operation to pay up to $180 million to satisfy loan agreements with “uncommercial terms and conditions”. In January, CWN threatened to take the matter to the courts in Kinshasa.
Vodacom has lashed out at the accusations, saying CWN has made it impossible to find an amicable arrangement.
The local business says it has single-handedly supplied the funding to Vodacom Congo at commercial terms that were agreed by CWN's directors. “Any intended litigation on this issue is entirely without merit and a contrived attempt to force Vodacom to disproportionately fund further investment,” the company said earlier this year.
Making every effort
The arbitration process has sparked speculation that Vodacom's investment in Vodacom Congo could be on its last legs. However, Vodacom will want to keep its hand in the business, if it wants to make any headway on the continent against African mobile powerhouse, MTN.
Vodacom's trouble in the DRC couldn't come at a more inopportune time, since the global economic crisis impacted heavily on returns the company gained in the African country.
The republic is mainly dependent on mining revenue, which took a beating last year during the economic downturn. Vodacom DRC saw operating profit drop by 44% in the half year, thanks to the country's economic woes.
“Vodacom firmly believes in the potential of the business in the DRC and believes that the interests of Vodacom Congo's employees, its customers and the DRC as a whole are of paramount importance,” says chief officer of corporate affairs, Bob Collymore.
“We stand ready to fund further expansion and are hopeful that the arbitration process will bring a positive result,” he notes.
Vodacom says its Congolese investment connects more than 3.5 million consumers and businesses, and employs 6 000 people.
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