Vodacom, EWN: Five-year or five-day deal?

Johannesburg, 02 Apr 2004

While Vodacom SA and Econet Wireless Nigeria (EWN) have announced the signing and implementation of a five-year management agreement, Econet Wireless International (EWI) maintains that the Federal High Court of Nigeria may negate this next week.

The signing of the agreement follows extensive due diligence undertaken by Vodacom over a nine-month period and supersedes an interim agreement that has been in effect since October 2003.

According to Vodacom, EWN will start trading under the Vodacom brand with immediate effect and Vodacom will also provide additional support in respect of procurement, network design and roll-out products and services, marketing and other group services.

Vodacom deputy group CEO, Andrew Mthembu, says the agreement represents a key step in the process of the company`s proposed equity investment into EWN, in terms of which the South African organisation would take a controlling stake in the Nigerian entity.

"The closure of the equity investment process will take time, although we expect it to be completed within a six- to 18-month time frame," says Mthembu.

"Vodacom is particularly proud to have made this announcement on the 10^th anniversary of the launch of its commercial service on 1 April 1994."

According to EWI spokesman, Kevin Kachidza, perhaps the fact that the announcement was made on April Fool`s Day is appropriate, since his organisation has asked the Federal High Court of Nigeria to grant an injunction against the deal.

EWI wants the court to prevent the following: allotment of shares to Vodacom, the change of the name of the company to Vodacom, and the conclusion of a management agreement with Vodacom.

"Justice Mustapha has adjourned the matter to Tuesday next week for concluding arguments before issuing his ruling, and should he rule in our favour, the announcement they have made will be null and void," says Kachidza.

"Essentially, it will mean they will be prevented from materially changing the nature of the company until the arbitration process in Paris is completed."

The 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.

This process has since gone to the International Court of Arbitration in Paris and EWI believes it has a strong case.

"Since the UN Court of Arbitration has already put together a panel to look into this issue, it will make a mockery of the entire process if a company is allowed to bulldoze its way into an agreement with one party when the existing shareholders are actually in the middle of a dispute," says Kachidza.

"As far as EWI is concerned, proper court processes are the only way of finalising such issues - we would rather put our faith in this than in contracts which could easily be reversed by a judge`s decision."

EWI`s CEO, Strive Masiyiwa, agrees, saying: "The court in Nigeria has the power to reverse any decision Vodacom and EWN took today, so this could end up as a five-day management agreement instead of a five-year agreement."