The Namibian (Windhoek)

Namibia: Leo Going for a Song

TELECOM Namibia will pay a nominal price of N$2 to buy broke Leo - less than what it costs prepaid customers of the country's second mobile operator to make a two-minute call.

In addition, Telecom Namibia will have to pick up the N$240 million tab for Leo's mounting debt and give its current owners N$96,5 million worth of shares in Powercom, the holding company of Leo.

But the official purchase price of Leo is N$2, The Namibian confirmed yesterday.

Written arguments submitted by the Communications Regulatory Authority of Namibia (Cran) to the High Court recently, opposing Powercom's owners application that its ruling regarding the Telecom Namibia takeover of Leo be set aside, stated that the purchase price of the company was N$2 million.

The "million" was a printing error, The Namibian has established. The price tag, in fact, is only N$2.

Powercom is losing between N$2 million and N$5 million a month, court documents showed, and it has tried desperately to find a buyer for Leo. The documents also showed that Powercom has tried in vain to convince ten foreign mobile giants, including MTN, Vodacom, Orange, TN and Bharti, to invest in Leo.

In the end, Telecom Namibia was the only taker.

Cran, however, soured the deal when it approved the transaction in June, provided that private investors are allowed to buy at least 25 per cent of Telecom Namibia. For this to happen, the Post and Telecommunications Establishment Act will have to be changed.

Cran said the condition was necessary as the Communications Act aims to encourage private investment in the telecommunications sector.

Guinea Fowl Investments (GFI), the joint venture between Investec Bank and Nedbank which bought Powercom, then dragged Cran to court.

In its written arguments, GFI said if Cran's decision is not "set aside and the transfer of the shareholding from Powercom to Telecom be approved before August 31 2012, Powercom would be liquidated, given its existing exposure of N$450 million and monthly operational losses of between N$2 million and N$5 million". This will mean that 116 permanent workers and 35 temporary workers lose their jobs, according to court documents.

By the time of going to press yesterday, the High Court still hadn't ruled on the matter.

Asked by The Namibian if Powercom would indeed be liquidated if Judge Shafimana Ueitele didn't rule on the matter today, Mike Peo, Nedbank Capital's head of infrastructure, energy and telecoms, backtracked.

Peo claimed that GFI's court application stated that "we may liquidate, not that we will liquidate and furthermore there was no time stated in our application".

"Much of what is currently in the public domain is either misquoted or factually wrong," he said.

If Telecom Namibia succeeds in buying Leo, it will have to invest "easily another N$400 million" to compete with MTC, communications expert Dr Christopher Stork told The Namibian earlier.

International rating agency Fitch is also not convinced of Telecom Namibia's chances to turn Leo around. It recently downgraded Telecom Namibia's credit rating outlook from 'stable' to 'negative'.

Fitch said its decision was based on Telecom Namibia's intention to establish itself as an integrated fixed and mobile service operator within the next two years, as well as the possibility that Government, as sole shareholder of Telecom Namibia, might sell some of its interest.

The agency has its doubts whether Telecom Namibia will be able to compete with MTC and is also worried that Government might decrease its financial support to Telecom Namibia if it reduces its control in the state-owned enterprise.

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