Windhoek — Telecom is ready to sign on the dotted line to take over the cash-strapped second mobile communication company Leo today, in a move that could unleash serious competition between MTC and Telecom in the local market.
Telecom's signing of the takeover of Leo takes place at a local hotel this afternoon, after nearly a year of negotiations and boardroom jostling for the best deal. Telecom sent out invitations yesterday morning for "the signing ceremony of the Telecom-Leo takeover."
MTC, which celebrates a larger subscriber base and fat operational account thanks to the head start of being the first mobile communications operator in the country, has already received a natural licence that allows it to compete directly with Telecom.
MTC has always objected that Telecom's push to enter the mobile market represents unfair competition since Telecom is not a mobile telecommunications company.
The deal had to be approved by the Namibian Competition Commission (NaCC), which set specific conditions that would ostensibly prevent Telecom and MTC from engaging in anti-competitive behaviour. The Namibian government owns both Telecom and MTC through the Namibia Post and Telecom Holdings (NPTH), which also owns the country's postal services.
MTC is jointly owned with Portugal Telecom that owns 34 percent of the first mobile operator. Major changes have already been taken, in line with the conditions set by the NaCC for the takeover of Leo by Telecom.
The NPTH was requested to create independent holding companies for its subsidiaries and to ensure that individual board members do no sit on either of the boards at the same time, or serve one company while a board member at the other subsidiary.
Telecom emerged as the successful bidder for Powercom (which is known by its trading name of Leo) when Telecel Globe, a subsidiary of Orascom Limited of Egypt, went shopping for potential buyers of Leo since late 2010, nearly a year after acquiring Powercom from a consortium of Namibian companies and individuals for about N$600 million.
It has been a turbulent time for Leo, which analysts estimated to be carrying liabilities of over N$400 million by the second quarter of 2011.
Telecel Globe tried at one point to infuse additional cash into the business, selling a portion of the shares in Leo to Namibians in an effort to partly strengthen Leo's black economic empowerment credentials.
The process took long and failed to materialise on time. Telecel Globe went to the market where it is said to have attracted interest from various Namibian-based investment institutions. Again nothing material came out of the discussions.
Telecom's finalisation of the protracted negotiations would no doubt heighten competition in the mobile telephony industry in the country.
MTC is on record that it is going to venture into services that previously only Telecom could provide. MTC's last board meeting approved spending of N$1.3 billion in the next three years on the new business direction. The current annual turnover of MTC is estimated at N$1.6 billion.