LAP Green, a Libyan parastatal company is to pay $257 million for the 75% shares it now holds in ZAMTEL.
This was disclosed by Finance and National Planning Minister Dr Situmbeko Musokotwane at the handover ceremony at the ministerial headquarters in Lusaka on Saturday, July 10, 2010.
This figure is broken down as follows:- $117.7 million will go towards employee benefits and liabilities; $64 million will be injected into the company; $32.7 million will be used to settle external ZAMTEL liabilities, while $42.6 million will go to the national treasury. Due to this development, the $75 million guarantee government has given suppliers has now shifted to LAP Green.
The Minister of Commerce, Trade and Industry will soon issue a ministerial statement in Parliament giving a full account of the company’s privatisation process.
At the same ceremony, LAP Green representative Abdulbaset Elazzabi signed a Master Payment Plan Instruction, allowing the company’s bankers to transfer funds into the Government of the Republic of Zambia (GRZ) account for the 75% ZAMTEL shares acquired.
Acting Commerce minister Brian Chituwo also signed an Investment Promotion and Protection Agreement (IPPA) on behalf of the Zambian government.
On June 5, 2010, the government announced the sale of ZAMTEL’s 75% shares to LAP Green at a cost of $257 million.
Announcing the privatisation of ZAMTEL in Lusaka, Dr Musokotwane said LAP Green had agreed to pay a total consideration of $257 million for the 75% equity in ZAMTEL, which values 100% of the equity in the company at $343 million.
In addition to the $257 million, LAP Green has agreed to provide $62 million in additional funding to finance part of ZAMTEL’s network expansion programme going forward and taking over government guarantees relating to a further $75 million in vendor financing, covering ZAMTEL’s existing network expansion projects.
‘’In total, therefore, their total commitment to ZAMTEL is $394 million. The government will retain 25% of ZAMTEL , and will continue to have an active role in management and direction of the company going forward, retaining two seats on the board out of a total of seven, and veto rights relating to certain key decisions,’’ Dr Musokotwane elaborated.
The other companies that had been shortlisted in the transaction were Bharat Sanchar Nigam Limited (BSNL) of India, Unitel of Angola and Altimo Holdings of Russia.
Many sections of the Zambian society have condemned the sale of the parastatal telecom company for what they believe is at a give away price, taking into consideration the vast investments and infrastructure the company has.
Economic analysts have termed as ‘’highly suspicious’’, government’s acceptance that ZAMTEL ‘s value is less than 30% of Zain Zambia’s worth in 2008.
In 2008, Zain was a relatively new comer to the local telecoms industry, providing only mobile telephone services to less than one percent of Zambia’s population, mainly along the line of rail and around provincial centres. Although the company’s main assets comprised its subscriber register and a relatively modest mobile telephone infrastructure, it was valued at $1.17 billion at the time of the initial public offering (IPO) in 2008.
ZAMTEL has more infrastructure than the other two mobile phone providers in the country – Zain and MTN. It offers fixed line telephone, mobile telephone, internet, international gateway and specialised training services to the whole country; while company assets include commercial and residential properties in all cities and towns in the country, fixed and mobile telephone delivery and support infrastructure, internet delivery services, a satellite earth station and a new but yet unutilised optic fibre network.
Despite the above factors, ZAMTEL has been unbelievably sold at a paltry $275 million when indications are that the new owners could actually sell the telecoms giant for a staggering $5 billion in 2011.
Many maintain that the sale is a rip-off if recent statistics in the global telecoms industry are anything to go by. The price is grossly understated, given that Vodafone of the United Kingdom paid $900 million for 70% stake in Ghana’s Telecom, a country where there are six operators. Thus, the growth prospects are slimmer than here where there are only two other mobile service providers.
And the Zambia Institute of Certified Accountants has called for the floating of government’s 25% shareholding in ZAMTEL on the Lusaka Stock Exchange (LuSE) for the public to continue having ownership in the company. The floating of shares will also enable the Securities and Exchange Commission (SEC) to regulate how the firm conducts its business.
‘’However, it is a good thing that ZAMTEL has been sold because it had accumulated significant tax losses that the company was not paying. This sale means that there will be more effective management and re-investment which will bring about improved services and an increased revenue base.
People also question the rationale behind the prompt reduction of the IGW fees now when government’s stance on the issue has been unshakeable for many years due to ‘’security reasons.’’ Many see this as a deliberate ploy to offer the new owners of ZAMTEL more powers in its operations and an easy access to the property.