Congolese government raises issue with Zain Congo’s acquisition

13 Apr 2010

The telecoms minister of the Republic of Congo, Thierry Moungalla, has stated that Kuwait-based telecoms giant Zain and India’s Bharti Airtel have 30 days in which to resolve issues surrounding the sale of the former’s local mobile subsidiary, Zain Congo. According to Reuters, the minister has claimed that the government had not been informed of Bharti’s USD9 billion deal to acquire Zain’s African assets which was formally announced at the end of last month, arguing that the deal was a contravention of Zain’s local mobile licence. It is understood that the Congolese government could impose financial penalties if the matter is not resolved to its satisfaction, while there also remains a possibility that Zain Congo’s licence could be revoked, or the duration of the concession reduced. ‘I cannot conceive that a buyer or a seller could at no point of the process inform the authority that had granted the licence,’ Moungalla said, adding, ‘It amounts to a clear violation of the law of our country.’

This is not the only hurdle Bharti faces in seeing the Zain deal through to completion. The objection by the Congolese authorities follows concerns raised by Gabon, which had voiced complaints just days prior to the signing of the accord. In addition, according to Reuters, minority shareholders in Zain Nigeria, the largest revenue generator of the assets acquired by the Indian company, have claimed that Zain has ignored their right of first refusal; South Africa-based Econet Wireless, which holds a 5% stake in Zain Nigeria, has reportedly taken the matter to arbitration.

As previously reported by CommsUpdate, on 31 March 2010 Bharti Airtel announced it had entered into a legally binding agreement for the acquisition of the majority of Zain’s African subsidiaries worth USD9 billion. Marking Bharti’s third attempt to enter the African markets, after two failed attempts to purchase South Africa’s MTN Group, it agreed to purchase units spread across 15 countries: Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Niger, Kenya, Madagascar, Malawi, Nigeria, Sierra Leone, Tanzania, Uganda and Zambia. Zain’s Moroccan and Sudanese subsidiaries were, however, not included as part of the deal.