Court reinstates Econet’s 5% stake in Airtel Nigeria; Bharti to appeal

31 Jan 2012

Bharti Airtel has said it will appeal a decision by the Federal High Court of Nigeria to reinstate Econet Wireless’ 5% shareholding in Airtel Nigeria, Reuters reports. The Indian telecoms operator inherited the ongoing legal case as part of its USD9 billion acquisition of Zain’s Africa operations in June 2010, including 65% of Zain Nigeria. TeleGeography’s GlobalComms Database states that Econet was a founding shareholder in Airtel Nigeria (then known as Econet Wireless Nigeria [EWN]) when the cellco was established in 2001, and claims its 5% stake was cancelled following a takeover by Vodacom of South Africa in 2003. EWN was subsequently renamed Vee Networks and its brand name changed to Vodacom, but Vodacom pulled out of its contract soon after, citing ‘irregularities’ in the payment of the brokerage fees. Celtel International, a division of Kuwaiti firm Zain, then purchased 65% of the company in May 2006, a move that was disputed by Econet Wireless, which claimed its pre-emption rights were breached. Then, in 2009 Econet Wireless started moves to block the sale of Zain’s interests in Nigeria to Bharti Airtel until a ruling on the dispute over ownership of the company was passed. However, the takeover by the Indian firm was concluded in June 2010, with Zain Nigeria rebranded under the Airtel moniker by the end of the year.

According to a statement on the company’s website, the court has upheld Econet’s claim that its 5% stake was unfairly cancelled, so any decision made since then without it is void. ‘All actions and resolutions taken by the company since October 2003 at which Econet Wireless Limited was entitled to be notified, and to participate in, as a shareholder, but was prohibited, are null and void,’ the judgement said. ‘This includes decisions to sell shares, issue shares, and also transfer shares to third parties.’ Econet said this would mean the company’s name would now revert to Econet Wireless Nigeria. ‘We have made it clear to the company, that as a shareholder, we would like to ensure that all actions that must be taken to comply with the court order are undertaken in such a way that there is minimal disruption to the ongoing operations of the company,’ commented Econet Wireless Group chairman Strive Masiyiwa, adding: ‘The board of Econet Wireless and I remain willing to sit down with Bharti Airtel, to review the best way forward for all parties. In the meantime, we have a fiduciary responsibility to take all of the necessary steps to vigorously protect the interests of our shareholders.’ For its part, Bharti Airtel has said it will appeal the court’s decision and that the judgement will have no impact on the equity holding of other shareholders in Airtel Nigeria.

Nigeria, Airtel Nigeria, Bharti Airtel, Econet Group (incl. Liquid Intelligent Technologies)