Telecom’s takeover of Leo clears hurdle with executive reshuffle

20 Jul 2012

Government-owned incumbent PSTN operator Telecom Namibia’s managing director Frans Ndoroma has resigned as CEO of state holding company Namibia Post and Telecommunication Holdings Limited (NPTH), in order to satisfy one of the conditions of Telecom’s proposed takeover of cellco PowerCom (Leo) stipulated by the Namibia Competition Commission (NaCC). TeleGeography’s GlobalComms Database says that in December 2011 Telecom agreed in principle to purchase 100% of Leo, and in May 2012 the NaCC gave its conditional approval pending compliance with ownership requirements aimed at ensuring fair competition. The anti-monopoly agency stipulated that the shareholding structure of Telecom and the country’s mobile market leader Mobile Telecommunications (MTC) must be ‘separate and independent’ within two years. As it stands, the NPTH owns 100% of Telecom Namibia and a 66% stake in MTC; if the takeover of Leo went ahead with existing ownership structures, the government would effectively control the entire mobile sector (in which Telecom is a distant third place). In addition, the NaCC ruled that no director or employee of Telecom Namibia may serve as a director of NPTH, and that the same applies in the case of MTC, ‘in the interest of preventing any collusive or coordinated behaviour that would undermine competition.’ In addition to Ndoroma’s resignation a NPTH CEO, Patience Kangueehi–Kanalelo has also resigned as NPTH company secretary to satisfy the NaCC’s conditions. Ndoroma will remain as MD of Telecom Namibia; Christa Muller assumes the role of acting CEO of NPTH.

Final approval for the merger is still awaited from the independent telecoms watchdog, the Communications Regulatory Authority of Namibia (CRAN), which, as reported by The Namibian newspaper, took a board decision on 7 June stating that the transfer of Leo to Telecom Namibia is subject to a legislative amendment to the Post and Telecommunications Companies Establishment Act of 1992, which makes way for a partial privatisation of Telecom via which not less than 25% of shares must be sold. The CRAN has, in principle, conditionally approved the transfer of Leo’s telecoms service licence, electronic communications network/services and spectrum usage licences to Telecom as the sole shareholder; Telecom must submit a formal application for the transfer of licences before the transaction is officially considered, while it may file a petition against the condition regarding its partial privatisation within 90 days of its issuance. If its takeover of Leo is not approved, Telecom will look to set up its own GSM/W-CDMA-based mobile operator, separate from its struggling CDMA-based wireless division, the company has stated. However, it has also pointed out that disallowing the merger would make it difficult for Telecom and fellow market struggler Leo to each find the capital to invest sufficiently in order to compete effectively in the small Namibian market with the runaway leader, MTC. Telecom claims therefore that the merger is pro-competition rather than anti-competitive.