Leo not carrying out bankruptcy 'threat'?

4 Sep 2012

The holding company of Namibia’s second largest cellco Powercom (Leo), which warned that it will liquidate the company if a court did not clear Telecom Namibia’s proposed takeover of Leo, appears to have backtracked on the statement, or at least delayed the deadline for the threatened action, reports The Namibian newspaper. As reported last month by CommsUpdate, Guinea Fowl Investments (GFI), the joint holding venture between Leo’s two shareholders Investec Bank and Nedbank, brought a case to the High Court in an attempt to remove regulatory obstacles to the merger with the state-owned telco. The Communications Regulatory Authority of Namibia (CRAN) has ruled that the merger can only proceed if legislation is amended to allow private shareholders to purchase 25% or more of Telecom Namibia – a condition that GFI argues it is powerless to comply with. In its arguments to the court, GFI wrote that if the sale of the indebted cellco to Telecom was not approved ‘before 31 August 2012, Powercom would be liquidated, given its existing exposure of NAD450 million (USD52 million) and monthly operational losses of between NAD2 million and NAD5 million.’ However, when asked by The Namibian on that date if Powercom would indeed be bankrupted in the absence of a ruling from the court, Mike Peo, Nedbank’s head of infrastructure, energy and telecoms, claimed that GFI’s court application implied that ‘we may liquidate’, and added, ‘not that we will liquidate and furthermore there was no time stated in our application.’ The High Court is still yet to issue its judgement.

There has been a correction to previously reported details of the proposed takeover deal: Telecom Namibia agreed to pay a nominal price of NAD2 to buy Leo (and not NAD2 million as reported), in addition to assuming NAD240 million in debt and issuing Investec and Nedbank with NAD96.5 million worth of Powercom shares. The Namibian confirmed yesterday that the erroneous value of NAD2 million was a printing error in written documents submitted by CRAN to the court. If Telecom succeeds in buying Leo, it will have to invest at least a further NAD400 million to compete effectively with market leader Mobile Telecommunications (MTC), the newspaper wrote, quoting an industry expert.