Leo takeover back on the cards as court overrules regulator

26 Sep 2012

State-owned Telecom Namibia’s proposed takeover of struggling mobile operator Powercom (Leo) looks to be back on track following a High Court decision rejecting conditions imposed on the deal by the Communications Regulatory Authority of Namibia (CRAN). Judge Shafimana Ueitele ruled that CRAN lacked the power to subject Leo’s proposed merger with Telecom Namibia to a pre-requisite legal amendment allowing the privatisation of a 25% stake in Telecom. As reported by newspaper The Namibian, the judge labeled the regulator’s actions ‘unauthorised and invalid’, and ordered CRAN to either restate or completely remove its conditions by 19 October. Leo’s investors had brought the case to court, arguing that CRAN’s imposition – requiring changes to the Post and Telecommunications Establishment Act – was impossible to comply with, and threatened to liquidate the loss-making cellco if the transaction could not be concluded soon.

CRAN had justified its action by citing the Communications Act’s aims of encouraging private investment in the telecoms sector; if the deal is completed the mobile sector will be in essence a government monopoly, as market leader MTC is majority state-owned. However, Ueitele said that CRAN’s conditions go beyond its remit under the Communications Act which ‘simply empowers the authority to stimulate, allow, promote or assist, foster or cherish private investment in the telecommunications and broadcasting sector’. The judge added that private investment had indeed been encouraged when Powercom (Leo) was offered up for sale by its current owners last year, with several large telecoms groups approached. ‘At the end of the process only Telecom Namibia submitted a bid to purchase Powercom,’ the judge noted. Under the High Court decision, CRAN must also pay legal costs to Guinea Fowl Investments, the joint holding venture between Leo’s two shareholders Investec Bank and Nedbank. CRAN chairman Lazarus Jacobs said immediately after the announcement that the watchdog would study the ruling before deciding whether to appeal.