MTN unit settles Guinean dispute

By Asha Speckman and Bloomberg Time of article published May 10, 2011

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MTN’s Areeba unit had sent the Guinean government a letter agreeing to pay a e15 million (R145m) penalty within 10 days, Guinea’s Telecommunications Minister, Oye Guilavogui, said yesterday.

The company’s assets would remain in the custody of the government until the dispute had been resolved, Guilavogui said yesterday on state-owned Radio Télévision Guinéenne.

Rich Mkhondo, MTN’s spokesman, said the dispute with the Guinean government had been resolved.

“That is all we know at this stage and I can’t say if the fine was paid or not paid,” he said. “Business was never interrupted, though we weren’t in control of our operations for about a week,” Mkhondo said by phone from Johannesburg.

In a second day of declines, MTN lost 82c to R141.18. in midday trade on the JSE. The shares later recouped some losses to close 0.07 percent lower at R141.90.

MTN, Africa’s biggest cellphone company, bought Areeba in 2007 as part of a $5.53 billion (R36.8bn) merger with Middle Eastern cellular operator Investcom. The dispute related to fees allegedly owed to the authorities, MTN said on Friday.

Thecla Mbongue, a senior research analyst at Informa Telecoms & Media in Johannesburg, said the dispute was ongoing. It was related to MTN’s takeover of Investcom and the indirect acquisition of operations in Benin, Ghana, Guinea-Bissau, Guinea, Liberia, Sudan, Syria and Yemen.

In Guinea MTN controls the bulk of the market (43.63 percent) followed by French telecoms firm Orange, Cellcom, state-owned Sotelgui and Intercel. By March this year, Guinea had 46 million cellular subscribers, Informa said.

Mbongue said the west African country’s government claimed MTN had not followed proper procedure.

An Informa Telecoms & Media news brief published on February 4 said Guinea had urged MTN to comply with the procedure in June 2009 but MTN replied that the shareholding structure of its Areeba unit did not change because the sale was done at group level.

MTN reportedly said it only required the authorisation to change legal and brand names. Both parties disagreed, leading to the fine, which MTN failed to pay by the deadline of January 31. In February, MTN contested the decision.

Khulekani Dlamini, the head of research at Afena Capital, said Guinea – although making a small contribution to MTN profits – was strategic because it contributed to MTN’s economy of scale and better negotiations with vendors. MTN’s largest west African assets are in Ghana and Nigeria.

“The environment has changed quite materially from what it used to be before. By and large governments in that area have realised the tax revenue opportunity that foreign direct investment represents. To that extent, they have created an enabling environment that is still growing in maturity,” Dlamini said. - Business Report

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