Law suit intrigues between the Bharti Celtel Nigeria and Econet Wireless International have exposed what could be termed as “sleeping with the enemy,” and may leave Airtel Kenya in an awkward position. This is a case where Airtel apparently does business with the very company that has given them headaches back in Nigeria following a law suit that saw the Nigerian High Court rule in favor of Econet and ordered Airtel Nigeria to pay US$3bn to Econet Wireless. It is a conflict of interest that leads to companies changing names in an attempt to create opportunities for their own businesses and associates despite the very reality of their relationships in other countries. The only question left to be answered here is whether Airtel Kenya is aware of the ownership of Liquid Telecom and decided to move on with or is it a case of just being in the dark over who they should deal with or no background checks for suppliers? Nevertheless just how did Airtel end up doing business with the enemy?
Kenya Data Networks to Liquid Telecom, who owns the company?
Airtel Kenya has for a long time been in partnership with Kenya Data Networks after Airtel signed a five-year agreement with Kenya Data Networks (KDN) to backhaul its 3G data traffic over KDN’s fibre-optic network. However in a turn of events, KDN was later acquired by Liquid Telecom, which is a Zimbabwean Telecommunications company.
Altech’s East Africa’s investment handed over to Zimbabwe’s Liquid Telecom in 2010, their new owner. This marked the end to Altech’s troubled investment in Kenya Data Networks (KDN) and Swift Global, with the company maintaining a minority stake in the two firms. However, there is still confusion as still many aspect of KDN remain unchanged with the website that belonged to KDN still functional although it’s now being used by Liquid Telecom.
Altech became a minority shareholder in The Liquid Telecom Group with an initial 8.6% equity stake with shareholder voting rights of 10%. Altech will also subscribe US$16.5 million in cash.
Ownership of the following Altech properties was passed to Liquid Telecom with regulatory approval:
- its 61% stake in Kenya Data Networks, a data carrier and infrastructure provider in Kenya
- Africa Data Networks, an operator in the DRC
- Swift Global, a provider of voice, data and mobility solutions to the Consumer, Business, Enterprise and Government sectors in Kenya, Uganda and Rwanda,
- Stream, a service provider in Rwanda and
- InfoCom, an ISP in Uganda.
During the hand over from Altech to Liquid, Nic Rudnick, CEO of Liquid Telecom, said: “Liquid has been building and investing in a high-quality pan-African fibre network for many years and this deal will accelerate our progress by enlarging our network footprint and complementing our existing product portfolio. We are a strong and ambitious company and have a long-term investment plan for all the companies we are acquiring.
Like us, KDN has built the largest fibre network in East Africa and we believe that it is a company with huge potential. I strongly believe that its people, its network and its customer base will all add value and opportunity to our current operations.”
Altech Group CEO, Craig Venter, said: “The Liquid transaction opens a positive new chapter for Altech in partnership with a group with proven expertise in its sector.”
Thus with the deal signed and KDN officially handed over to Liquid Telecom, the business began with Liquid Telecom taking over all other contracts that KDN had including Airtel Kenya.
Questions over Liquid Telecom ownership
So just what who owns Liquid Telecom? A background check to the Econet Wireless website leads you to its subsidiaries one of them being Liquid Telecom. Econet Wireless is a diversified telecommunications group with operations and investments in Africa, Europe, South America and the East Asia Pacific Rim, offering products and services in the core areas of mobile and fixed telephony services, broadband, satellite and fibre optic networks.
Econet Wireless is a privately held group, and is not listed on any stock exchange. One of its subsidiaries, Econet Wireless Zimbabwe is listed on the Zimbabwe Stock Exchange and its activities are confined only to the Zimbabwe market.
The Group’s subsidiaries include Econet Wireless International, Econet Wireless Africa, Econet Solar International, Econet Wireless Group and Liquid Telecom. This is a clear pointer that Liquid Telecom is no doubt part of Econet International.
Econet Wireless Came Back to Kenya?
In the year 2003, CCK gave a report that four out of the five prequalified consortia in the tendering of third mobile operator, proceeded to the final evaluation stage. ECONET Wireless Kenya Ltd (A consortium of Econet Wireless international, Kenya National Federation of Co-operatives (KNFC), Rapsel Ltd and Corporate Africa Ltd) emerged the winner with a financial bid of US$ 27 million. The Commission was, however, not able to issue Econet with the license as initially planned, since licensing negotiations had not been concluded. The Commission then granted the license in the next financial year in September 2003, after which Econet was expected to begin service rollout.
However in the same month of September, KENYA cancelled the license it had given that month to Econet Wireless International of South Africa to provide mobile phone services.
The firm, jointly owned by South Africa’s Altech group and Zimbabwe’s Econet Wireless Group, won a tender in September 2003 and was officially handed a license to start operations.
“The government has today nullified the assurance of the license for the third mobile phone operator to Econet Wireless. All the money so far paid towards this license will be refunded,” the then Information Minister Raphael Tuju said in the statement.
Econet Wireless International is locally partnered by Rapsel Ltd, Kenya National Federation of Cooperatives and Corporate Africa. Tuju said the local partners “are not able to raise money that will enable them to hold shares that conform to the shareholding requirement as per the government’s policy in the sector.
However in different reports, the story seems to be different. It was reported in local newspapers the same year that “An air of mistrust among principal shareholders has once again blown into the management of Econet Wireless Kenya.” Investigations revealed that the future of Econet Wireless Kenya, which is supposed to run Kenya’s third mobile phone provider, was threatened by an intense power struggle in the firm. So how then did they come back as Liquid Telecom? That is a question that remains unanswered.
The case in Nigeria that is a headache to Airtel:
On 24th January 2012, the Federal High Court of Nigeria ruled in favor of Econet Wireless Limited (“Econet”), an international telecommunications group, based in South Africa, in its dispute with Airtel Networks Limited (“Bharti”), over the ownership of a 5% stake, in Bharti (formerly Econet Wireless Nigeria Limited).
The court ordered that Bharti restore the 5% stake, which was stripped from Econet in 2003, by the board of directors of Bharti. The court also ordered that all resolutions, and decisions taken by Bharti, since November 2003, to date, in which Econet was excluded as a shareholder, are null and void.
Bharti bought 65% of the company in Nigeria, in 2009, as part of an acquisition of the African businesses of Zain of Kuwait. At the time of the sale Bharti valued, the Nigerian company, which it renamed Airtel Networks Limited, at over US$4,5bn. This would have valued the Econet 5% stake, at over US$220m, at the time.
On 26th January 2012, Bharti filed an Application for Stay of Execution in the Federal High Court, requesting the Court to grant it an injunction, and to stop Econet from exercising its rights under the court judgment, until an appeal has been heard, by the Court of Appeals of Nigeria.
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