Following years of dispute with Congolese Wireless Network, South Africa's Vodacom is now exiting the Democratic Republic of Congo (DRC) market, while searching for other regional markets in which to invest.
Vodacom's joint-venture dispute with Congolese Wireless Network has been taken for arbitration in Brussels, Belgium.
Vodacom owns a 51 percent stake in the venture withe Congolese Wireless Network, but the two companies have been embroiled in a dispute over a US$484 million capital injection by Vodacom Group into the money-losing company.
Last year, Vodacom appointed investment bank Rothschild to explore options for the business in the DRC.
"It is a bad experience for Vodacom and one that provides lots of lessons for any operator hungry for expansion in the region," said Amos Kalunga, telecom analyst from Computer Society of Zambia. "What is more worrying is that there are no more new licenses in Africa and therefore Vodacom would still need partners in whichever country the company intends to operate."
The confrontation between the two companies started in 2010 when Vodacom Group proposed a capital injection of $484 million, which automatically would have diluted Congo Wireless Network shares in Vodacom Congo. Congo Wireless Network accused Vodacom of fraud and abuse of trust, mainly because of a loan that allegedly resulted in Congo Wireless Network incurring inflated interest and fees.
In the midst of the dispute, Congolese Wireless Network proposed a liquidation or sell-off to a third party. Congolese Wireless Network then demanded that Vodacom Group pay back more $166 million in interest. Vodacom refused to pay back the interest and insisted that it had provided more $340 million to the joint venture and commercial rates had been on by Congolese Wireless Network.
The sale of the DRC network would be a serious setback for Vodacom Group's plans of becoming a major player in Africa's mobile market. In addition to the operation in DRC, Vodacom has operations in Mozambique, Lesotho and Tanzania where the company claims its subscriber base has grown to more than 17 million.