The sale of Zambia Telecommunication (Zamtel) to Libya's Lap Green Networks is in reverse after a government report called the sale of the company illegal and fraudulent.
Recently elected President Michael Sata has promised to void the sale of the company should it be proved that it was illegally sold.
According to the report by the Commission of Inquiry set up by Sata to investigate the sale of the company last month, Lap Green Network failed to meet all three of the mandatory pre-qualification criteria during the bidding process and as a result should have been disqualified at the preliminary stage.
Commission Chairman Sebastian Zulu, who is also the Zambian minister of Justice, said RP Capital Partners of Cayman Islands, single-sourced as a financial advisor by the previous government, was in direct breach of procurement procedures.
The fraudulent and incompetent transaction, Zulu said, resulted in Zamtel being undervalued.
Zulu said the company was undervalued at US$38 million despite having a book value of $81 million.
The evaluation of Zamtel assets by RP Capital was also highly incompetent, misleading and illegal, as the tender could have been floated to allow other companies to bid, according to Zulu.
"Therefore, the sale of the company to Lap Green Network was irregular, illegal and fraudulent," said Zulu when presenting the report last week.
The previous government sold Zamtel at the total cost of $394 million, claiming the deal was aimed at saving the company from closing after plans to recapitalize it failed.
Primary bids were received from various foreign telecom companies including Angola's Unitel, Russia's Vimpel Communications together with Altiomo Holdings and Lap Green Networks. After months of scrutinization, Lap Green Networks emerged the successful bidder.
But the transaction forced the then minister of Communication and Transport, Dora Siliya, to resign following sustained public criticism and litigation.
Lap Green Network owns 75 percent of Zamtel while the rest is still owned by the Zambian government. Zamtel is Zambia's only total telecommunication solution service provider, offering broadband Internet, fixed and mobile services.
If the Zambian government reverses the sale of the company, Lap Green's plans of further expansion in Africa will suffer a serious setback. Lap Green Networks operates in over seven countries in African including Niger, Uganda and Ivory Coast.
Last week, Libya's National Transitional Council (NTC) appointed a new CEO to take stock of Lap Green Networks in Zambia and several other operations in Africa. Abdul Rahman Al Shater was appointed new acting CEO to strongly push for the growth of Lap Green Networks expansion program.