Zambia has reversed the sale of Zamtel to sub-Saharan mobile operator Lap Green Networks of Libya, following allegations that the company was fraudulently and irregularly sold by the previous government.
Lap Green became the majority shareholder in Zamtel after buying 75 percent of the company's shares in 2010, when the previous government decided to privatize the telecommunications company. The Zambian government at the time claimed it wanted to save the company from closing after plans to recapitalize it failed. The Zamtel shares were sold for US$394 million despite several attempts to block the sale by citizens and shareholders, who claimed the company was still viable.
In 2009, the Zambian government, through the Zambia Development Agency (ZDA), government announced the sale of Zamtel, and chose RP Capital of the U.K. as financial advisor to the deal. Primary bids were received from India's Bharat Sanchar Nigam, Angola's Unitel, Russia's Vimpel Communications, Altiomo Holdings, and Lap Green Networks. After months of scrutinization, Lap Green emerged the successful bidder.
However, the process was marred by corruption allegations, which led to the resignation of the then Minister of Communications and Transport, Dora Siliya, who has since been arrested for her role in the sale of the company.
When the new government led by President Michael Sata assumed office in September last year after a general election, investigations were launched through the Commission of Inquiry into the controversial sale of the company to the Libyans. The resulting report revealed irregularities in the manner in which the company was sold.
The report among other things established that the sale was "fraud and irregular" as Lap Green Networks did not meet any of the guidelines and conditions that were set by ZDA for the sale. The report also established that the previous government politically influenced ZDA to have the company sold to Lap Green Networks.
Last week, the Zambian government decided to reverse the sale of the company despite the investment, amounting to US$170 million, that Lap Green Networks has made in Zamtel since the takeover and its ability to attract more than 400, 000 new customers.
Lap Green CEO Wafi Alshater said in a statement Monday, however, that Zamtel was legally acquired and belongs to the Libyan people.
"Lap Green Network said will pursue all options and do everything possible to retain the stake in Zamtel which it legally acquired," Alshater said. "Should the Zambian government stick to its decision, the situation will not only be damaging to the telecoms industry in Zambia but also send a negative message to those looking to invest in Zambia," he added.
Zambia's Sata, on his part, told reporters this week that "it is surprising that the company has decided to take a confrontational stance, despite the main issues surrounding the transaction."
The Zambian government started by first reversing the sale of the fiber-optic network belonging to the Zambia Electricity Supply Corp. (Zesco), which was sold together with Zamtel.
Lap Green planned to use the investment in Zambia as a stepping stone for further investment in the Southern African region. The reversal has now left Lap Green Networks' expansion plans in the region hanging.
The problems surrounding the sale of Zamtel underlines the difficulties that African governments face in privatizing incumbent telecom operators. Generally, corruption and lack of transparency among senior government officials has been at the root of the problems surrounding the privatization of Africa incumbent telecom companies.
Meanwhile in East Africa, Lap Green is fighting for the restoration of an operating license that was revoked in Rwanda last year after the company failed to comply with operational obligations. The license was revoked following a court order that placed Lap Green, operating in Rwanda as Rwandatel, in liquidation.