The Zimbabwean government has declined to renew the operating license of Telecel Zimbabwe, the country's second-largest mobile operator, for allegedly refusing to abide by the country's foreign ownership law.

Telecel Zimbabwe is 60 percent owned by Egypt-based Orascom while the rest of the company is owned by a Zimbabwean consortium called the Empowerment Corporation. In turn, Russia's VimpelCom is a parent company of Orascom.

Telecel is second to Econet Wireless in terms of investment and subscriber numbers, with more than 2.5 million customers.

Telecel's 15-year license expired in June. The company was given an ultimatum to comply with the country's so-called indigenization law that requires all foreign-owned companies to cede 51 percent of their shareholdings to indigenous Zimbabweans.

Telecel management is trying to convince the Zimbabwean government to renew the operator's license. If the Zimbabwean government agrees, the company will be required to pay US$137 million for a new license for a period of 20 years.

The company has over the past few years struggled to keep its operation going in Zimbabwe following differences with the country's telecom sector regulator.

In 2007 the operator's license was cancelled by the Post and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) over the company's shareholding structure, but the cancellation was reversed after the company successfully contested the matter with the Zimbabwean government.

However, VimpelCom is reported to be preparing to sell its stake in Telecel due to the continuing friction with the Zimbabwe government.

"While the indigenization law provides for the 51 percent shareholding, the process itself of giving out the controlling stake to the locals does not make sense to the investors and may be a scare to those planning to invest in the country," said Edith Mwale, telecom analyst at Africa Center for ICT Development.

Mwale said the Zimbabwean government has since 2011 been looking for an international or regional operator to buy a 49 percent stake in the financially troubled, government-owned operator NetOne, but to no avail because of such laws.

Zimbabwe elections are being held at the end of the month, and President Robert Mugabe, who is seeking re-election, is determined to please voters by allowing them to buy majority shares in foreign-owned companies.

Last week, Telecel said the operator's shareholders are determined to address the issue of its shareholding structure in Zimbabwe soon.