Indigenization law pushes Russia's VimpelCom out of Zimbabwe

Russia’s VimpelCom has invited bids from regional and international investors interested in buying its stake in mobile phone operator Telecel Zimbabwe.

The winner of the bid to buy the 60 percent controlling stake in Telecel Zimbabwe is expected to be announced before the end of the month. The rest of the company is owned by a Zimbabwean consortium called the Empowerment Corporation.

VimpelCom has already sold its businesses in war-torn Central African Republic and Burundi to South-Africa based Econet Wireless.

The company has over the years been in conflict with the Zimbabwean government over the country’s so-called indigenization law, aimed at bringing more black Zimbabweans into business. The law requires foreign companies to cede 51 percent ownership in their Africa holdings to black Zimbabweans. Some foreign-owned companies have resisted complying with the law.

In 2007, the Post and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ) cancelled Telecel’s license because of its shareholding structure. The cancellation was reversed after the company successfully contested the matter with the Zimbabwean government.

Last year, POTRAZ refused to renew Telecel’s operating license after it expired following a dispute over the ownership of the company. The license was only renewed after the Zimbabwean authorities got an assurance from Telecel that it was going to comply with the indigenization law.

However, Telecom has not yet complied with the law. The Zimbabwean government has also complained that the company has failed to pay $137 million for its 20-year license.

Telecel Zimbabwe General Manager Angeline Vere disputes the claim, saying the company had advanced an initial deposit of $14 million and that the balance is due to be paid this month.

Telecel Zimbabwe has over 2.5 million customers and is the country’s second largest operator after Econet Wireless.

Regional telecom analysts blame the indigenization law for the lack of international investment in the country’s telecom sector.

Since 2011, the Zimbabwean government has been looking for an international or regional operator to buy a 49 percent stake in the financially troubled, government-owned NetOne, which has about 1.3 million subscribers.

“Many international telecom operators are looking to take over or buy stakes in an already existing company because it’s cheaper than getting a new license but not so with Zimbabwe because of the law,” said Edith Mwale, telecom analyst at Africa Center for ICT Development.

She said the Zimbabwean government has the option of reversing the law to keep the telecom sector from continuing upheaval.

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Must read: Hidden Cause of Slow Internet and how to fix it
Notice to our Readers
We're now using social media to take your comments and feedback. Learn more about this here.