Row over MTC Ownership

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By Staff Reporter WINDHOEK The Ministry of Works Transport and Communications supports the move by Telecom to own a 51 percent shareholding in MTC after the dismantling of Namibia Posts and Telecom Holding Ltd (NAPTH). Once NAPTH is abolished, the current law, the Posts and Telecommunications Companies Establishment Act No 17 of 1992, will have to be reviewed to provide for the ownership and the creation of subsidiaries. This law does not apply to NAPTH and that is why the holding company, instead of Telecom, owns MTC. A ministry discussion document on the restructuring of NAPTH of September 2005 said “Regarding the ownership of MTC shareholding, strong arguments were advanced by Telecom that MTC had been created in 1995 as an initiative of Telecom, but, due to a limitation in the empowering legislation, Telecom could not directly own MTC shareholding. That is why it was owned by NAPTH. At the same time, NamPost argued that it is entitled to accrue value from MTC since in the past 15 years MTC was run by NamPost’s holding company NAPTH, which is to be abolished. MTC Managing Director Bengt Strenge said he fears the move will negatively affect the dividends that the mobile telecommunications declares to the government but also the dividends that would have accrued to its Black Economic Empowerment partners and its strategic economic partner (SEP). Its management briefed the Parliamentary Standing Committee on Economics, Natural Resources and Public Administration about the operations of MTC during which it expressed concerns about plans to be declared as a subsidiary of Telecom. He took issue with the planned takeover by Telecom, labelling it “a way of getting our cash”. Strenge said MTC’s proposal was to have the three companies MTC, Telecom and NamPost to be 100 owned by the government to enable them to be monitored and also to ensure that they pay their dues. Out of four findings of a ministerial task team and the report on the restructuring of NAPTH, the ministry said it supports that Telecom owns 51 percent in MTC provided the board of directors of MTC are appointed in consultation with the Cabinet and also that dividends declared by MTC are apportioned to Telecom in proportion to the 51 percent shareholding and are declared to the government without set-offs or deductions. The other options that were considered were that the government own 51 percent shareholding in NamPost, Telecom and MTC, while NAPTH is converted into a property company owned by the three companies, and that NamPost and Telecom be owned by the government directly, while NAPHT is converted into a property company and that Telecom owns 51 percent of MTC. The other two options were that NamPost, Telecom and MTC have 51 percent shareholding and the property company be owned by the government with the last option being that the current structure with NAPTH as holding company for the three companies with 51 percent shareholding be retained. The proposed name of the property company is Namcom Properties. A discussion document on the restructuring of the NAPTH says major challenges were identified to overcome the terms of directing the restructuring process. By July 2006, Portugal Telecom will have a 34 percent shareholding while 15 percent of the stake is still outstanding for BEE partners with the rest owned by NAPTH. In the latest twist, a document submitted to Cabinet in September last year proposed the creation of a trust fund to hold 10 percent of the shares for state sponsored institutions and programmes, watering down the BEE stake in MTC to 5 percent. “In respect of the 15 percent earmarked for Black Economic Empowerment groups, a discussion and consultation were embarked upon to determine the way forward. Cabinet directed that 10 percent of the 15 percent be reserved for existing government sponsored institutions and programmes and the remaining 5 percent should be alienated to BEEs,” it added. While the restructuring would cost government lots of money and cause job losses due to the transfer of property, Strenge said, “Profit transfers from MTC to Telecom will be negative for our BEE partners,” He added, “MTC feels dividends won’t go to the government.” He also said that the move was profit driven because normally groundline networks were not known to be very profitable. Worldwide, groundline operators also own mobile networks because they are more profitable. For example, this year MTC declared N$80 million in dividends to government while Telecom declared N$12 million. While Telecom has 87 customers per employee, MTC has 1 569 clients per employee. If the cabinet approves the restructuring, Strenge said the money that MTC would declare to the government and its BEE shareholders would decrease. Strenge said other challenges that lie ahead of the company are delays in the new legislation, which is supposed to create a regulator for all companies dealing with communications. He said there was need for a new regulator, which would be independent, strong and competent. MTC was launched in 1995 with an investment of N$ 25 million. To date it has 252 sites and is targeting to reach 380 sites by end December this year. With population coverage of 88 percent, the company is rated as the third best in Africa after South Africa and Morocco. Amongst the problems that it faces are site acquisition, shortage of power supply, and high leased-line and satellite costs from Telecom among others.