Dubai Holding unit battles to restore Tunisie Telecom IPO

A Dubai Holding unit is battling to reinstate an initial public offering of Tunisie Telecom, in which it bought a US$2.25 billion (Dh8.26bn) stake in 2006.

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Emirates International Telecommunications (EIT), an investment company that holds a 35 per cent stake in the Tunisian telecoms company, says a planned share sale was cancelled without its approval.

EIT wants the initial public offering (IPO) to be reinstated but is being opposed by Tunisia's new government, as well as a local union.

Tunisie Telecom has been subjected to large-scale strikes in the fallout of the January uprising that toppled the country's president, Zine el Abidine Ben Ali.

The Tunisian General Labour Union (UGTT) is demanding the sale be abandoned permanently. The union also objects to the employment of about 60 of the company's 8,500 staff, whose salaries it claims are inflated and violate labour regulations.

EIT has denied union allegations that these contractual employees are overpaid, and is calling for the reinstatement of the IPO to allow Tunisie Telecom to grow.

It planned to list a 20 per cent stake on the Tunis and Paris stock exchanges in what would have been the first offering by a Tunisian company on a European bourse. Under the proposed IPO, 10 per cent of shares offered would come from the government's 65 per cent stake, and 10 per cent from EIT's holding.

But UGTT opposes any moves that could lead to the privatisation of the company and possible job losses that could follow. The union told The National that, were Tunisie Telecom to be privatised, extensive layoffs would follow.

The IPO was initially suspended because of the political situation in Tunisia, and protests over what was perceived as a privatisation of the company.

But in a meeting of company, government and union officials held on February 9, it was decided the IPO, along with "all privatisation initiatives", would be permanently cancelled. At the meeting there was also a call for a freeze of the employment of staff whose "salaries are higher than normal ones under [Tunisie Telecom] regulations", according to the minutes.

Raouf Chekir, the former chief executive of Tunisie Telecom, signed the minutes of the meeting, which was also attended by representatives of the telecoms ministry, the social affairs ministry and the UGTT. EIT, which holds four of the 12 board seats, said Mr Chekir had no right to sign the minutes of the meeting, to which representatives of the Dubai investment company had not been invited.

EIT is part of Dubai Holding, the conglomerate owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai.

Deepak Padmanabhan, the chief executive of EIT, said Mr Chekir did not have the authority to sign such a document. EIT acknowledged that Mr Chekir later retracted his approval of the document.

"In order for such a resolution to be valid it would need to be approved by a qualified majority of the board of directors consisting of representatives from the state of Tunisia and EIT," Mr Padmanabhan said.

"Tunisie Telecom has a clear corporate governance framework and decisions taken outside of this framework should not be considered legal or valid," Mr Padmanabhan added.

Mr Chekir, who assumed the office of chief executive on February 2, stepped down soon after signing the minutes of the meeting, although he retains his board position at Tunisie Telecom.

He told The Nationalhe wanted to suspend the IPO process temporarily but the unions demanded it should be scrapped. Mr Chekir said the document he signed did not constitute an agreement to cancel the IPO.

"The meeting lasted 12 hours and was in a stalemate," he said. "In the end the ministry accepted that the IPO process would be abandoned.

"I signed the minutes of the meeting because I was present at the meeting, but it was not an agreement.

"The next day I wrote to the minister explaining that the agreement between the government and the unions was not applicable to Tunisie Telecom and for Tunisie Telecom is null and void."

Mr Chekir added he resigned as chief executive after refusing a request from the secretary of state to sack the 60 higher-paid employees.

But the union disputes EIT's argument that the February 9 "agreement" is invalid because Tunisie Telecom board members were not consulted.

"We've always made agreements like this. We don't need to bring our demands to Tunisie Telecom's strategic partner, we bring them to the Tunisian state," said Mohamed Mongi Ben M'Barek, the secretary general of the General Federation of Post and Telecommunications, a branch of the UGTT.

Mr Ben M'Barek said the union considered Tunisie Telecom to be fundamentally a public company.

"We regard selling even a minority of shares on the public bourse as a step toward full privatisation," he said.

bflanagan@thenational.ae

tashby@thenational.ae