JOHANNESBURG / LONDON // South Africa-based Econet Wireless is disputing Gulf carrier Zain's ownership of one of its most important operations, Zain Nigeria, in a row that could derail Zain's divestment plans. Econet said on Wednesday it disputed the purchase in 2006 by Celtel, now called Zain, of a majority stake in a group called Vee Networks Limited, now Zain Nigeria. Econet ? which has operations in nine countries in Africa, Europe and the East Asia Pacific Rim ? said in a statement it was pursuing arbitration proceedings because it believed it had been denied its right of first refusal over the stake.
It has now appealed to legal authorities including an international tribunal operating under the auspices of the United Nations for the transaction to be unwound. The South African group was a founding shareholder of Vee Networks and claimed that its right of first refusal over the stake was breached in 2006, when its Nigerian partners sold their shares to Zain. Econet said the arbitration would result in Zain's being unable to dispose of its Nigerian operation until the issue is resolved, if it decides to sell its African operations.
Zain, a hot but tricky potential acquisition target for stagnating Western telecoms groups, has invested more than US$12 billion (Dh44bn) in Africa. Nigeria is the group's biggest market, contributing 21 per cent of customers and 17 per cent of revenues. The company has put on hold for now plans to sell its African operations while one of its major shareholders tries to persuade other owners to club together to sell a 46 per cent stake, for which it says it already has a buyer.
Kuwait's Kharafi Group, which owns 11 per cent of Zain but is estimated to control about 20 per cent in total through other firms, wants to sell 46 per cent of Zain to a group of Asian investors ? although those investors may press for a larger stake. Econet said that as part of the proceedings it had applied for interim measures to prevent Zain from selling, transferring, disposing of, dealing with or otherwise encumbering the disputed stake until the matter was resolved.
Econet said Celtel had provided "certain undertakings to preserve the status quo". However, Zain's Chief Executive Officer Saad al Barrak told reporters on Monday evening that he had not signed anything. "This has no basis whatsoever... This is a fantasy," he said, without commenting further on the case. Zain Nigeria has traded under various brands since 2001 due to a series of board room conflicts. It has been known as Vee Networks, Vmobile, Celtel and now Zain Nigeria.
*Reuters