Airtel Tanzania is the country’s third largest telco. It has been unable
to meet a government requirement to list on the bourse. PHOTO |
BOUREIMA HAMA | AFP
Tanzania
has eased pressure on the country's third-largest telecommunications
firm, Airtel Tanzania,
to list as part of the settlement reached between
the two parties early in June.
Airtel Africa's
prospectus for the London listing shows the waiver was effected earlier
in June, giving the subsidiary of India's Bharti Airtel Ltd a breather
as the Tanzania government continues to push telcos and mining firms to
go public or face sanctions.
This policy
requirement, passed into law in 2016, saw the country's largest telco,
Vodacom Tanzania, list on the Dar es Salaam Stock Exchange in 2017.
"In June, pursuant
to settlement arrangements agreed on with the Tanzania government,
Airtel Tanzania will receive a waiver of the listing requirement,"
Airtel Africa says in the prospectus, which The EastAfrican has seen.
In 2016, Tanzania
passed regulations that required telcos to offer at least 25 per cent of
total share capital on the DSE by December 31, 2016.
Mining companies were also required to sell 30 per cent of their shares to local investors.
Delay
As its rivals took
steps to comply with listing requirements, Airtel argued that it was
unable to meet this obligation due to several factors.
Top among them was
insufficient liquidity in the Tanzanian economy due to a potential lack
of investors with sufficient capital to subscribe for the shares. Other
factors were market conditions in the telecoms sector and the political
climate.
"Neither the
Tanzania Capital Markets and Securities Authority nor the Tanzania
Communications Regulatory Authority (TCRA) has taken any action against a
licence holder for failing to comply nor has any action been taken
against a telecommunications company for failure to comply with the
Communications Act of 2016," Airtel said.
However, the telco
acknowledged that should it fail to comply with the requirement to
complete a local listing and/or obtain a minimum local shareholding in
Tanzania in future, it could be subject to fines, penalties, litigation
and other enforcement actions, which could have adverse effects on its
business, operational results, financial condition and prospects.
The prospectus
details the agreement Airtel Tanzania struck with President John
Magufuli's administration in June. The two sides agreed to restructure
Airtel Tanzania and settle disputes.
Tax clearance certificate
Part of the
agreement was to grant Airtel Tanzania a one-time tax clearance
certificate for all historical tax claims for the period up to December
2018, "such that it will not become subject to any new tax assessments,
claims or demands by the government, subject to verification and
consideration of the records by the Tanzania Revenue Authority."
Airtel Tanzania's
corporate tax loss for the financial year ended 2017 will now be carried
forward, and the TCRA fines treated as settled without any liability.
The two sides
agreed that such settlements will not be seen as "a concession or
admission of wrongdoing, obligation or liability," and Airtel Tanzania
will not be subject to any tax arising in connection with the
transactions contemplated by the agreements.
Airtel Tanzania will pay the government $26 million over 60 months, with payments having started in April.
The firm and the
government will co-operate in the sale of towers owned by Airtel
Tanzania, and the proceeds will be distributed in a predefined manner
towards repayment of the shareholder loans to be retained in Airtel
Tanzania, with the balance distributed as a special one-time payment to
Tanzania.
In March 2018, the
government raised tax claims of $874 million against Bharti Airtel,
relating to capital gains on transfers of ownership of Airtel Tanzania
in 2005 and in 2010. It also raised various tax claims against Airtel
Tanzania totalling $47 million as at March.
Compliance Decision
A Compliance
Decision dated April 20, 2018, said the TCRA held Airtel Tanzania in
breach of certain provisions of the Electronic and Postal Communications
Act, 2010, and imposed fines of $183 million.
The government is seeking to increase its shareholding in the firm to 49 per cent.
Airtel Africa is
also facing similar challenges in Uganda, where in September 2018, the
Uganda Communications Commission (UCC) said it will introduce a
requirement for all telecommunications firms to list on the Uganda
Securities Exchange as a condition for obtaining or renewing a license
to operate in the country.
"The UCC announced
an intent to change the licensing framework in Uganda, which might
include listing obligations and impact the licence fees payable and
duration of the licence.
"Once the new
licensing framework has been established, Airtel Uganda would be
requested to submit an application based on the proposed framework.
"Although there is
no legal or regulatory requirement for telecommunications operators to
list on the Uganda Securities Exchange, the National Broadband Policy
2018, issued by the Ministry of Information, Communications Technology
and National Guidance proposes the introduction of a requirement for all
telecommunication operators in Uganda to list on the local securities
exchange through an initial public offering," the firm said.
In East Africa, only the Ugandan unit has been posting profits.
Fraud in Kenya
The Kenyan unit
announced additional losses of $6.7 million, which it blamed on employee
fraud via its mobile money service, Airtel Money. The group has further
received $860,000 as an insurance claim against the fraud in Kenya.
"While the group
has introduced enhanced controls, including increased segregation of
duties, daily reconciliations and technical restrictions on the transfer
of funds to non-Airtel bank accounts, the risk of fraudulent activity
by individuals employed by or working in partnership with the group
cannot be eliminated completely," Airtel Africa said.
It added that technical or administrative errors could result in customer losses for which it could be responsible.
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