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.
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.
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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.
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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