Harare – Econet Wireless’ acquisition of a 53 percent stake in Botswana’s leading mobile service provider Mascom from MTN Group Ltd is set to be concluded by mid-year.

In a statement issued by MTN on the sidelines of releasing its 2018 financials on Friday, the South African company said it is selling its stake in Mascom and withdrawing from the Botswana market as the company seeks to reduce the number of countries in which the company operates, while embarking on a drive to raise at least $1.1 billion from asset sales to strengthen its balance sheet.

Strive Masiyiwa’s founded Mascom in the late nineties, before he obtained a license to launch Econet Wireless after a protracted court battle with Zimbabwean government authorities.

The name Mascom was derived from Masiyiwa Communications. Masiyiwa subsequently sold a controlling stake in the business to Portugal Telecom and subsequently MTN, while Econet remained a minority shareholder.

“MTN has accepted an offer from Econet Wireless (Pty) Ltd, our existing partner, to acquire Mascom and in line with IFRS recognition requirements, Mascom has been classified as an asset held for sale at 31 December 2018.

“The purchase consideration for MTN’s shareholding is USD300 million and the transaction is subject to various approvals and is anticipated to be concluded by June 2019,” said MTN in a statement.

Econet which had an indirect 7 percent stake in Mascom via the holding company Mobile Botswana (MBL) raises its indirect interest in Mascom to 60 percent.

The remaining 40 percent of Mascom is currently owned by the Botswana Public Officers' Pension Fund (BPOPF).

Reports suggests that the Zimbabwean firm will push the BPOPF to release a 10 percent stake in Mascom for a public listing in Botswana, adding that Econet will do the same.

The MTN-Econet deal has faced opposition from Mascom's board, which argued that BPOPF should have been given the right of first refusal for MTN's 53 percent stake. Econet says, however, that their partnership via the holding company MBL gives it the right to acquire the South African firm’s shares.

MTN first became a shareholder in Mascom in 2005, scooping about 44 percent of Mascom for $128 million, which was about P704 million at the time, with Mascom valued at P1.7 billion.

Mascom is currently valued at P5.6 billion, which means MTN’s 53 percent shares in Mascom are worth P3 billion. MTN says it is disposing the shares held in Mascom due to “lack of control position and MTN branding which meant that the group is not able to execute on its BRIGHT strategy.”

The BRIGHT strategy which MTN is pursuing is focused on growth of its financial services, digital, wholesale and enterprise businesses.

The lack of control MTN alludes to stems from Mascom’s complex shareholding structure. While MTN is the major shareholder of Mascom, the South African telecommunication giant does not have management control over Mascom.

In 1998, when Mascom became one of the country’s first wireless carrier, it was owned by Deci Holdings at 36 percent, Portuguese Telecommunications (25 percent), Strive Masiyiwa (14 percent), Debswana Pension Fund (15 percent), International Finance Corporation (5 percent) and Southern African Enterprises Development Fund (5 percent).

By 2004, Mascom’s shareholding had drastically changed: Portuguese Telecoms was now the majority shareholder with a 50.1 percent stake, followed by Deci (30 percent) and Strive Masiyiwa (19.99percent). Still in 2004, Mascom became a majority citizen owned company after Portuguese Telecoms decided to sell its entire shares in Mascom.

The shares were acquired by DECI and Masiyiwa, with DECI owning 60 percent and Masiyiwa had 40 percent. DECI at the time was owned by BPOPF and Botswana Insurance Fund Management (BIFM), placing Mascom in the hands of citizen shareholders. However, there was a catch to Portugal Telecoms offloading its shares: on top of money paid for its shares, the Portugal Company was given a lucrative management contract for Mascom running for 10 years. The deal expired in 2014, and it was extended by another 10 years. The management contract is the reason why Mascom has never had a citizen CEO.

When MTN became a 44 percent shareholder in Mascom back in 2005, the management contract deal was already in place. Although MTN later raised its stake from 44 percent to 60 percent in 2007, the complex holding structure still prevented it from taking over management of Mascom. MTN later reduced its stake to the current 53 percent.

It became clear last year that MTN was ready to divest from Mascom, after the South African mobile operator and Orange Group announced a joint venture, on Mowali project a mobile wallet interoperability wave.

MTN and Orange Group partnered to enable interoperable payments across the continent. Mowali makes it possible to send money between mobile money accounts issued by any mobile money provider, in real time and at low cost. Orange Group happens to be a major shareholder in Orange Botswana, a main competitor to Mascom.

The decision by MTN to dispose its entire shares in Mascom to Econet comes less than six months after Econet, tried last year to sell the remaining shares for $50 million (P500 million) but the deal faced stiff resistance, with other shareholders indicating it was way too much. Econet had put the value of Mascom at P7 billion, while BPOPF argued Botswana’s top carrier was worth between P4.8 billion and P5.2 billion.

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