Maravi

Zamtel price was determined by the market - Mutati

COMMENT - This is not privatisation, this is simply a change of ownership from the Zambian government to the Libyan government.

Zamtel price was determined by the market - Mutati
By Fridah Zinyama
Thu 22 July 2010, 15:50 CAT

COMMERCE minister Felix Mutati has said the market determined the price for Zamtel, contrary to public outcry that the country had been cheated from getting the true value of the company.

And Mutati said the government has retained the right to list some or all of its holding in Zamtel on the Lusaka Stock Exchange (LuSE), so that Zambian citizens can participate in the turnaround of the company.

Presenting a ministerial statement to Parliament on Wednesday on the partial privatisation of Zamtel to Lap Green Networks of Libya, Mutati said RP Capital had valued Zamtel assets at US $142-US$204 million.

He said companies that bid for Zamtel were also allowed to conduct their own investigations, build their own business models and ultimately decide the value of the company.

“The government selected the most competitive offer,” he said. Mutati explained that the price achieved of US $257 million was measured on the basis of enterprise value per subscriber, the highest ever achieved on the African continent.

“It is not just a good price,” he said. “It is an excellent price for which all major telecom industry analysts have already given credit.”

Mutati said the government made a clear decision to use the proceeds of the transaction to ensure that Zamtel, a key institution, is transformed into a viable business which is capable of fulfilling its potential and properly serving the needs of the Zambian consumers and businesses.

“Zamtel will be able to make a fresh start with an appropriately sized workforce, a rationalised balance sheet, with a sizeable capital injection and a new dynamic management team,” he said.

Mutati said the government was confident that within a few months, Zamtel under the new ownership would see a positive difference.

He said the business plan put forward by Lap Green was focused, credible, achievable and would see Zamtel rapidly transform into a strong, capable and innovative company.

On the government’s 25 per cent shares in Zamtel, Mutati said the government remained a significant minority shareholder in Zamtel and retained the right to list some or all of its holding in Zamtel on the stock exchange.

“I would like to urge the public through their members, that now that we have done the work in the gym with what we have accomplished, let us all go and run the race by mobilising our financial resources as Zambians and position ourselves to come and participate in the Initial Public Offering of government’s 25 per cent shareholding,” he said.

On the optic fibre network, Mutati said the government had requested Zamtel and Zesco to conclude negotiations on the sharing of the said assets.

“There was little logic in having an additional competitor in the fibre-optic transmission market when that competitor was a parastatal and an electricity utility company,” he said.

Mutati explained that the two companies worked together to agree on a structure whereby both companies’ fibre networks are effectively pooled and under the agreement, Zamtel sells fibre services to third parties, and Zesco gets a share of the revenues.

“Given the trajectory that we have envisaged for Zamtel going forward, even though Zesco will receive a smaller proportion of the total revenues than Zamtel, it is expected to make much more money than it would ever have been able to alone because it will benefit from Zamtel’s expertise and specialised sales channels,” he argued.

Mutati said Zesco would focus more management attention on dealing with its own non-telecommunications issues and it would have free access to all the fibre optic network capacity it needs.

He said the privatisation of Zamtel had already started showing positive effects on the economy as evidenced in the liberalising of the international gateway, resulting in Zain reducing its international call rates by 70 per cent.

Mutati also said Zamtel’s assets were negative K360 billion at the point of sale.

He was responding to a question by Livingstone parliamentarian Sakwiba Sikota who wanted to know the actual value of Zamtel at the point of sale.
Mutati said the company’s liabilities were more than its assets.

“The assets before taking account of the liabilities however stood at about K541 billion, this amount including obsolete equipment such as Mwembeshi Earth Station,” Mutati said.

Sikota also sought to know how much money the government owed Zamtel before its partial privatisation and what would happen to that debt. In response, Mutati said the government owed Zamtel about K36 billion and it had been written off.

Zambezi West parliamentarian Charles Kakoma asked why Mutati was not elaborating on how they selected RP Capital to valuate Zamtel and whether or not they observed tender procedure.

Mutati said the Zambia Development Agency (ZDA) Act provides for a mechanism to handle that. “We have single sourcing, public tender and limited tendering systems, “he said. “In the case of RP Capital, we used the single-sourcing mechanism.”

Mbabala parliamentarian Emmanuel Hachipuka wanted to know whether the government had sold Zesco’s optic fibre with Zamtel. Mutati said the optic fibre of Zesco had not been passed on to the new owners of Zamtel. Mutati said Zamtel would lease space on Zesco’s optic fibre and pay for the service.

Labels: FELIX MUTATI, PRIVATISATION, ZAMTEL

posted by MrK @ 2:22 PM