Tanzania rules that Bharti Airtel operations were privatised illegally

A Tanzanian probe found that the local unit of Indian mobile-phone company Bharti Airtel Ltd was originally transferred from the state illegally and the government will start talks to retake what it says is its rightful share of the business.

The investigation discovered that the initial privatization of Tanzania Telecommunications Corp. “broke the law, regulations and procedure,” according to a statement from President John Magufuli’s office that quoted Finance Minister Philip Mpango. “What we saw was very dirty and terrible. In short, our country was conned and a lot of money was lost,” Mpango said.

For its part, Airtel said last month its 2010 acquisition of the 60 per cent stake in the company from Kuwait’s Mobile Telecommunications Co., known as Zain, was in full compliance and followed all approvals from the government. Tanzania’s complaint relates to the initial privatization of the company five years prior to when Airtel took control, it said in a statement at the time.

Tanzania’s ownership claim follows an order by the government last year that telecommunications companies should sell at least a quarter of their units on the local bourse to boost domestic ownership. The local operations of Johannesburg-based Vodacom Group Ltd. became the largest company on the Dar es Salaam Stock Exchange when it raised 476 billion shillings ($213 million) in August. Airtel has yet to list Airtel Tanzania, in which the government has a 40 per cent stake.

Government Asset

Magufuli said in December that Airtel Tanzania is a government asset in remarks aired on the East African country’s national broadcaster. Calls to Zain’s offices in Kuwait weren’t answered when Bloomberg called outside normal business hours, while Airtel Tanzania spokeswoman Beatrice Singano Mallya and the finance minister declined to comment when contacted on Friday.

“The government cannot talk about the expected outcome of the proposed negotiations a priori,” Mpango said by mobile text message.

The Indian telecommunications company is the latest foreign investor to have a run in with the East African state. The government in July demanded $190 billion in back taxes from Acacia Mining Ltd., saying the gold miner had been under-declaring mineral exports for more than a decade. Barrick Gold Corp. Chairman John Thornton agreed that Acacia would establish a new operating model to share the economic benefits from the mines equally with the Tanzanian government and pay $300 million to the state as a "show of good faith."