Congo's CWN threatens to sue Vodacom

Vodacom said Congolese Wireless Network (CWN) had threatened to sue to force it to “invest significant further sums in the business”.

But the group rejected this demand on the grounds that it had carried the funding costs since the network's launch in May 2002, and that CWN should also come to the party.

Vodacom Group had lent the Congolese firm US$350m since its launch and funded and guaranteed capital expenditure worth about R5,3bn.

Vodacom Congo was formed out of CWN, which bought a licence in 1999 but was struggling to fund its expansion until its re-launch in May 2002. CWN owns 49% of the company, and Vodacom the rest.

Chief officer for corporate affairs Bob Collymore said Vodacom could not justify further investment in the company, particularly when relations with CWN were now “combative and dysfunctional”.

Vodacom was now prepared to face its partner in court, a move described by analysts yesterday as tricky and a gamble, given concerns about weak judicial systems in such countries as the Democratic Republic of the Congo.

Vodacom's woes confirm that investment in potentially lucrative but politically and economically unstable markets can be a nightmare. A case in point is Nigeria, where SA-based Econet Wireless Group is still embroiled in a shareholder dispute with its Nigerian partners, whom it accuses of selling a company they jointly formed in 2001 to Celtel, now part of Kuwait-based Zain.

Technology news website TechCentral yesterday claimed CWN had accused Vodacom of fraud and swindling, abuse of trust, and usury, among other charges. It said CWN also wanted Vodacom to pay more than US$200m it claimed was allegedly unlawfully taken out of the business “through various means”.

But Collymore said the dispute centred on funding arrangements. While holding out for a peaceful resolution, he said Vodacom could not simply agree to CWN demands.

“Having explicitly approved the terms of the funding, CWN cannot now claim ignorance of these terms, and we refute any suggestion that Vodacom has unduly benefited from the finance agreements. Any intended litigation on this issue is entirely without merit and a contrived attempt to force Vodacom to disproportionately fund further investment,” Collymore said.

Despite the dispute, analysts said Vodacom was unlikely to walk away from a market with a population of 65-million people.

CWN, headed by Congolese businessman Alieu Conteh, could not be reached for comment.

Source: Business Day

Published courtesy of