Revealed! How $16m Killed Vodacom/Vee Networks Deal  

Racism, financial impropriety and not corporate governance or abuse of trust may have killed the Vodacom/Vee Networks deal, report IT Edge news crew.


Scheming for the money

Did Vodacom Group of South Africa actually pull out because of poor corporate governance on the part of its Nigerian partners, Vee Networks?
Was the payment of brokerage fees to Bromley Investment, Oceanic Securities and Empee ventures the reason? IT Edge can now reveal that there was more to Vodacom’s pulling out than it is generally believed. Among other facts uncovered by IT Edge, the issue of corporate governance and violation of trust as alleged by Vodacom may have been contrived afterall.
 

Documents sighted by IT Edge reporters showed that if Vodacom and Vee Network’s deal had sailed through, the South African mobile operator would have dished out a whopping $16 million (about N2.16 billion) to its agents and proxies.

For instance, a globally acclaimed financed institution with branches all over Europe and America would have earned $2million (About N270 million) for overseeing the deal and its transactions while a South African hotelier with a strong link with one of the South-South governors would
have earned $7million (about N945 million).

A Nigerian lawyer from Delta State who works for a very thriving law firm in Lagos would also have earned $7 million (about N945 million) as commission for being the “finders”. Curiously too, the trio would have earned about three percent of the operator’s yearly gross earning in the
next five years had the deal sailed through and lasted that long.

IT Edge sources disclosed that Vodacom would have paid the commission from its capital injection of $150 million (about N20.25 billion) in November when it ought to have brought in its money to Vee network’s operations.
Vodacom lawyers and their Nigerian counterparts had carefully packaged all of these.

But certain people within Vee networks objected to the large sums of money that were to be taken away through brokerages packaged by Vodacom. Some thought that $16 million, that is N2.16 billion, commission was really crazy especially by a network that was wobbling and jerky.
To some others, it was an amount that could turn around the network if properly utilised so they objected strongly to it.

Good bye Vee
Sensing therefore that this may put spanners in its works, Alan Knott-Craig, who had a strong link with the South African hotelier, advised the board of Vodacom Group on the contrived allegation of poor corporate governance and alleged payment of brokerage fees to Nigerian brokers.
“Indeed, there was more to Vodacom, departure than we know”, a Vee Network source confided. “All the brokerage fees paid to the Nigerian companies are even not up to $3 million (about N450 million) but see Vodacom wanted to pay $16 million and their brokers will take home about three percent of the company’s yearly earnings. So what is left?” He queried.
 

Good bye Mthembu
But the dilemma of Vodacom was not so much because of the brokerage fees. Why, analysts ask, did the board fire Andrew Mthembu, the former deputy chief executive officer (CEO) for the Group?

IT Edge learnt that it was part of the apartheid game plan to scuttle the ambition of a black man taking over as CEO. Knott-Craig’s tenure ends in September and the succession plan shows that his deputy would have
taken over. “But all that has crashed” a Vodacom source who is embittered about the arrangement said.
Vodacom’s interest in Nigeria resulted from its excitement over the breakthrough of its archrival MTN in Africa’s most populous country. MTN has been able to garner over two million active subscribers in less than two years of rolling out its mobile network in Nigeria. This has helped to even the scores against its archrival on the South African mobile turf. MTN’s recent financial results put it ahead of Vodacom. Its Nigerian operations through MTN (Nigeria) accounted for more than 50% percent of this earning.

Nigeria’s dicey
In year 2000 when the Nigerian Communications Commission (NCC) wrote to virtually every operator in the world to come and be a part of the auction process in the soon to flag off Nigerian mobile market, many politely declined without hurting the NCC or the government of Nigeria. But Knott-Craig in a somewhat sarcasm spiced with hatred and mischief was quoted as saying that Nigeria was not a country any wise businessman should take any business risk. He led his Group to shun the emerging market leaving the coast clear for MTN to explore.

Mthembu, as a black man, believed in Nigeria and the proposed auction process. That was his first sin. He licked his wounds until another opportunity came to buy majority shares in Econet Wireless Nigeria (EWN) last year.
Mthembu again carried out a campaign of his life to ensure that Vodacom took advantage of the situation to be a part of Africa’s largest mobile market. That was sin number two but the Group considered it all the same. The deal suffered a number of set backs because of the frequent
altercations between the Nigerian company and its estranged pioneer partner and founder, Econet Wireless International (EWI) and Strive Masiyiwa.

This was sin number three for Mthembu, But Vodacom wriggled out of it on the basis of a management contract for five years instead of outright share purchase. Again, IT Edge learnt that it was not to be because majority of the Group board wanted outright purchase of shares. They voted to inject $150 million to be made available in November, with strings and conditionalities attached.
Besides paying $16 million as commissions, and ceding three percent of gross earnings to the agents, Vodacom Group was to have a controlling management and ultimately the board of Vee Networks. This ruffled many
personalities, which made them to query the whole arrangement. They wanted out and warned that the scheme if allowed to succeed would be a case of running from “Masiyiwa’s fry pan into Vodacom’s fire.”

‘Option B’
While the deal was being watched to see a possible review, some “smart boys” at Vee Networks were already holding talks with British Telecoms, (BT) Orascom Group and others for what a source called “option B.” At that stage, the group had decided that they would have nothing to do with Vodacom or any South African company for that matter.

When the Vodacom deal crashed, the Option B became handy. Vee Network is already considering opening its operations for due diligence by its two new suitors while Vodacom is fine-tuning plans to return to Nigeria with its eyes fixed on Nitel. The Nigerian public telco is scheduled for privatisation in 2006.

Incorporated as Vodacom Group (Pty) Ltd with registration number 1993/005461/07, the telco's directors now include WYN Luhabe (Chairman),ADC Knott-Craig (CEO),MS Aziz Joosub. A Carrapatoso (Portugal), L Crouse, PAM Guindani (Italy), J Malherbe, SM McKenzie (US), SE Nxasana, CK Tan (Malaysia) and PR Williams (UK). Mthembu is out, sacked as a result of the Vee Network deal. But he is in court contesting his dismissal.
…Print Edition in IT Edge

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