Happiness Zengeni Business Editor
Brainworks Capital Management is set to acquire a significant stake in Telecel Zimbabwe currently held by the Empowerment Corporation (EC) in a transaction which could end the protracted share wrangle in the indigenous investment vehicle.
Brainworks is said to have made an offer for the 40 percent stake or 80 million shares held by EC for $20 million cash.
The transaction will be approved at an extra-ordinary general meeting to be held on February 20.
EC managing director Mr Patrick Zhuwao told The Herald Business that the investment vehicle had issued a notice pursuant to an offer made by Brainworks so that shareholders can consider the transaction on its merits or otherwise.
“The offer is subject to acceptance by shareholders reflecting on the Empowerment Corporation register. The company is private but as an entity which deals significantly with the public, it is prudent we are transparent about the transaction.”
Empowerment Corporation founding shareholders are currently embroiled in a share dispute in which Ms Jane Mutasa’s Indigenous Business Women’s Organisation and her family investment vehicles Selpon Investments are challenging Mr James Makamba’s stake in the company. The issue is still before the courts.
Market observers said that the deal came as a pleasant surprise but one which will prove to be a game changer in the telecoms industry.
Well-placed sources told The Herald Business that the value of the stake ($20 million) is reflective of the value considering that over the years the company has been run down with poor corporate governance at the forefront.
“Telecel should be at the same level as Econet; not only were they the first but at one point they showed huge potential for growth. However, shareholder wrangles and bad management wiped off value from the group.”
According to a third quarter industry report from the Postal and Telecommunication Regulatory Authority of Zimbabwe Telecel subscribers receded 7,4 percent to 2 223 724.
The report says 36 percent of total subscribers were inactive in the period under review with Telecel having the highest rate of inactive subscribers at 53 percent. An active mobile subscriber is defined as a subscriber who has used the network at least once in the last three months.
Due to the decline in active subscriptions Telecel lost market share by 2,1 percent to reach 19,5 percent from 21,6 percent market share recorded in the second quarter of 2014. As a result Telecel had the least market share in the 3rd quarter of 2014, while NetOne surged to 24 percent.
The group struggled to renew its licences while at the same time failing to have a solid management structure. Telecel has had several management changes.
Sources said the transaction will usher in a new dispensation in terms of management.
On its part, Brainworks, which is headed by former banker Mr George Manyere, has cemented its position as one of the few investment companies which are making significant corporate finance deals.
Last year, the company was instrumental in the transaction which saw Bob Diamond’s Atlas Mara acquire banking institution ABC Holdings.